Here’s how well your favourite fast food chain is doing in the current economy

Famous Brands on Wednesday (29 May) reported a marginal (2%) rise in revenue for the year ended February 2019 to R7.2 billion.

Gross profit however, declined 5% to R3.6 billion, while operating profit before non-operational items also decreased 5% to R849.7 million.

Famous Brands is home to numerous casual-dining and fast food chains in South Africa including Steers, Wimpy, Debonairs, Mugg & Bean, Tashas, Salsa, Mythos, and Turn n Tender. It also owns Gourmet Burger Kitchen (GBK) in the United Kingdom.

Headline earnings per share dropped 19% to 319 cents per share, the group said, highlighting economic and political uncertainty in its major markets, both locally, in the lead up to the national government elections, and in the UK.

“Across these markets, the trading environment was characterised by restrained consumer discretionary spend and negative sentiment, while keen competitor activity intensified margin pressure. In South Africa, weak economic conditions were exacerbated by country-specific risks,” Famous Brands said.

Technological advancements continued to cause a strategic shift in the industry, the holding group said, “evidenced by the rapid growth of online ordering and door-to-door delivery services in our sector”.

The board declared a gross dividend of 100 cents (2018: nil) per ordinary share.

Brands

Famous Brands said that it has a portfolio of 25 restaurant brands, represented by a network of 2,871 operations across South Africa, the rest of Africa and the Middle East (AME) and the United Kingdom.

The business is segmented into Leading brands and Signature brands, strategically positioned to appeal to a wide range of consumers across the income and demographic spectrum and across meal preferences and value propositions.

The Leading brands are categorised as quick service, fast casual and casual dining. “Our network comprises 2,761 franchised and 110 company-owned operations,” it said.

Revenue grew by 5% to R895 million. Operating profit rose by 10% to R476 million, while the operating profit margin increased to 53.2% (2018: 50.7%).

“Given the subdued economic environment, our expansion programme was measured and conservative. We opened 162 restaurants (2018: 182) and revamped, relocated or converted 260 sites (2018: 248),” the group said.

Among its leading brands, Debonairs Pizza grew market share in a robust category, while Wimpy gained back share, arresting the decline experienced in the previous year.

Steers and Mugg & Bean retained their market share, and Fishaways did well to hold steady, it said.

“Across these brands, our key focus during the period was to continue to improve the experience and service for our customers. Over 850 of our SA restaurants have now enabled online ordering via web or app. We also introduced driver-tracking technology and expanded our delivery offering to over 2 000 drivers on all major delivery platforms,” Famous Brands said.

Signature brands portfolio

The group said that its Signature brands ‘under-performed management’s expectations’, and remain the subject of critical review. “System-wide sales growth was derived primarily from new restaurants, while like-for-like sales declined,” it said.

Famous Brands said that in line with its strategy to apply a ‘brutal filter to unclutter the business’, it continued to aggressively rationalise this portfolio to position it for growth.

It therefore exited the following businesses during the reporting period: 14 on Chartwell (one restaurant); Thrupps (five outlets closed due to a strategy review by partner Total); O’ Hagan’s (two restaurants); The Bread Basket; and the Made pilot project trialled with Edgars.

It said that 32 new restaurants were opened across the portfolio and four were revamped.

“During the review period, we acquired the balance of the 49% shareholding in the Mythos joint venture partnership, in which the group already owned a controlling stake,” it said.

Prospects

Looking ahead, the group said that it is unlikely that local or global trading conditions will improve materially in the short term, “but the efforts made this year to restructure our business to withstand adverse conditions should hold us in good stead”.

The group said its goal is to open 187 restaurants in the new financial year, while 308 revamps are planned. “This programme will however be determined by an improvement in trading conditions,” it stressed.


Read: These 2 major US fast food brands are having a hard time in South Africa

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Here’s how well your favourite fast food chain is doing in the current economy