RocoMamas and pizza flip Spur out of the fire

Business

RocoMamas and pizza flip Spur out of the fire

Despite flagship steak ranches leaking profit margins

Marc Hasenfuss

Tough trading conditions gnawed into Spur Corporation’s margins in the half year to end December – but the restaurant franchisor still has a strong appetite for expansion.
Results for the six months to end December released on Thursday showed Spur’s gross profit margin dropping from 73% in the corresponding interim period in 2016 to 71%. But the operating profit margin dropped from close to 40% to under 35% after flagship Spur Steak Ranches as well as smaller brands Panarottis, John Dorys, The Hussar Grill and Captain Doregos saw margins markedly eroded. Spur, the largest component of revenue and profits, saw margins squeezed down to 84.5% from 88.5% previously.
The exception was gourmet burger brand RocoMamas, which reported a 55% gain on profits to R13-million with operating margins fattening to 73.3% (70.4% previously).
Overall, total franchised restaurant sales from local and international operations slipped 2.6% to R3.7-billion.Spur CEO Pierre van Tonder said franchised restaurant sales in South Africa were 3% lower as ongoing political instability and higher living costs negatively affected consumer sentiment and discretionary spending.
But he noted an improvement in the second quarter of the interim period with restaurant sales in South Africa only declining a marginal 0.2% after having dropped 6.2% in the first quarter. Van Tonder said Spur Steak Ranches limited the decline in sales to 5.3% in the second quarter – a big improvement on 14% decrease registered in the first quarter. He said Spur’s first quarter business was affected by the aftermath of the social media fallout following a altercation between customers in a Spur outlet in March last year.
Van Tonder stressed that Spur management continued to take decisive action to ensure the profitability of its franchisees in the prevailing lean trading environment.
He said this included a shift in the promotional strategy away from discounting to protect franchisee margins. “While this has had the expected negative impact on restaurant turnovers in the short term, the move has buoyed franchisee profitability – which is critical to the sustainability of the franchise model.”
Van Tonder said the pizza and pasta segment – comprising Panarottis and Casa Bella – grew sales by almost 7%. “This is a pleasing performance in the highly competitive pizza market where several chains have launched aggressive discounting campaigns to attract customers.”Although Spur endured tough trading on the six months under review, the appetite for expansion is still strong.
In the interim period a net 22 outlets across all brands were opened in South Africa, bringing the local restaurant base to 550 stores.
Another six outlets were revamped and six relocated to better trading locations.
Five new international outlets were opened and five closed. New outlets opened in Nigeria (Spur and Panarottis), Mauritius (Spur Grill & Go), Kenya (RocoMamas) and Namibia (John Dory’s).
Van Tonder said the restaurant footprint in South Africa would be expanded in the second half with the opening of 21 restaurants across Spur Steak Ranches (three), Panarottis (one), RocoMamas (10), Captain DoRegos (five), The Hussar Grill (one) and Casa Bella (one).

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