Spur heads for the sticks

Cape Town - Restaurant franchise group Spur Corporation will be looking at smaller towns for expansion opportunities in SA.

Speaking at the release of its results for the year to end-June, Spur CEO Pierre van Tonder said on Thursday that the company had devised a smaller franchise model to take into smaller centres.

The first of such stores would be opening in Modimolle (Nylstroom), Limpopo, next month.

Addressing the perennial question of whether Spur had reached saturation point in terms of expansion opportunities, Van Tonder stressed that the company was fortunate to not operate in a shrinking market.

"As economic patterns change, we are seeing more and more people in SA moving into casual dining. We certainly won't see 25 store openings in a year, but then again we shift a restaurant up the road and suddenly sales shift up 20%."

During the period under review, Spur opened 11 restaurants in SA while a further 28 outlets were refurbished or relocated to better trading locations.

The company plans to open 15 new franchised restaurants across its three brands (Spur, Panarotti's and John Dory's) in SA in the year ahead.

Van Tonder said Spur's shift into smaller towns entailed the development of a smaller restaurant of between 275 square metres and 300 square metres. "We are fairly bullish about the concept. But we realise that for it to work, we have to get the costs down."

He said rising costs (including electricity and property rates and taxes) would put pressure on franchisees, but added that strategies have been implemented to maintain franchisee profitability - including ongoing improvement in procurement and distribution efficiencies, menu engineering and enhancing operational standards.

Spur is also looking at polishing up its most popular venues. Van Tonder said the company had developed a "signature store" concept for high profile locations.

He said the first outlets revamped to this format would be in the V&A Waterfront in Cape Town as well as new restaurants in Bryanston and Bloemfontein.

Van Tonder said a fourth signature store would be opened at Cape Town International Airport in late 2009.

Spur's results showed revenue up 10.5% to R327m, while improved trading margins meant operating profits were up 14% to R98m.

Van Tonder said the improved margins stemmed from recent changes to Spur's distribution and procurement models.

The annual distribution was pegged at 55c per share. During late trade on Thursday, Spur's shares were up 3.26% to 950c.

- Fin24.com