Here’s why the Collins Foods (ASX:CKF) share price is pushing higher today

Here’s why this KFC operator’s shares are rising again…

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The Collins Foods Ltd (ASX: CKF) share price is pushing higher again on Thursday.

In early trade, the quick service restaurant operator’s shares are up 1.5% to $13.57.

Why is the Collins Foods share price rising?

The Collins Foods share price is pushing higher this morning after investors responded positively to the release of an announcement.

According to the release, the company has entered into a share purchase agreement with RDK Holding and MDK Holding to acquire nine KFC restaurants in the Netherlands for 10.25 million euros. This will be funded from Collins Foods’ existing debt facilities.

The release notes that the sellers are the second largest KFC franchisee in the Netherlands behind Collins Foods with its existing 35 restaurants. Once the transaction completes, this acquisition will increase the Collins Foods KFC network in the Netherlands to 44 restaurants. This represents 55% of the market in the country.

But management isn’t stopping there. Last week Collins Foods signed a Corporate Franchise Agreement (CFA) with KFC owner Yum! Brands for KFC Netherlands. This means Collins Foods has the rights to develop, manage, and operate the KFC business in the country. The agreement provides a framework for the development of up to 130 new KFC restaurants over a 10-year period.

It is also worth noting that the new acquisitions will not count towards its 130 new restaurants target.

Management commentary

Collins Foods’ Managing Director and CEO, Drew O’Malley, appeared to be very pleased with the deal.

He said: “Today’s acquisition marks another exciting step forward for Collins Foods’ European growth strategy. The restaurants we are acquiring are from one of Netherlands’ top KFC operators. It provides us with an opportunity to bring an additional quality network of restaurants into our European business and adds further capability to our team and increased scale to our operations in the Netherlands. The acquisition of these nine restaurants increases our presence to 44 KFC restaurants in the Netherlands and going forward, facilitates further growth opportunities.”

“In tandem with our new Corporate Franchise Agreement, it demonstrates our commitment toward making KFC Netherlands an essential component of Collins Foods’ global growth strategy. We see exciting opportunities for the Netherlands market to grow over the medium term as KFC’s market penetration increases to be more in line with other Quick Service Restaurant operators, and as we further innovate product, marketing and customer experience under our new Corporate Franchise Agreement,” the CEO concluded.

The Collins Foods share price is now up 42% in 2021.

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Motley Fool contributor James Mickleboro owns shares of Collins Foods Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Collins Foods Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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