Famous Brands looks to drive-throughs

• The group says ‘changing consumer expectations have unlocked food delivery as a sustainable category’

Famous Brands said it is investing more in smaller stores and drive-throughs in response to changing consumer behaviour and a preference to eating at home.

The restaurant group, which owns Wimpy, Steers, Debonairs and Fishaways, will also continue investing in delivery, as it is becoming more profitable.

The company opened three drive-through restaurants in SA in the 2023 financial year and will focus on growing this format in the current financial year.

“The format meets consumers’ growing requirements for convenience and security. We are investing in delivery technology to improve our lastmile efficiency. Partnerships with third-party platforms will remain critical,” it said.

Famous Brands said “changing consumer expectations have unlocked food delivery as a sustainable category”. It increased the total dividend for the year more than four-fifths, to 363c per share. Gross profit rose 9.1% to R3.2bn.

Operating profit increased more than one-third to R860.9m and the operating profit margin 1.9 percentage points to 11.6%. Total profit for the year jumped 56.2% to R555.3m and headline earnings per share, a common profit measure in SA, 37.1% to 488c.

The company owns 17 restaurant brands and earns franchise fees from 2,887 restaurants including Mugg & Bean and Vovo Telo outlets. Of all the restaurants, 87.2% are in SA, just more than one-tenth in the rest of Africa and the Middle East, and the rest in the UK.

In SA sales improved after the lifting of all Covid-19 restrictions in June 2022. “With many consumers working in hybrid and remote jobs, mealtimes have become more flexible and spread across the day.”

But evening sit-down trade has not recovered to prepandemic levels, and consumers tend to make earlier bookings, the company said.

The recovery was bogged down in poor local economic conditions such as high unemployment, persistent power cuts, and interest rates hikes, with high inflation dampening consumer spending. It was able to put up prices an average 12% as input costs rose.

Its signature brands, including more formal restaurants such as Turn ‘n Tender, Salsa and Mythos, made a R14m profit after posting a R8m loss in the previous year, when there were curfews and alcohol restrictions. However, it impaired the value of its signature brands by R5m, suggesting future earnings will be less than previously expected and impaired R36m in the Wimpy UK chain, as the UK consumer environment remains challenging.

Famous Brands is cautiously optimistic about prospects in Africa and the Middle East and opened its first Debonairs pizza chains in Saudi Arabia and Oman and its first Steers chain in the United Arab Emirates.

In SA, it said, load-shedding can be difficult for smaller franchisees who may not be able to afford backup power or the costs of running it.

“We are concerned about SA’s weak economic prospects and high levels of load-shedding,” Famous Brands said. “A constrained consumer and a competitive environment mean we must compete even harder for a share of wallet.”

EVENING SIT-DOWN TRADE HAS NOT RECOVERED TO PREPANDEMIC LEVELS, AND CONSUMERS TEND TO MAKE EARLIER BOOKINGS