Why the Collins Foods share price is on a rollercoaster ride today

The Collins Foods Ltd (ASX: CKF) share price is on the move following a major announcement regarding its KFC restaurants in Australia will shut down their eat-in dining option.

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The Collins Foods Ltd (ASX: CKF) share price has been making some big moves today, falling by as much as 14% this morning to claw its way back into the green and be up by 7.39% at the time of writing. This share price action comes on the back of a major announcement regarding the company's KFC restaurants in Australia.

Sit-down restaurants to close in Australia

Collins has announced today that all its Australian KFC restaurants will immediately close their in-dining restaurant areas, in a move to slow down the spread of the coronavirus and protect the health and wellbeing of its staff.

The company will now provide sales of food and beverages via takeaway, drive-thru, and delivery options. This includes contactless options such as its KFC app, and the company has confirmed that more of these contactless options will be rolled out throughout its restaurant chain. Customers are also being encouraged not to pay with cash but use these other options instead. Collins Foods commented that the sale performance within its KFC Australia restaurant chain has so far been in line with its original expectations, and pointed out that around 80% of its sales are currently through these 3 options.

Commenting on these developments, Collins Foods managing director and CEO Graham Maxwell said: "We believe the announcement of today's bold move to close in-restaurant dining areas and focus on take-away, drive-thru and delivery in the near term, to be strongly in the interest of the public's well-being and of the KFC brand."

European update

Two days ago on 16 March, Collins Foods announced that that all KFC restaurants in the Netherlands would be closed for at least 3 weeks, after the Dutch Government announced that all restaurants in the country must close until 6 April. Collins Foods commented that the Dutch Government is now permitting restaurants to operate take-away, drive-thru and delivery channels. On the day of this prior announcement, it was unclear if this would be still possible in the short term.

The company added that over the last 24 hours, the German government had also placed a limitation on the hours that in-restaurant dining can trade each day. Collins Foods hopes to minimise any loss of sales in its restaurant via take-away, drive-thru and delivery channels in these markets.

Motley Fool contributor Phil Harpur has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Collins Foods Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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