Big win for GPI as Burger King opens its 80th shop in 5 years

Business

Big win for GPI as Burger King opens its 80th shop in 5 years

Franchise could reach 150 outlets over the medium term, and perhaps 250 outlets over the longer term

Marc Hasenfuss

An accelerated roll-out programme that helped empowerment company Grand Parade Investments (GPI) achieve its contractual obligation of opening 80 Burger King shops in five years is likely to continue in the financial year ahead.
On Monday GPI – which secured the master franchise agreement for the iconic food brand five years ago – confirmed the opening of its 80th Burger King restaurant at the Kolonnade Retail Park in Tshwane.
This is an important milestone for GPI. If the company had not met the stipulated target of 80 restaurants there was a risk of losing exclusivity on the Burger King franchise.
GPI said the Kolonnade outlet was the 20th Burger King restaurant to be opened by GPI for the financial year to end June. The company indicated that plans were on track to open another 20 restaurants by the next financial year.Burger King CEO Juan Klopper said the brand continued to grow in the South African market. “We now have 35 ‘drive-thrus’ in a restaurant network achieving restaurant sales on average in excess of R1-million per month.”
Klopper said further development of Burger King was key to achieving long-term traffic growth in existing restaurants. “Our strategy remains focused on scale, by identifying the communities that love our burgers and building restaurants to reach them.”
Klopper believed Burger King could reach 150 outlets over the medium term, and perhaps extend to around 250 outlets over the longer term.
In the half year to end December, GPI reported that Burger King had increased profit from operations by 546% to R20.7-million on the back of an aggressive store roll-out.
But Burger King remained in the red at bottom line with a reduced headline loss of R5.7-million at the interim stage.
At the end of December GPI’s stake in Burger King was valued at R827-million.Burger King’s push for profitability will be important to change real investor sentiment that has seen the GPI share trade at a large discount to its last stated intrinsic value of around 650c/share.
Investor sentiment has also been rocked by an exodus of top executives in the last year – including the CEO and FD in recent weeks.
Last month GPI chairman Hassen Adams said the company was mulling the sale of part of its strategic stake in JSE-listed restaurant franchisor Spur Corporation. This would raise fresh capital – possibly between R250-million and R300-million – to fund the growth in Burger King.
The company also holds franchise agreements for coffee and confectionary brand Dunkin’ Donuts and ice cream brand Baskin-Robbins, which is rumoured to be for sale.
The bulk of value in GPI, however, lies in its gaming investments – most notably significant minority stakes in the GrandWest casino in Cape Town and limited payout machine operator GrandSlots.
GPI also holds a 15% stake in the Golden Valley casino in Worcester. Although this is a small casino, the property has strategic value after a decision by the Western Cape government to allow one of the existing provincial casinos to transfer its licence to the Cape Town metropole.

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