Restaurant group Spur is continuing its expansion in SA with 32 stores set to open before the end of June, along with a planned revamping of franchises and the piloting of a fast-food vegan brand.
Even as consumers are under pressure due to skyrocketing fuel prices, inflation and rising interest rates, the group sees growth prospects “if conditions remain stable”.
Speaking at the annual financial results on Friday, CEO Val Nichas said that while some brands such as Panarottis were quite mature and well established across SA, there was still opportunity to expand the RocoMamas brand and growth opportunities for all brands “if you look at small towns and new developments”.
The group closed 15 and opened 23 stores in SA in the past financial year.
Spur’s figures show that sales at its Spur brand, which accounts for about 70% of revenue, grew 30.1% for the year to end-June with group sales up 32.5% to R2.4bn overall.
Nichas said that restaurants recorded increased visits in late June and July after the mandatory regulation requiring masks was lifted and more consumers ventured out. However, the company is not expecting the postpandemic boom to last.
“We are quite cautious about the fact that this [boom] might not be the reality for long,” Nichas told Business Day.
One way it plans to keep customer levels high, she said, is to target infrequent users with value-for-money offerings or attract a family who has never yet celebrated a child’s birthday at Spur. She said only 18% of SA adults visit restaurants.
With consumers under pressure, the group has not passed on the full brunt of food inflation into prices. In June Stats SA said vegetable oil was 40% higher than the year before, driven by Russia-Ukraine war.
Spur group price increases from June 2021 to December averaged at 2.6% and then about 3.5%-3.8% in the first half of the 2022 calendar year.
Nichas thinks prices will rise slightly more than 3.8% in the last six months of the 2022 year. She told analysts there was a lot of expansion opportunity overseas, where 84 of the group’s 631 restaurants are located.
Spur has closed all chains in New Zealand with only two stores left in Australia but has a presence in Mauritius, Zambia, Namibia, Botswana and the Middle East, and one RocoMamas in India.
The group, which makes money from its burger, pizza and steak franchises, has launched a test plant-based burger and nacho brand Mod Rockers, under the leadership of Rocomamas founder Brian Altriche.
Altriche, who spent months perfecting the RocoMamas brand he launched in 2013 and in which Spur bought a stake in 2015, is now tweaking the Mod Rockers concept. The pilot store in Rosebank has faced challenges due to construction in the area and that nearby offices are not as full due to hybrid working arrangements.
The Spur group will not franchise the plant-based brand unless it is profitable, Nichas said, in what is still a niche segment.
RocoMamas is now Spur’s second biggest brand in terms of revenue, having overtaken pizza brand Panarottis. There is a lot of internal competition between brands. The Panarottis brand is looking tired and is struggling in a highly competitive pizza category.
Spur has updated the Panarottis logo and opened its first new look store in Vaal Mall, which saw sales jump 40% after the rebrand. It will redo 12 Panarottis stores “imminently”.
Many stores of other brands such as Spur and John Dory’s will also be revamping with some store renovations having been put on hold during the pandemic.
In terms the of franchisee agreement, franchise owners must upgrade stores every five years, but Nichas said the head office extends the deadline if the restaurant is well-maintained or a particular store is struggling.
On average, store owners see a 15%-30% increase in sales after revamps, as fresh stores keep consumers interested.
Spur group, which also owns the Hussar Grill high-end steak restaurant, has set aside R1m to market and reposition the John Dory’s seafood brand, that makes almost a third of sales from sushi.
Spur, a family restaurant, has rolled out sensor tags for children in the play areas to wear. These beep if the child leaves the store. It aims to have this rolled out to all Spur stores by Easter, its second busiest period. All Spurs already employ staff to monitor the play areas, which are fitted with cameras.
Headline earnings grew 31% to R121.1m, still more than a quarter below pre-pandemic levels, while the group declared a final dividend of 78c, a R70.95m payout. Its total dividend of 127c follows none in 2021, while it had paid out 136c in 2019.
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