Spur to consider selling struggling Captain DoRegos

© Andrey Armyagov – 123RF.com

Speaking at the release of the company’s interim results to end-December, CEO Pierre van Tonder said on Thursday that he was pleased with the growth in franchise brands outside the traditional Spur Steak Ranch offering. Spur saw a better-than-expected performance from recently acquired gourmet burger specialist RocoMamas, while Panarottis Pizza Pasta grew restaurant sales 22%, The Hussar Grill by 37% and John Dory’s 20%.

These all outstripped the Spur Steak Ranches brand, which pushed up restaurant sales 6%.

The core Spur brand, though, still accounted for the bulk of the R170m pretax profit, generating a wholesome R107m. Spur’s central kitchen and distribution arm chipped in R37m, with Panarottis making R11.9m, and RocoMamas and each John Dory’s contributing R5m.

Van Tonder said it was the company’s plan to ensure all the smaller brand formats achieved gross margins of 75%-80% within five years.

"Spur operates on an 89% margin and we won’t be happy with anything less than 75% for our other franchise brands."

He warned that margins might be lower in countries elsewhere in Africa due to a higher cost base, but estimated that margins outside SA could pan out at 60%-65%.

In the interim period Panarottis managed a 71% margin, while John Dory’s and RocoMamas achieved 54% and 63%, respectively.

The smaller brands represent about 42% of Spur’s 572 stores, and Van Tonder believed that the profit split between the core Spur brand and the other eateries could be 50/50 within five to six years.

Spur, though, is still suffering a bout of indigestion with Captain DoRegos, a trading format that pitches to the lower-income market. Van Tonder said the Captain DoRegos business had stabilised following the post-acquisition consolidation of the brand, but indicated that sales growth of just 0.6% reflected the tough trading conditions in the lower-income market.

He conceded that a possible option for Spur was to bulk up Captain DoRegos for a sale. "We would look to improving the operating margin substantially and expanding the brand’s presence in Africa. In two or three years we may be able to sell it."

Overall, though, Spur looks determined to remain on the front foot and planned to open 31 restaurants across its brands in SA in the second half, most notably 17 RocoMamas outlets.