Spur is reviewing its company-owned stores portfolio and is in discussions to sell two restaurants to franchisees as part of its strategy to divest from direct ownership.
During the six months to December, a Doppio Zero outlet was sold and converted to a franchised store, resulting in R1.4m in profit before tax. It is finalising the sale of a further two company-owned restaurants to franchisees.
The group has about 14 company-owned restaurants across Hussar Grill, Doppio Zero, Pizza e Vino and Modern Tailors.
This year, Spur Corporation, whose other brands include RocoMamas and Panarottis, plans to open 56 restaurants — 42 in South Africa and 14 internationally. It has 640 outlets in South Africa and 113 internationally, including in Australia and Mauritius.
CEO Val Nichas said total customer numbers increased marginally during the half-year compared to the previous corresponding period.
“There is a glimmer of hope. It’s the first period [where] we started seeing a slight increase in customer count. We had an increase in December for Spur and Panarottis, very impressive. Overall, the group showed a marginal increase, which is promising.”
“Eastern Cape is the lowest-performing region, and it’s because of economic pressures. The exit of some of the big manufacturing companies has resulted in job losses.”
— Val Nichas, Spur CEO
She said trading conditions in the weak macroeconomic environment were compounded by increased competitor promotional activity in the battle for market share in the meal solution category.
Trading was further impacted by supply chain disruptions due to the outbreak of foot-and-mouth disease, which resulted in supply shortages and significantly higher beef prices.
“Despite sustained pressure on disposable income, year-on-year customer numbers increased slightly across the group. Encouragingly, the average spend per head grew ahead of menu price inflation over the six-month period,” she said.
Gauteng represented 55% of turnover, followed by the Western Cape at 21% and KwaZulu-Natal at 15%. The Eastern Cape contributed 6%.
“Eastern Cape is the lowest-performing region, and it’s because of economic pressures. The exit of some of the big manufacturing companies has resulted in job losses.”
Spur generates half of its turnover during the lunch period, followed by dinner at 38% and breakfast at 11%. Breakfast turnover rose 8% during the period because several smaller brands, such as Roco and Panarottis, had started introducing breakfasts, said Nichas.
John Dory’s and Piza e Vino had a tough period, recording a decline in turnover. Two Piza e Vinos were converted into Doppio Zeros, while three John Dory’s were converted into two RocoMamas and one Panarottis.
“Piza e Vino is struggling to find its value proposition. The good news is that we have franchised one of Piza e Vino’s company-owned stores. Hopefully that will show a nice increase in performance,” said Nichas.
John Dory’s, with 44 outlets, “continues to show negative growth and will continue to see that for a period while we rationalise the portfolio to either convert, close or refine top-performing stores,” said Nichas.
The star performer was Panarottis, with turnover growth of 17.2% to R628.4m
The star performer was Panarottis, with turnover growth of 17.2% to R628.4m. The brand has 97 outlets.
“Panarottis’ repositioning continues to gain momentum, supported by positive customer feedback and growing franchisee appetite for new store openings. The refreshed store design has now been rolled out across 70% of the network,” said Nichas.
Spur brand, which accounts for 64% of the group’s South African restaurant sales, opened its second drive-thru two weeks ago, five years after introducing the format.
Sales at international restaurants, which contribute 10% of group restaurant sales, were up 14%, with Mauritius representing 22% of the group’s international restaurant sales.
Sean Culverwell, an investment analyst at Anchor Capital, said that given the numbers seen from retailers, coupled with the well-publicised strain on consumers, Spur’s first-half results reflected strength.
“What is telling is that in South Africa quick-service restaurants (QSR) are outperforming casual dining restaurants (CDR), and yet Spur continues to outperform their listed peer [with] a larger QSR segment. Despite this less than favourable backdrop, Spur’s portfolio, which is over three-quarters CDR, has been able to deliver strong growth. This highlights best-in-class execution and strong brand resonance with customers. Spur’s revenue growth of 7.2% also outperformed the CDR segment’s 6.3%.”
The one area of concern remained John Dory’s, said Culverwell. “Despite management instilling a strong brand refresh, the chain can’t seem to gain traction. We suspect more John Dory’s may be converted to Spurs or Panarottis given the larger formats of the restaurants relative to a RocoMamas.”
Spur Corporation has sold the Nikos brand to the founders, a move that Culverwell says shows the management acknowledges that Greek cuisine “is not in their wheelhouse”.
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