Spur expects sales at new brands to sizzle
Although tough trading conditions continue to gnaw at prospects for the fast food sector, restaurant franchisor Spur Corporation has managed a sliver of top line growth thanks to strong trading by recently acquired brands RocoMamas and The Hussar Grill.
A trading update issued on Monday also showed that the core Spur Steak Ranches brand managed a strong sales comeback, especially in the last quarter of the year to end-June.
Spur has pencilled in total franchised restaurant sales edging up 1.3% to R7.1bn in the year to June. A divisional breakdown showed franchised restaurant sales in SA growing 1.5% with sales from international restaurants falling 0.7% in rand terms.
Global restaurant sales rose 2.7% on a constant currency basis. A further breakdown showed the Spur Steakhouse brand, which accounts for about two-thirds of the group’s South African business, would report a 2.8% decline in total restaurant sales and a 4.9% drop in existing restaurant sales.
Fortunately fast expanding RocoMamas, a smash burger specialist, is expected to show a 31.5% increase in total restaurant sales and a sprightly 14.5% jump in existing restaurant sales.
The Hussar Grill, an upmarket steakhouse brand, would manage a 24.4% increase in total restaurant sales and a 6.6% increase in existing restaurant sales. Spurs pizza and pasta hub (Panarottis and Casa Bella) would show a 4.2% increase in total restaurant sales, while seafood specialist John Dory’s would show a 0.6% increase.
Spur CE Pierre van Tonder was pleased that the core Spur brand continued its recovery in the second half. The Spur brand reported a decline of 6% and 0.1% in local restaurant sales across the group in the first and second quarters of the financial year. However, the third quarter showed growth of 1.4% and a resurgent 12.2% gain was registered for the last quarter.
Van Tonder reiterated Spur’s strategic shift in the promotional strategy for the Spur brand to reduce reliance on discounting — including specials such as Monday night burgers — in the second half of the 2017 financial year.
“Subsequently, a combination of judicious promotion coupled with product improvement has improved franchisee margins and ensured that our franchise financial model remains sustainable.”
He said a similar strategy had been implemented at Panarottis during the second half.
“This has, as was the case for the Spur brand, had the predicted impact of tempering restaurant turnover growth in the short term.”
Van Tonder said The Hussar Grill and RocoMamas were benefiting from new outlets and growth in existing businesses.
He noted that Panarottis had been affected by fierce competition in the pizza market, while John Dory’s had been negatively impacted by the temporary closure of certain key sites due to revamps.
Looking ahead, Van Tonder said increasing healthcare, education, transport, utility, property rates and food costs, in addition to the VAT hike, continued to put pressure on Spur’s middle-income customer base.