Restaurant group Spur Corporation has embarked on an expansion drive that will see it enter the Democratic Republic of Congo (DRC) and try to have another bite at Lesotho — where it closed its restaurant due to poor performance.
The company will also add new restaurants in countries where it already has a footprint as it expects demand for its offering to increase with the easing of lockdown restrictions. The group, which already has a presence in Kenya, Zimbabwe, Botswana and Zambia, plans to open 32 new restaurants in SA and seven in other countries. In the DRC, it will launch RocoMamas and Spur through partnerships with local companies.
The restaurant group’s expansions come as some local companies, especially in retail, have recently exited countries such as Zambia, Kenya and Nigeria due to, among other things, challenges in bringing goods in and out of these countries, weak economic growth and difficulty in repatriating money.
Spur CEO Val Nichas said on Thursday that although it has been challenging operating in some markets outside SA, Spur has succeeded in most of the countries it is in because of its strong partnership with local companies that understand the market, the supply chain and legal and financial systems. Moreover, “a lot of our brands resonate with customers”, she said, adding that Spur wants to “create dominance in Africa”.
Nichas said the reason for Spur closing its franchise in Lesotho last year was that, apart from lockdown restrictions, the location of the restaurant “was a bad choice of site it didn't have enough volume”.
Of the group’s 624 restaurants at the end of June 2021, 539 were in SA, with 85 outside SA’s borders. Of those 85, 74 were elsewhere in Africa.
The number of Spur Corporation restaurants
— IN NUMBERS: 624
The group has shown its ability to expand (and be successful) on the continent, said Craig B Pheiffer, chief investment strategist of Absa Stockbrokers & Portfolio Management. “That experience lends itself to further scaling up of the restaurant offering into existing territories and into new regions.”
South African investors have become wary of local companies diversifying internationally and elsewhere on the continent as there have been many failures.
“The franchise model, though, lends itself to a healthy mix of local expertise and group restaurant experience and further expansion outside South Africa’s borders should serve the group well,” Pheiffer said.
Independent analyst Jimmy Moyaha said Spur’s previous business model has not proven to be Covid-resilient and, looking at the way it was hit, “I am not sure if a traditional Spur-style expansion is a good move” given the slow vaccination rollout on the continent. Perhaps the company is shifting its long-term view of how the brand is seen before the market picks up again — “then that would be a good play”.
Moyaha said Spur’s expansion of its virtual kitchens will prove to be interesting because “we have seen a greater shift into online-based food services”.
A lot of our brands resonate with customers.
— Val Nichas, Spur CEO
Spur launched new takeaway meals through virtual kitchen brands such as Rib Shack and Pizza Pug that are located in its existing restaurants. At the end of June 2021, 302 of the group’s restaurants were participating in the virtual kitchen offering.
Spur group revenue for the year to June declined by 10.5% to R681m. This was due to concessions granted on franchise and marketing fees to franchisees for the first eight months of the financial year, as well as lower sales in company-owned restaurants. Revenue from the South African operations accounted for 96% of total group revenue.
Nichas said there are franchises that are still struggling due to a drop in foot traffic at some malls and also a lack of tourists in areas such as the V&A Waterfront in Cape Town.
Profit before income tax increased by 16% to R148m.
Spur and its competitors have been battered by the pandemic, with lockdown restrictions including the curfew and curbs on the sale of alcohol.
The company ramped up its takeaway offering to cater for the changing customer requirements of eating at home.
It opened its first Spur Drive Thru in Pretoria in June. Plans are afoot to expand this “convenient and lucrative channel”, it said.
Takeaways accounted for 18% of the group’s South African turnover, with the highest percentage of takeaways being at RocoMamas, Panarottis Pizza Pasta and Spur Steak Ranches.
Nichas said although trading in July was difficult due to the continuing restrictions and curfew hours, “August proved a buoyant trading month, stimulated by increased marketing activity across most brands, and this positive trend continued into September”.
Pheiffer said Spur has been under severe pressure given that lockdowns affected their restaurants both locally and internationally.
“The result under the circumstances was credible and commendable and reflects how well the business was able to adapt to the circumstances and leverage off their delivery/pick-up experience. Management also looked at the business with a longer-term lens and afforded some protection and financial support and concessions to franchisees,” Pheiffer said.
Among the hardships the group has faced is the death in May of its former CEO, Pierre van Tonder, who shot himself. He had retired in December 2020. Van Tonder was instrumental in building the group during his 34 years with the company, moving up the ranks from junior restaurant manager to MD and CEO.
Asked what support Spur was giving to staff who may be going through tough times, Nichas said it has introduced a wellness programme and other support structures in partnership with a health-care company. It has also established a help desk and an open dialogue between line managers and staff.
To honour Van Tonder the company has launched an award in his name that will be given to employees who make a positive contribution in the development and growth of small enterprises.
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