SOCIAL MATERIAL MATTERS
Spur Corporation’s activities and operations are regulated by a range of legislation. Ensuring compliance with these regulations is an essential aspect of the company’s commitment to good governance. Excessive regulation, or a volatile regulatory environment, can affect the viability of the operating models, increase the difficulty of strategic planning and discourage potential franchisees.
Failure to ensure regulatory compliance in the group creates
the risk of monetary fines, reputational damage and the loss
of its legal and social licence to operate. While Spur Corporation is not directly responsible for the regulatory compliance of franchisees, compliance failures at franchisee level can have
a direct reputational impact on the group and its brands.
There are also a number of proposed laws, guidelines and codes of conduct currently under discussion, several of which have the potential to affect the group’s business and franchisees. While it is not clear when these laws will be promulgated or what their exact final nature and impact will be, we continue to monitor their development and engage proactively with the relevant authorities to ensure that the practical implications for the industry are understood.
Proactive and systematic management of compliance is the responsibility of the group’s in-house legal and compliance officer. The group chief financial officer, assisted by the legal and compliance officer, is responsible for monitoring compliance within the organisation, assessing potential consequences or risks associated with new legislation, and reporting to the social, ethics and environmental sustainability committee in this regard. Significant non-compliance with mandatory laws and rules will be reported to this committee, and escalated to the board as necessary.
Departments in the group affected by pending legislation monitor progress and the likely impacts in their areas of the legislation, and report back to the board committees and the board. Franchisees are kept informed regarding regulatory developments and operations teams provide guidance on implementing the required response.
The primary regulatory concerns for the group currently include:
Consistent quality of food is a critical issue in the restaurant industry. Spur Corporation’s centralised procurement function monitors suppliers’ and the outsourced distributor’s compliance with HACCP and/or ISO 22000, the food safety management system, and engages independent parties to conduct specialised food safety audits of suppliers and franchisees. Franchisee employees receive training in food preparation, food safety and other relevant areas. Operations managers monitor food quality during store inspections.
B-BBEE rating of franchisees
The group encourages franchisees to improve their broad-based black economic empowerment (“B-BBEE”) status as part of our commitment to transformation. Where franchisees are unable to produce verified B-BBEE certificates of an acceptable level, there is a risk that they may not be granted business licences, liquor licences, leases in strategic locations such as casinos and airports, or they may be penalised by landlords.
The B-BBEE status of suppliers can have a significant impact on those of franchisees and, wherever possible, Spur Corporation’s procurement function uses its influence to effect transformation among suppliers of the outsourced distributor. We have established a structured solution to assist franchisees to improve their B-BBEE ownership level and this is currently being presented to franchisees around the country.
Guideline 14 of the Food and Cosmetics Act
Guideline 14 was released in 2015 by the Department of Health (“DOH”) and prohibits the marketing of food items deemed to be unhealthy. Spur Corporation is engaging with the DOH through an industry body to explore ways in which the industry can self-regulate to address issues raised within the guidelines. Milestones and timelines have been set to satisfy the requirements for self-regulation and Spur Corporation is committed to achieving these. Requirements include displaying the kilojoule content of meals, and ceasing the use of toy-and-meal combos.
The Spur adult menus include Choose Healthy Options Wisely (“CHOW”) accreditation, which links into the CHOW app to offer customers independent verification that aims to influence behavioural change and promote healthier eating. “Better for You” meals have been introduced to the kids’ menu in the form of healthier side options.
Proposed changes to liquor licensing laws
Spur Corporation continues to engage with the Department of Trade and Industry (“dti”) regarding the proposed Liquor Amendment Bill. The bill includes proposals that will have a substantial impact on establishments serving alcohol, and on the people who work in them. These include limitations on liquor licence holders that operate within 500 metres of schools, places of worship, recreation facilities, rehabilitation or retreat centres, residential areas and public institutions. The extended liability clause could hold manufacturers, distributors and retailers responsible for all alcohol-related harm and damage caused when alcohol is consumed.
The Franchise Association of South Africa (“FASA”) Code
FASA is a non-profit organisation that represents the interests of franchisors, service providers and franchisees in South Africa with the objective to promote ethical franchising. The draft FASA Code of Ethics and Business Practices provides for the establishment of a franchise industry ombud. The appointment of the ombud was gazetted in 2016; it is yet to happen, but could have a significant impact on franchisors once finalised. Spur Corporation engages with other industry players in the casual dining and quick-service restaurant (“QSR”) franchising industries on an ongoing basis to monitor developments to proposed legislation and regulations.
