Spur stakes UK division on new-format restaurant
Spur Corporation’s steak-ranch venture into the UK hit the company’s sales and profit this year, prompting it to rethink its model in the UK and the roll-out of smaller-sized on-the-go franchises in South Africa.
The Cape Town-based company, which owns brands including Spur Steak Ranches, Panarottis Pizza Pasta, John Dory’s and Captain DoRegos, saw revenue grow by 3.7% to R760m, while after-tax profit slumped by 1.2% to R135.6m in the year to end June. Revenue at the UK division contracted by 6.3% to R147m and its loss before tax widened to R4.7m from R2.2m.
“In t he UK, our current model has passed it s sel l- by date,” says Pierre van Tonder, CEO of Spur Corp. “Hence we l aunched t he new model of t he smaller Spur.” The company will continue to sell its current leases in the UK, with Aberdeen CEO of Spur Corp. sold for £425 000 (R8.9m) and Lakeside for £450 000 (R9.4m), he said. If the new model, called Ribs, Burgers and Wings, is successful, the company’s board has given the go-ahead to expand it internationally, Van Tonder said. If unsuccessful, he would “come home”. The new model will also f ind its way to SA, according to Van Tonder. Plans to roll out the smaller-sized on-the-go format locally are progressing well, with two outlets planned for Worcester and one for Piketberg, both in the Western Cape, he adds.
“We call it ‘Grill and Go’ in SA,” he says. “[It] is specifically designed for what I call transient sites. [This] model of 150m² to 200m² is being rolled out with [certain] petroleum companies.”
These outlets won’t be opened in traditional Spur territories, explains Van Tonder. They would rather be focused on highways and similar sites, he says, with a focus on smaller towns.
“You can’t spend R6m on a site in Kriel and expect to make a return,” he says. “When you build a smaller Spur with a smaller menu and spend R2.5m, a franchisee can make a return.”
SA’s economic woes, with the effects of power outages, a slump in metal prices and layoffs in the mining sector, have hit one of Spur’s brands. Revenue from Captain DoRegos has slumped by almost 26% to R6m in the year ended 30 June from R8.1m in the previous f inancial year. It turned a pre-tax profit of R2.1m in 2014 into a pre-tax loss of R11.8m, which includes an impairment charge of R13.9m to the brand name.
“Captain DoRegos trades in the worst segment of the market where people are really poor,” Van Tonder says. “It’s a very tight market. Those are the people who got the hardest hit [economically].”
The top end of SA consumers was not as hard hit as the middle segment, Van Tonder adds. The company was successful in its promotion campaigns, including Spur’s Family Card loyalty programme targeting t his market, according to him.