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Economy takes bite out of Spur local sales

Jan 29 2018 11:45
Lameez Omarjee

Cape Town - Franchise restaurant group Spur Corporation [JSE: SUR] recorded a drop in local sales in the six months to December 31 2017, while sales in its international restaurants picked up over the same period.

According to a trading update, South African sales fell 2.6% to R3.7bn.

“In South Africa, franchised restaurant sales declined by 3%, while sales from international restaurants increased by 1.3% in rand terms and by 3.2% on a constant exchange rate basis,” the report read.

“The first half was a tale of two distinct quarters - while local franchised restaurant sales declined by 6.2% in the three months to September 2017, the second three months of the financial year to December 2017 showed a marked improvement with sales declining by only 0.2%,” said CEO Pierre van Tonder. 

According to Van Tonder, the political uncertainty caused by the Cabinet reshuffle in March 2017, a struggling economy as well as the social media backlash against an outlet of Spur Steak Ranches contributed to the “perfect storm” in March 2017.

Sales in Spur Steak Ranches fell by 9.3%. Spur Steak Ranches came into the spotlight last year when an altercation between two of its customers at the Spur Texamo restaurant in Oakdene sparked a boycott over the way Spur handled the situation.

Van Tonder later announced in a statement that management would embark on a nationwide tour to gain a greater understanding of customers and franchisees, News24 reported. "The altercation between two Spur customers in March in Johannesburg and the reaction that followed drove home a powerful message, namely that we urgently needed to give attention to the needs and frustrations of our customers," said Van Tonder.

In the trading update Van Tonder explained that the group decided to move promotional strategies away from discounting in the second half of the previous financial year to protect franchisee margins. 

“This has had the expected negative impact on turnovers in the short term, but is critical to the sustainability of the franchise model, particularly in the case of Spur Steak Ranches, and has been successful in restoring acceptable profitability for franchisees,” he said.

Captain DoRegos, a fast food franchise which sells fish, chicken and burgers, took a 12.2% knock in sales.

Pizza and pasta restaurants Panarottis and Casa Bella saw sales grow 6.6% during the period. Fish restaurant John Dory’s reported growth of 1.8%, and steak restaurant the Hussar Grill reported sales growth of 24.1%.

“Smash-style” burger joint RocoMamas reported sales growth of 37.5%. Spur acquired a 51% shareholding in the franchise in 2015.

“The performance of the Hussar Grill and RocoMamas has been particularly pleasing. We believe we are on the right track to restoring Spur Steak Ranches to the growth trajectory it was on prior to March 2017,” said Van Tonder.

Limiting Day Zero damage

He added that a resolution to “political turmoil” would have a “profound” impact for business in the future.

Van Tonder said the group is also implementing remedial strategies to limit the damage of Day Zero at its Western Cape franchises.

During the period the group opened 35 new outlets, while 13 closed their doors. Internationally five outlets were opened and another five were closed.

The group has a total of 613 outlets as at December 31 2017, more than the 591 outlets reported in June 2017. This includes 63 outlets operating outside South Africa.

Spur Corporation will release its interim results on February 22 2018. 

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