Protection of Personal Information (“POPI”) Act
POPI affects the management of confidential consumer information held by companies and prescribes the manner in which personal information is to be collected, captured, stored, used and deleted. Spur Corporation has conducted extensive analysis of the impact POPI will have on the group, including assessing information flow and security at the group’s head office, corporate offices, retail and ancillary operations, which include marketing, the call centre and the group’s customer loyalty programmes.
Tax compliance is a standard board agenda item, reflecting the rising complexity of local and international tax frameworks and the increased assertiveness of revenue authorities.
HEALTH AND SAFETY
The health and safety of our employees and customers is a critical concern for the group. This matter is most relevant to the group’s manufacturing operations at the sauce and décor facilities.
While franchisees are responsible for health and safety at their operations, compliance at restaurants is a key concern for the group since this could pose a reputational risk for the group, particularly where kids’ facilities are concerned.
The group’s occupational health and safety structures are monitored by the health and safety committee. Monthly health and safety reports are made to head office, and progress on health and safety compliance is reported to the chief executive officer on a quarterly basis.
Spur Corporation’s corporate offices and manufacturing facilities have health and safety systems in place that are audited by an external party. Manufacturing sites are audited monthly and non-production sites quarterly. No major injuries were reported during the year under review.
The group supports health and safety at franchisees through occupational health and safety and first aid training that is provided to franchisees. Franchisees’ health and safety procedures and policies are reviewed by the operations management teams to ensure that these comply with the relevant legislation.
Customer satisfaction is an important value driver for the group that supports the growth and retention of a loyal customer base. Service excellence is a critical component of the brand promise at each restaurant in the group.
Spur Corporation has a range of initiatives in place to address customer service. These operate at different levels in the group and include:
- Franchisee training, which emphasises the importance of providing excellent customer service.
- Training of franchisee management staff through the modular Management Prestige Training Programme, which includes training on managing and resolving complaints quickly and efficiently in-store. Franchisee staff also receive training in conflict management.
- Spur Corporation’s in-house customer service centre achieved nearly 100 000 interactions during the year and is an important customer touchpoint and base for monitoring consumer relations. The service centre also supports franchisees and provides customer feedback to franchisees to ensure any required operational improvements are addressed. Around 6% of all interactions in 2017 related to complaints, 10% to compliments and 84% to queries.
- Spur Corporation’s social media team monitors and responds to queries, compliments and complaints posted to sites such as TripAdvisor, GoReview, Facebook and Twitter. Negative comments are forwarded to the customer service centre for logging and resolution.
The group’s customer loyalty programmes include the Spur Family Card, John’s Club Card (John Dory’s) and the Panarottis Rewards Programme, which have been designed to grow sales and reward customer loyalty. There are also local customer loyalty programmes at Spur Corporation restaurants in several countries across Africa.
The main focus regarding the Spur Family Card during 2017 was on acquiring a new loyalty provider rather than on member acquisition and active members declined to 1 770 000 in 2017, below our target of 2 008 000. Loyalty spend reached R2.0 billion and the redemption rate of the Spur Family Card vouchers remains at well over 70%. A team of loyalty card fraud agents monitors suspicious activities and trends, and these are reported to franchisees for follow-up.
Spur Corporation invests heavily in building its information technology (“IT”) capability as a key enabler of achieving excellent customer service. This investment supports the group’s ability to influence purchase behaviour across all target markets through platforms such as digital loyalty, e-gifting, business-to-business e-commerce/loyalty, GPS locations, generator notifications and social network management. The group is in the process of consolidating the loyalty and gifting programmes into a single platform to improve innovation, customer-reward capabilities and fraud detection.
|Loyalty membership (’000)||Loyalty spend (R’m)|
|2017 target||Achieved||2018 target||2017 target||Achieved||2018 target|
|Spur Family Card||2 008||1 770||1 848||2 038||2 000||2 100|
|John’s Club Card||250||193||230||129||169||178|
Spur Corporation’s vision commits the group to make a positive and lasting difference in the lives of those we interact with, including communities. This commitment also aligns with the spirit of generosity, which is one of the group’s core values.
