Fast-food chain posts record full-year earnings as the economy rebounds Cafe de Coral Holdings, the world's largest Chinese fast-food chain operator, may choose not to renew the leases on at least 30 restaurants and several Oliver's Super Sandwiches outlets in the face of rent rises of up to 30 per cent. Chairman Michael Chan Yue-kwong sounded the warning yesterday as the company announced net profit had risen 10.37 per cent to a record $284.85 million in the year to March. The economic recovery had not only boosted Cafe de Coral's profitability, but also prompted landlords to lift rents, threatening the survival of retailers and restaurant owners, Mr Chan said. 'We won't renew contracts if the new rental makes our stores commercially unviable. At least we won't do this for the sake of maintaining our market share,' he said. To offset some of the higher rent and food costs, Cafe de Coral raised its marked prices 3 per cent to 5 per cent, or 50 cents to $1 in real terms, last financial year, Mr Chan said. 'Any further increases in prices will depend on the economic environment,' he added. The average spending per person at a Cafe de Coral outlet remained at about $24. With 123 outlets in Hong Kong, the Cafe de Coral fast-food chain was the group's main earner, contributing about 80 per cent, or about $227 million, of its net profit last year. Spaghetti House, a 24-strong restaurant chain, accounted for 13 per cent of the group's profit and the rest came from institutional catering services. Mr Chan said the group planned to add about 20 outlets to the total of 254 in the coming year, split between Hong Kong and the mainland. The new outlets would be a mixture of Cafe de Coral, Spaghetti House and Oliver's. The expansion plans come despite the fact that sales in Hong Kong's restaurant sector shrank to $53 billion last year compared with $57 billion in the boom year of 1997, he said. 'Competition is getting more punishing, with 600 restaurants opened last year,' he said. 'It's a case of survival for the fittest.' Rival Fairwood Holdings saw its 66-strong fast-food chain weather the competition with net profit surging to $38.28 million in the year to March from $3.7 million year on year. The profit included a non-recurring gain of $9.3 million from the disposal of a property. Fairwood's net profit margin stood at 4.56 per cent last year, which was below Cafe de Coral's 9.37 per cent. Fairwood proposed a final dividend of 9.2 cents per share, bringing the full-year payout to 18 cents per share. Cafe de Coral recommended raising its final dividend 11 per cent to 20 cents, taking the full-year dividend payout to 27.5 cents. Fairwood shares closed yesterday 7.26 per cent lower at $4.15. Cafe de Coral was steady at $8.75.