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INTEGRATED REPORT 2017

Passionate people building great brands

OPERATING CONTEXT

Growth in gross domestic product (GDP) in South Africa has been generally weak since the second quarter of 2015. The country slipped into a technical recession in the first quarter of 2017 after two consecutive quarters of contraction, indicating the generally weak state of the South African economy.

Spur Corporation’s brands operate in a highly competitive market. In recent years, competition for share of stomach has increased due to the growing presence of standalone restaurants, new brands, international restaurant and fast food brands entering the South African market, as well as through the availability of quick meals from convenience stores and supermarkets.

Consumer spend is also dependent on disposable income. In South Africa, salaries are increasing at an average of 6% to 8%. However, rising food, petrol and electricity prices tend to run ahead of these rates, reducing the money available for discretionary spend.

Consumer confidence affects the likelihood that consumers will spend money, as well as the number of times a consumer is likely to visit a restaurant in a single month. Consumer confidence has been negative since early 2015.

In order to grow revenues, Spur is also dependent on a ready supply of prospective franchisees with the necessary funds to invest. With business confidence levels in negative territory (below 50) for an extended period, investors are less likely to commit to new business ventures.

For existing franchisees, increases in the cost of the meat, vegetables and fruit reduce profit margins, affecting their return on investment and ultimately impacting the financial sustainability of the business. Vegetable prices grew rapidly for most of last year as a result of the drought. This has started to feed into the price of meat, which continues to climb.

Case Study

Spur franchisees – in the community and for the community

As part of Spur’s celebration of “50 years of Spur People”, we produced several videos for the Spur channel on YouTube that profile Spur franchisees from around South Africa. The videos enable franchisees to tell their stories and highlight their many and varied activities in their local communities.

The success of every Spur restaurant is directly related to the owner’s dedication and involvement in their community. These videos emphasise that each Spur is individually owned by a member of the local community, and that Spur franchisees have been giving back by supporting their communities – especially children – for generations.

Many franchisees actively support local schools, sports clubs, old age homes and churches through a range of initiatives including sponsoring sports kit, sports tours and sporting events, arranging golf days and hosting fundraising events. In many instances, franchisees also support initiatives in the communities in which restaurant employees live.

View these videos and more at Spur’s YouTube channel at
www.youtube.com/user/SpurChannel/videos
.