Spur Corporation continues to suffer a hangover from a racial incident that took place in one of its Johannesburg restaurants. The incident caught on video went viral on social media causing boycott calls against the Spur Steak Ranches brand.
As a measure to recover from a dramatic decline in sales and profitability Spur Steak Ranches is killing discounted offerings. Those favoured buy one get one frees are going.
Releasing its interim financial results yesterday, Spur Corporation reported a 9.3% decline in sales to R344.5 million. Comparable profits were down by about 20%.
Spur Corporation has under its roof a number of well-known chain restaurants like Panarottis, Casa Bella, RocoMamas, John Dory’s, The Hussar Grill and Captain DoRegos’.
The Spur Steak Ranches brand is the worst performer. The flagship brand recorded 5.3% decline in sales in the second quarter sales after seeing 14% decline in the first quarter.
Management said “While restaurant turnovers in the first quarter were impacted in the aftermath of the social media fallout following a customer incident in a Spur outlet in March 2017, the stronger second quarter suggests a positive outlook for the Spur brand for the remainder of the financial year.
“Management continues to take decisive action to ensure the profitability of its franchisees in the current trading environment. This includes 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.”
Management said its Pizza and Pasta class, incorporating Panarottis and Casa Bella, grew sales by 6.6%. “This is a pleasing performance in the highly competitive pizza market where several chains have launched aggressive discounting campaigns to attract customers.”
RocoMamas continued its strong growth trajectory and increased sales by 37.5% as eight new restaurants were opened in South Africa.
John Dory’s opened a net two new outlets and increased sales by 1.8%.
The Hussar Grill again showed the resilience of its higher income customer base as sales grew by 24.1%. Three new restaurants were opened as the chain expanded its presence nationally to 17.
The financial stress of Captain DoRegos’ lower income market contributed to sales declining by 12.2%.
International restaurant sales increased by 1.3% in rand terms and by 3.2% on a constant exchange rate basis. Sales in Mauritius (11 outlets) increased by 15.7%, Africa (39 outlets) declined by 0.9% while sales in Australasia (11 outlets) were 12.0% lower.
Management added that it was continuing with its measured expansion programme. A net 22 outlets across all brands were opened in South Africa, bringing the local restaurant base to 550.
A further six outlets were revamped and six relocated to better trading locations. Five new international outlets were opened and five closed. The new outlets are in Nigeria (Spur and Panarottis), Mauritius (Spur Grill & Go), Kenya (RocoMamas) and Namibia (John Dory’s).
Management said it continues to seek opportunities to acquire brands with good growth prospects. The group aims to open at least 10 international restaurants to June 2018, with the focus mainly on Africa where new outlets will be opened in Namibia (three), Zambia, Zimbabwe and Swaziland.
A further two outlets will be opening in Saudi Arabia, one in Mauritius and the first RocoMamas in Australia.
The group noted that the water crisis in the Western Cape poses a risk in the months ahead and remedial strategies are being implemented to minimise the impact on trading.
Management added that “While the stabilising political environment in South Africa is expected to boost consumer confidence in the short term, the directors believe that any marked improvement in spending is only likely to follow an economic recovery in the medium to longer term.”