Many of our franchisees are active in their local communities with a range of initiatives, some of which are discussed here.
The Spur Foundation runs corporate social investment (“CSI”) initiatives at a group level. These projects focus on feeding and educational programmes for children, and on the provision of basic necessities, in line with the Foundation’s motto of: “Nourish, Nurture, Now!”.
Initiatives funded through the Spur Foundation emphasise support in the first 2 000 days of a child’s life, particularly Early Childhood Development (“ECD”) and nutrition. We believe that South Africa can only grow if we, as a nation, are able to address the developmental challenges facing its citizens. By providing support over the critical phase in a child’s early development, the supported initiatives help to lay a strong educational foundation on which a healthier, more prosperous and better society can be built.
In 2014, Spur Corporation committed to funding the Foundation through a donation of 100 000 treasury shares per year for five years. To date, three tranches of shares have been transferred. The dividends from these shares will provide ongoing annuity income to sustain the Spur Foundation’s CSI initiatives. Funding is further supplemented by contributions from Spur Advertising and franchisees, and event contributions.
The Foundation also has a Staff Initiatives programme providing limited funding to staff who are actively involved with charitable work in their communities. This programme has been well received by staff.
In 2017, we launched the Full Tummy Fund initiative as a programme of the Spur Foundation and the vehicle used to invest in educational development and nutritional programmes. John Dory’s already supports the Full Tummy Fund by adding an automatic donation of R2 to a selected kids’ meal on their menu; Panarottis went live early in the 2018 financial year and other restaurants in the group are in the process of implementing similar initiatives. We also launched the new Full Tummy Fund website (www.fulltummyfund.co.za), which highlights the work done by the Foundation, introduces our various beneficiaries and lists ways in which the public can get involved. The website also hosts a gallery of images, news articles and has an online donation portal allowing donors to make a secure online donation.
The Spur Foundation supported a number of initiatives in 2017 including:
- The ASHA Trust: establishes holistic, age-appropriate learning centres for children aged nought to four in Alexandra, Gauteng, benefitting 830 children.
- Ikamva Labantu: works with over 380 preschools, which positively affect over 17 000 babies, toddlers and children, directly assists over 240 children and youth at risk and 134 vulnerable families.
- Joint Aid Management (JAM) South Africa: helps establish food gardens at more than 1 700 ECD centres that feed over 84 000 children every school day.
- Spur Foundation’s 2016 Charity Golf Tour raised R400 000, which was donated to two of our official beneficiary partners: JAM South Africa and the ASHA Trust.
- Spur Corporation’s Mandela Day focus for 2017 was on seven ECD facilities in Durban, Johannesburg and the Western Cape. Each was given a mini-makeover by the Foundation’s willing volunteers. Full Tummy Fund gardens were established at three of the centres – two in Gauteng and one in the Western Cape.
- Spur Corporation has a voluntary employee salary deduction donation scheme and employees are encouraged to make a difference in their communities.
- Spur Corporation funds a range of community-focused events that encourage families and children to improve their health while having fun and experiencing the Spur “taste for life”. More than 435 events were supported that aim to uplift communities through sport. Funds raised through these events support feeding schemes as highlighted below.
Total CSI spend for 2017 was R2.9 million (2016: R2.2 million), including voluntary employee salary deductions, representing 2.1% of net profit after income tax.
Official beneficiary partners:
Associate beneficiary partners include:
For more information on these and other beneficiaries, please visit www.fulltummyfund.co.za and
Spur Foundation www.spurcorporation.com/governance-sustainability/spur-foundation/.
HUMAN CAPITAL AND SKILLS DEVELOPMENT
Spur Corporation’s business model centres around people, and the group’s employees are critical components in the group’s ability to create value for all stakeholders. The group continues to invest time and resources in growing and retaining its human capital. In a fast growing global economy, the war for talent continues to drive the need to ensure the best in talent management practices across the group. We accordingly review and improve our talent acquisition practices continually, benchmarking our reward and remuneration practices while ensuring the retention of critical talent across the group.
528 people were employed at Spur Corporation’s South African operations as at 30 June 2017 (2016: 490).
Spur Corporation’s human resource (“HR”) function is responsible for incentivising, motivating and providing opportunities for advancement through the Employee Value Proposition to ensure an agile and fit-for-purpose workforce.
