Spur group restaurant sales recovered in the last six months of 2021 after weakening in 2020 when consumers stayed at home.
Business Day spoke to CEO Val Nichas about the group’s plans to keep attracting consumers in a weak economy.
Restaurant sales are about 10% lower than before Covid-19 hit. When do you think Spur store turnover will revert to levels before the pandemic?
Overall, we are still a little behind 2020 sales revenue. [However] there are restaurants that obviously are achieving the 2020 and 2019 results.
I think it’s going to be a process. The market has just opened up. Consumers, obviously, face economic pressure. There is high unemployment. I think if the buoyancy continues, we will get back to [prepandemic levels] in another six to eight months.
Are consumers eating out as much as before?
Through the Covid-19 period we definitely saw a decline in footfall in major malls. In December we suddenly saw a return [of customers] to the major malls. That has made a huge difference because the major malls make a big contribution to our business. This is because they’ve got bigger stores.
We lost almost 2% of revenue in December because of the slower tourist traffic at airports and casinos. Once tourism picks up, revenue should increase.
Spur announced many restaurants will be revamped. How do franchisees afford to pay for renovations after the lockdown placed them under financial pressure?
Over the years all our restaurant brands had to revamp to keep them fresh and relevant. The difference this time is that we are in a more depressed economy and so cash flows aren’t as good. But we work with our franchise partners.
There are revamps every five years, but it is not strictly enforced. If a store has been maintained and it’s in good condition, and the franchisee is constantly upgrading equipment, a revamp can be done every seven to eight years.
[However] franchisees are eager to revamp stores, because afterwards they see a growth in turnover of between 15% and 30%.
There has been pressure to change the Spur brand and design, as the native American imagery is seen as offensive by some consumers? Are you considering a change?
Spur is a 55-year-old brand, so it's got a rich heritage. It has evolved over the years.
We've just commissioned a comprehensive research study, because we want to make decisions that are consumer led. So we’re not going to mess with things that are successful.
Absolutely, we’ll look at the corporate identity. But I think it’s beyond that. It’s saying how does Spur look in a decade? We will look at every touchpoint that a consumer comes into contact with. The menu, the play areas ... What will the future parent want out of the play areas?
So we’ve got two big projects happening behind the scenes.
Panarottis, the pizza chain, was the second-largest contributor to the Spur revenues but has been overtaken by the very successful RocoMamas. What are you doing about Panarottis' declining popularity?
We are actually conducting consumer research right now about some planned changes. We are really confident about the future of that brand, because it's in such a lovely category.
Takeaways now make up 20% of Spur revenue. How do third-party delivery companies, which can charge about 30% commission, affect the bottom line?
Thankfully, just over 50% of our takeaway sales are actually click and collect [which is] customers ordering online and fetching [the food] themselves. But the balance of takeaways are delivered by the third-party aggregators.
We have a choice to say we are not using third-party delivery because there’s a commission that has to be paid, but then we lose out on the takeaway sale. We see delivery as a cost of doing business. It’s better than not having the business at all.
Obviously, we are quite a high-volume business. So we try to negotiate the best rates.
Many SA companies have struggled in Africa and withdrawn their businesses from the continent. But Spur appears to be doing well. Will you expand?
Interestingly enough, Africa has been one of our key regions. We haven’t had success in Australia. We’ve got a couple of challenges in the Middle East.
But we actually have a strategy around African dominance, because we know that the brands have resonated with the African continent and its consumers. In Zambia, we’ve already got 21 restaurants. In Kenya, we’ve got 11.
Africa is a very important region for us and we will continue to grow there.
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