Grand Parade Investments’ (GPI) announcement that it is exiting Dunkin’ Donuts and Baskin-Robbins could be seen as a victory for activist investors who have long called for the closure of the struggling SA outlets of the US chains.

Institutional shareholders Denker Capital, Excelsia Capital, Kagiso Asset Management, Westbrooke Alternative Asset Management and Rozendal Partners, which collectively hold 12.5% in GPI, banded together in 2018 and called for the gaming and fast-food empowerment group to let go of the brands.

Since launching the popular US doughnut and ice cream brands in SA three years ago, GPI, which also runs Burger King in SA, has been struggling to get its fast-food operations to perform. Dunkin’ and Baskin-Robbins, with collectively 16 outlets in the Western Cape, have incurred cumulative losses of R96m since 2016.

GPI’s food division incurred a R107.7m loss for the year to end-June 2018. The only positive contribution to this division was the R608,000 it received in earnings from its 17.48% holding in Spur.

One of GPI’s disgruntled shareholders, Jared Winer of Westbrooke, welcomed the liquidation of the outlets. "This would be the first move in getting the business on to the right track, as it would mean better allocation of capital."

Winer said he would get a better idea of the effect of the liquidation once he met with GPI management.

The sluggish performance of GPI’s food division led its disgruntled minority shareholders to push for and succeed in getting former SABMiller executive Mark Bowman and former Spur financial director Ronel van Dijk appointed to its board at a general meeting in December 2018.

AlphaWealth fund manager Keith McLachlan said the liquidation of the local outlets was the start of a long overdue clean-up. He said it was a mistake for GPI to go into the fast-food market in the first place because it initially did not have the skills to run businesses in the sector.

Before moving into fast-food, GPI was better known for its gaming and leisure interest, which included a lucrative 15.1% holding in SunWest.

GPI acting CEO Mohsin Tajbhai said the group had been concerned about the performance of the chains for a while. And though it decided in September 2018 to dispose of them, he admitted that pressure from shareholders did play a "little part" in it deciding to liquidate the chains after it could not find buyers for them.

Tajbhai, the fourth GPI CEO in three years, said the difficult economy, the introduction of the sugar tax and a rise in the VAT rate had taken its toll. The group had struggled to make Dunkin’ and Baskin-Robbins profitable, even after it reduced the headcount and stopped rolling out new stores.

GPI hinted in its 2018 annual report that it was reconsidering its investment in the chains. "The sluggish growth of the economy and mediocre performance of Dunkin’ Donuts and Baskin-Robbins have called for a deep introspection into the performance of these two brands."

Tajbhai said the disposal of Dunkin’ and Baskin-Robbins was part of a broader clean-out at GPI. It was also looking to reduce overheads at Burger King and its food catering equipment operation, Mac Brothers.

He said its turnaround effort was paying off, as it had learnt from its mistakes when it came to operating Burger King, which was now starting to improve its performance. "All the stores that we opened in the past year and a half have been profitable."