SPUR CORP. LIMITED INTEGRATED REPORT 2014

Operational reports

Spur Steak Ranches

A Taste for Life

Spur Steak Ranches is a family-orientated chain of steakhouses that has been part of the South African family since 1967. We promise a warm, relaxed, family-friendly environment, generous portions of great tasting food and a hearty helping of quality.

Spur Steak Ranches produced strong results, with total restaurant turnover increasing 11.3% to R3.95 billion (2013: R3.55 billion). Existing restaurant turnover grew 9.8%, showing good organic growth in tough economic conditions. This was supported by menu price increases of 3.4% and 3.9% in November 2013 and May 2014, respectively. Franchise revenue increased 10.6% and the division contributed R176.6 million to group profit before income tax – an increase of 11.2% on the 2013 financial year.

Distinct peaks of consumer activity are apparent around mid-month and month-end paydays, which we harnessed through attractive specials and focused marketing initiatives. We continue to target redundant trading periods to maximise efficiency through weekday specials. These offerings continue to prove attractive to cash-strapped consumers.

Food prices, electricity costs, water, rates and fuel rose steeply in the financial year putting pressure on franchisee margins. The group’s environmental sustainability committee has developed a number of toolkits for franchisees advising them of energy-saving solutions and the franchisees that have supported this initiative have realised tangible energy cost savings. Our operations management teams continue to engage constructively with proactive franchisees on improving efficiencies within their outlets to counter escalating costs. Menu engineering remains a key tool for boosting sales and gross margins to compensate for overhead cost pressures.

Skills development was a strong focus for the brand. We introduced the modular management prestige training programme during the year that takes existing and potential managers through the fundamentals of the restaurant business. Employees are recognised for their achievements in this programme by being assigned a rank depending on the level they achieved. The training includes literacy and numeracy skills and six practical modules featuring aspirational levels and performance recognition elements. Every operations manager and franchisee manager was assessed against the required skill set and where necessary, focused training programmes were provided.

One of the critical success factors for the division was the continued refurbishing and upgrading of outlets to ensure a consistent look and feel across the brand.

We opened nine new restaurants locally and closed six, bringing the total number of outlets in South Africa to 370. We also relocated five restaurants to better trading locations. Our franchisees invested approximately R54.0 million in 63 revamps, realising significant benefits from the resulting increases in restaurant turnover. Strategic relocations, refurbishments and installation of new kids’ play areas will continue in the year ahead.

Uptake of Spur’s Family Card grew strongly with membership rising to 1.7 million by year-end. By June 2014, Family Card holders accounted for 44% of total turnover. Card holders visited our restaurants more frequently than non-card holders (repeat visits grew by 47% on 2013 levels) and spent 34.8% more on average. The digital Family Card was successfully launched in October 2013 and customers can now transact on their mobile phones without a plastic card. The rate of R50 loyalty voucher redemptions was 60.2% at year-end, well ahead of industry norms. We launched the Spur Gift Card in October 2013 and, despite not being marketed, sales of the cards have exceeded expectations.

The financial year also saw the launch of several exciting digital initiatives to enhance the restaurant experience, including an augmented reality application that brings Spur characters to life – an industry first in South Africa.

Goals for 2014 Achieved in 2014 Goals for 2015
Open six new outlets Opened nine new outlets Open 10 new outlets
Relocate/revamp 45 outlets Revamped 63 outlets and relocated five Revamp 35 outlets and relocate five
Continue to promote weekday specials Weekday specials remain a key marketing initiative Continue to promote weekday specials
Implement an innovative lunchtime offering It was decided not to proceed with a separate lunchtime menu N/A
Further entrench breakfast market presence Breakfast trading continued to grow despite a small price increase Further entrench breakfast market presence
Focus marketing on product credentials (quality and value proposition) Achieved in marketing and in-store materials Marketing focus will remain on product credentials (quality and value proposition)
Ongoing rollout of smaller model outlets in appropriate locations Opened two additional outlets taking total to 12 Further refine smaller format outlet models and open two more outlets
Continued community involvement A high proportion of franchisees implemented community initiatives in 2014 Continued community involvement
Enhance loyalty offering Cardholders account for 44% of total turnover, 33% of total invoices Leverage off loyalty programme for marketing purposes. Continue to increase participation in loyalty programme
    Continue the focus on training
    Investigate innovation in kitchen equipment and design to improve efficiency

Full details of our historic performance and goals are available in the key performance indicator table.