Johannesburg - Deal-hungry fast-food retailer Famous Brands [JSE:FBR] said Tuesday's R27m acquisition of Keg and McGinty's pub franchises would be the first in an effort to add other categories to its offering which includes Steers, Wimpy and Giramundo.
The company, led by CEO Kevin Hedderwick, last week bought little-known flame-grilled chicken brand Giramundo, effectively fully exposing it to the quick service food category. New category acquisitions would follow, he said.
"It's really a strategy to expand our competitive landscape," said Hedderwick of the group's food franchising deal plans.
"If you look at our business at the moment, we have representation in all the quick service restaurant categories. So, we can't add another pizza brand," he said.
The purchase of Keg and McGinty's, which includes the franchise agreements, trademarks and intellectual property of the pub chains, will be funded through existing cash resources. As a result, net borrowings to equity will increase to 32% from February's 28%.
Keg is a franchised pub and restaurant brand, while McGinty's is a franchised pub brand. Managed by transport group Kempston, the network currently has 28 Keg and five McGinty's franchised outlets in South Africa, Zimbabwe and Mauritius.
Last week, Famous Brands bought a 51% controlling stake in a humble Giramundo with plans to grow this brand into a formidable player by adding between 25 and 30 outlets over the next five years.
The acquisition of Giramundo ended Famous Brands' decade-long search for a chicken brand to complement its quick service restaurant portfolio.
Hedderwick, who was once MD and shareholder of Keg Franchising, acknowledged the pub and restaurant sector has been on a decline in recent years, saying that was largely due to brands failing to innovate and adapt to changing trends.
'Good food, good beer, great cheer'
But this was also a global phenomenon, he added. The Keg and McGinty's chain was once a network comprising 65 restaurant pubs in South Africa, with representation in Australia.
"However, there are a number of independently-owned pub restaurants that are growing in popularity, which underlines that there is good growth potential within the category for skilful operators," said Hedderwick.
Of late, said Hedderwick, there has also been a strong revival in the pub restaurant category in the US and the UK, with the evolution of so-called gastro (short for gastronomic) pubs.
Gastro pubs represent a repositioning of the old style pub category, which had become over-dependent on serving alcohol to survive.
Famous Brands has set aside R2m to build a new look for the Keg brand, expected to be unveiled in December this year.
"While the brand needs innovation and renovation, we are confident that we can restore its rich heritage as a pub and restaurant business, where the emphasis is on the food," said Hedderwick.
"In an overall sense, this repositioning will be based on the three pillars which underpinned the brand's popularity in its heyday, namely good food, good beer, great cheer - and in that order," he said.
The group expects to grow the chain by three to five stores from 2011 onwards.
- Fin24.com