Franchises fire up Famous Brands

Johannesburg - Food services company Famous Brands said it will continue its aggressive growth strategy by opening 135 new restaurants and revamping another 100 in the year ahead.

According to CEO Kevin Hedderwick, the group is able to sustain this growth as the capital expenditure is done by franchisees.

"That's the beauty of franchising; there is no capital strain on us when it comes to developing the network," he said.

Out of 1 602 stores in its different franchise networks in South Africa, and 17 elsewhere, only five are owned by Famous Brands itself.

"Franchisors cannot be as efficient as franchisees because an owner runs a business far better than a manager," Hedderwick said.

Famous Brands is a fast food restaurant and casual dining franchisor. Its brands include Steers, Wimpy, Debonairs Pizza, FishAways, House of Coffees and Brazilian Cafe.

Commenting on the group's results for the year to end-February, which were released on Wednesday, Hedderwick said hyper food inflation has put profit margins under pressure. These dropped from 18.3% in 2008 to 16.9%.

Revenue increased by 30% to R1.5bn, with headline earnings per share up 11% to 159c. The dividend is 76c per share.

"I think we can be satisfied with our results - the conditions in which we traded this year have been very different," Hedderwick said.

The group plans to roll out new management software to improve warehouse efficiencies. "Everyone is moving towards just-in-time inventory, because in today's climate you do not want to be sitting with excess stock," said Hedderwick.

He said it remains a priority not to be seen as expensive.

"It is a big challenge for us to make sure our products are always affordable," Hedderwick said. "As long as you offer value and quality through a strong brand, chances are you will be able to grow your business."

Famous Brands' shares closed at 1 665c on Wednesday, up 1.83% for the day.

- Fin24.com