Spur CEO speaks on minimum wage, upgrades and play areas
Spur released its halfyear results to endDecember in which it continued to perform with headline earnings up 15.4% to R130m. Business Day spoke to CEO Val Nichas about how the business is doing.
The minimum wage increased at the beginning of the month from R25.42. How is this affecting your restaurants?
The minimum wage has gone up to R27.58. The increase affects profitability, so restaurant owners will have to schedule staff better and create crossfunctional expertise.
They will make sure that they schedule staff to ensure they don’t have employees standing around if the store isn’t busy and schedule more staff on the weekends, because it’ sa busier time. They’ve just got to use their resources more effectively.
Does the group plan for minimum wage increases?
It is something we always prepare for because we know that there is a steady increase every year. We had budgeted for an inflation-based increase.
We support the minimum wage and the increase, because we think it’s good for the country and the money will flow back into the economy.
While we support it, it’s like any cost going up. When electricity increases, we look at how we’re going to mitigate that cost and build it into the business model, so that it doesn’t affect the franchisees’ bottom line. You’ve got to mitigate the loss to the bottom line.
You have revealed a new Spur layout and look in four stores. Can the franchisees afford to upgrade their stores?
Out of all our franchisees, we have only about 100 owners of a single franchise. You’ll find the good operators (often with multiple stores) will make a provision for refurbishments every month.
The advantage for the guys that invest in a revamp is the amazing return. The return on revamped stores overall hasn’t been less than about 20% annual growth. It has been right up to between 35% and 42% a year. I think the forwardthinking franchisees can see the benefit of keeping the restaurant refreshed. Others don’t make a provision, so then we will delay the refurbishment. We usually do them every five years, but sometimes stretch it out to seven years.
You said some franchisees are upgrading the kids’ play areas? Tell us more.
The new revamped Spur stores automatically come with new kids’ play areas. Independent of that we ’ ve got franchisees who are also reinventing the kids’ play area. The Chatoga (Kempton Park) and Thunder Ridge Spur (Pretoria) stores upgraded these even though they are only in line to revamp their stores in three to four years’ time. They know the value of great kids’ areas. The reinvention project team (at head office) are piloting what happens when you create a new environment for kids with different games and equipment.
Spur opened six new-look John Dory stores with new menus towards the end of 2023, bringing the number of those outlets to 48. However, the brand saw a minor 0.8% reduction in sales to end-December.
I think John Dory’s is going to be the next brand to improve after Panarottis’ success. Behind the scenes, we have been monitoring its performance, and we think the second half [January to June] will start showing the upswing. We are very excited about that.
When you released results you said the last three months of the year had slower sales than July to September. Why was this?
We had fantastic growth in July and in the following two months. Then we saw sales slow down in October and November. We actually did panic. But in December, sales turned.
I think during the World Cup, a lot of people watched rugby at home. So even though we were happy with our sponsorship of the Springboks, we did see a bit of a downturn in spend. But thankfully, we had a recordbreaking December, which we’re very pleased about.
How does Spur support franchisees who are struggling in this environment?
Every month we have a process where the brand CEOs will bring an application to CFO Cristina Teixeira and COO Kevin Robertson. They will use the franchisees’ balance sheets detailing their turnover, revenue and operating standards. Then the CFO and COO will assess whether Spur needs to offer some support in the form of (royalty) concessions.