As part of its diversification strategy, Spur Corp’s eponymous steakhouse brand now accounts for only half of the group’s restaurants — but it remains its highest-margin brand and its strongest earner.
The strategy has sparked questions: could the group have grown even faster by doubling down on South Africa’s most iconic steakhouse brand? Or has spreading its bets across multiple formats been the smarter move?
Either way, it is paying off. Spur Corp hiked its dividend 40.4% to 299c a share on the back of robust full-year results, with strong brands, loyal customers and disciplined franchising driving a competitive performance.
Anthony Clark, founder of Smalltalkdaily Research, says the group’s second-half performance was heavily supported by the Spur Steak Ranch brand, which has refreshed its menu but retains its core strengths, including consistency from one generation of customers to the next.
Clark also cites the notable turnaround at Panarottis, driven by a refocused brand strategy.
“Customers are dining in more at Panarottis. John Dory’s, however, continues to struggle due to high fish prices. RocoMamas is being fine-tuned to sustain momentum, and Hussar Grill remains resilient.”
He says the group’s results were “very solid”.
“They pay a strong dividend and it is tightly run, with firm cost control.”
Over the past year, customer numbers at Spur Corp’s various brands were flat, but they spent slightly more on meals. Brands benefited from store revamps and targeted marketing campaigns that helped them to compete with the home meal replacement options offered by many retailers.
Spur Steak Ranches generate 65.9% of franchise revenue and 71% of South African franchise profit, with margins at a hefty 87%. The brand continues to deliver reliable and strong returns for both the group and its franchisees. But the contribution from others in the stable is growing fast.
The most recent addition, Doppio Zero, has quickly become a heavyweight in the speciality division. Doppio Collection now accounts for 42 of the 80 speciality restaurants. Between them, Doppio and Hussar Grill contribute R1bn in annual sales and Doppio is set to expand into Africa, with a Zimbabwe store planned for later this year.
The largest “day part” revenue stream for the group, at 51%, is lunch time.
They might not want Spur every night – sometimes they want pizza, seafood or sushi – and our portfolio keeps that spend inside the group
— CEO Val Nichas
CEO Val Nichas, who took the helm five years ago, says the group’s “house of casual dining brands” strategy offers “a lovely cross-pollination”. About one in three Spur steakhouse customers also eat at Panarottis. “They might not want Spur every night — sometimes they want pizza, seafood or sushi — and our portfolio keeps that spend inside the group,” she says.
The diversification has also cushioned the group against shocks. Beef prices have spiked as much as 25% amid a foot-and-mouth outbreak, which Nichas calls the year’s “biggest market disrupter”. Spur invested more than R1.5m to secure fillet supplies and has shifted marketing towards other protein options such as chicken and seafood. Supply chain efficiencies delivered the biggest savings to franchisees in five years.
Across its 724 outlets in 14 countries, the group continues to modernise. Franchisees have spent R200m on opening new outlets and revamping existing ones, with most revamped stores reporting double-digit sales growth.
While the Spur brand increased restaurant sales 4.8% to R6.64bn (64% of total South African sales), the speciality brand portfolio increased sales 36.2%.
Restaurant sales at Panarottis rose 13.6% to R1bn and at RocoMamas by 5% — these represent 10% and 9% of local sales respectively. Not all brands are firing on all cylinders — sales dropped at John Dory’s and Nikos.
Franchised restaurant turnover was up 8.3% at R11.5bn. Group revenue grew 11.2% to R3.9bn thanks to the strong performance of the manufacturing and distribution division and higher sales in company-owned stores after the inclusion of 11 restaurants in the Doppio Collection.
Interestingly, takeaways now account for 13% of sales, boosted by virtual kitchen (VK) brands such as Pizza Pug and RibShack RocoFellas. A new VK curry brand, Spice Sisters, launches later this month.
Nichas is upbeat about the outlook. Lower inflation and interest rates are offering some relief to debt-burdened consumers, “while the stable electricity supply is supporting consumer and business confidence”.
Spur Corp plans to open 56 new outlets in the year ahead — 42 in South Africa and 14 abroad.
The group’s portfolio is working well with its focus on home-grown brands. The eating-out market has rebounded since the pandemic, with Spur Corp’s share price more than doubling over the past five years.
After last week’s results, Spur disclosed that an arbitrator had partially ruled against it in a multimillion-rand dispute with GPS Food Group. The case, six years in the making, centres on an alleged verbal agreement to develop and operate a rib-processing facility intended to supply products to Spur. The company has consistently denied that any binding agreement existed. While the arbitrator has yet to determine the value of the award, Spur plans to appeal the decision within the next 30 days.
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