Famous Brands, the owner of Debonairs Pizza, Steers and Wimpy restaurants, has shut 41 outlets in the past six months due to shifting demographics and persistent economic pressures that are weighing heavily on consumers.
The closures were primarily driven by changes in consumer behaviour and demographics that made some areas unviable for trading, CEO Darren Hele told Business Day on Wednesday.
Some franchisees had struggled to remain profitable as consumers tightened their belts and as a result of increased competition, he said.
The group did not disclose which outlets had been shut, but said 14 were part of the group’s leading brands and four were signature brands. One outlet was in the Southern African region, 21 were in the rest of Africa and the Middle East, and one in the UK. It still has a network of just over 2,900 restaurants.
Famous Brands reported a 0.8% increase in revenue at its leading brands division for the six months ended August, though revenue was down 10.4% at its signature brands segment due to the closures and lower franchise fees.
The group said overall sales were below expectations despite having expanded deliveries. In the Southern African region revenue climbed 3.8% due to strong growth in Zambia, while the Africa and Middle East division reported a 105% increase after acquiring Famous Brands Restaurants Holdings.
However, challenges in Nigeria, Saudi Arabia, and the UK, where Wimpy’s revenue fell 17%, weighed on the group performance.
The group invested R91m across its markets for the interim period. That included investments for leading brands in SA, the Southern African region and selected Africa and Middle East markets, for developing consumer-facing technology and improving the efficiency of its manufacturing and logistics infrastructure.
A sum of R12m was allocated to the construction of a cold storage facilities at its Midrand campus after securing “a specific debt facility”.
While the outlook is optimistic with load-shedding seemingly under control, political stability, declining fuel prices, a cut in interest rates with more likely to come, and slowing food inflation, Famous Brands said it could may take time before consumers had more disposable income.
“We enter the second half of 2024 with slightly less uncertainty in the macroeconomic environment, considering the strengthening of the rand. Interest rate cuts may provide scope for a more positive consumer outlook,” it said.
“Although it takes time for positive sentiment to translate into consumer spending power, we believe it is trending in the right direction and we are cautiously optimistic about a degree of recovery in the second half of the year.”
The group has a series of promotional activities planned heading into the peak summer season.
“Within this context, we aim to focus on our core brands. Famous Brands will continue to build iconic world-class brands as a responsible franchise operator, invest in consumer-facing technologies, and plan to open 89 new stores across the group in the second half of the 2025 financial year,” it said.
In May, Business Day reported that Famous Brands was looking to sell various noncore assets over the medium term, after reporting lower full-year earnings as weaker consumer spending dampened demand.
Update: October 23 2024
This story has new information about the closure of restaurants.
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