More Burger King stores set to open
Grand Parade Investments is likely to continue roll-out of stores in next financial year after achieving its five-year franchise contractual obligation
An accelerated roll-out programme that helped empowerment company Grand Parade Investments achieve its contractual obligation of opening 80 Burger King stores in five years is likely to continue in the next financial year.
An accelerated roll-out programme that helped empowerment company Grand Parade Investments (GPI) achieve its contractual obligation of opening 80 Burger King stores 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 the end of June.
The company indicated that plans were on track to open 20 more 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 ‘drivethrus’ in a restaurant network achieving restaurant sales on average in excess of R1m per month,” he said.
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 about 250 outlets over the longer term.
In the half-year to endDecember, GPI reported that Burger King had increased profit from operations by 546% to R20.7m due to a more aggressive store roll-out.
Burger King, however, remained in the red at the bottom line, with a reduced headline loss of R5.7m at the interim stage. At the end of December GPI’s stake in Burger King was valued at R827m.
Burger King’s push for profitability will be important to change investor sentiment that has caused the GPI share to trade at a large discount to its last stated intrinsic value of about 650c a share.
Investor sentiment has also been rocked by an exodus of top executives in the last year, including the CEO and financial director in recent weeks.
GPI chairman Hassen Adams told Business Day in May the company was mulling the sale of part of its strategic stake in JSElisted restaurant franschiser Spur Corporation. This would raise fresh capital, possibly R250m-R300m, to fund the growth in Burger King.
The company also holds franchise agreements for coffee and confectionery 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 GrandWest Casino in Cape Town and limited payout machine operator GrandSlots.