The group values the diversity in its workforce and seeks to create equal opportunities for all employees. We do not tolerate discrimination of any kind and have formalised disciplinary and grievance policies and procedures that are communicated to all employees. Diversity and inclusion workshops were held during the year.
The group holds employee roadshows twice a year to increase employee engagement and to enable the group to access real-time feedback and concerns. A comprehensive employee engagement survey was held in the financial year and targets to address areas for improvement have been established across all business units.
A Line Manager’s Development Forum is in place in Johannesburg and Cape Town to provide a platform for managers to learn from each other through experience
An active Employee Assistance Programme is in place that funds counselling for employees in need, small emergency staff loans at affordable interest rates and wellness-at-work initiatives. These include free sight assessments, flu inoculations and talks on basic personal financial management.
The group’s succession plan aligns with our transformation goal, differentiating between actual and earmarked successors and identifying the need for external appointments.
An external benchmarking review of operations management employees, completed in June 2016, indicated a shortfall against the group’s stated remuneration policy and adjustments were made in 2017 to bring these in line.
Corporate employee rotation – a measure of employee turnover – increased to 12% (2016: 6%), largely as a result of the higher employee turnover in corporate owned retail outlets, which is typical of the retail restaurant industry.
Spur Corporation focuses on employee learning and development, and regular career discussions are held with employees to align individuals with their core skills and capabilities. Transformation is a critical consideration in training initiatives for group employees and upskilling and promotion of appropriate equity candidates is prioritised.
Employee development is supported through a number of initiatives including:
- The Multi-Store Leadership Programme attended by all operations managers and certain head office employees to grow their knowledge and sharpen their franchisee management skills.
- Adult Education and Training (AET) numeracy and literacy programmes, which are being expanded to facilitate completion of an online Matric qualification.
- A bursary scheme for the children of employees, which allocated R564 263 in bursaries in 2017.
- Financial support for business-related studies.
- A Management Development Programme hosted at the University of Stellenbosch Business School. Nine managers successfully completed the programme during the year and one additional manager completed a New Manager Development Programme also hosted by the University of Stellenbosch Business School.
- An outsourced Leadership Development Programme, which starts with tests to identify individual areas of strength and weaknesses, along with a structured programme to support and address these areas.
The group invested R2.2 million in employee training across the above and other projects, including group funding of tertiary studies for employees and bursaries for employees’ dependants.
|2017 target||Achieved||2018 target|
|Corporate employee rotation||15%||12%||10%|
|Employee training costs (R’000)*||2 000||2 248||2 057|
|* Includes dependents’ bursaries.|
FRANCHISEE EMPLOYEE TRAINING
The group provides training to franchisee employees to support franchisees in running successful businesses. Improving skills in restaurant employees strengthens the group’s brands and builds consumer loyalty through ensuring the highest standard of food quality and service at restaurants. Given the group’s commitment to investing in skills development, well-trained management staff at franchisees are attractive to competitors and the high level of turnover at this level is a concern.
Franchisee employee training initiatives includes:
- Training centres in Johannesburg, Durban and Cape Town
offer Spur Training Academy workshops in food preparation and food safety, operational efficiencies, financial management, sales techniques, management skills, environmental awareness and customer safety. In total,
11 835 franchisee employees were trained at internal workshops and regional training in major centres.
- The Management Prestige Training Programme is a modular training programme with six modules of two weeks each that includes theoretical and practical components. Employees receive recognition for each level passed as their skills develop.
- Practical training is offered at training restaurants around
the country to ensure franchisees and restaurant management are capable of managing all aspects of a franchise business. A total of 256 people received practical training in 2017.
- Practical product workshops for all restaurant brands are run through the Management Prestige Training Programme. The programme features modules of two weeks each and focuses on improving the manufacturing skills of the various franchisee management teams and production employees.
- Online testing and assessment enables franchisees to test waitron product knowledge in-store and to complete Management Prestige Training Programme assessments. New modules are loaded every six months and, to date, more than 18 000 registered users have accessed this. Video training material is being developed to enhance this programme.
- The training centre also delivered several special interventions during 2017, including play canyon attendant training
(1 198 attendees), a conflict and aggression short course
(1 135 candidates) and the Panarottis loyalty programme
(1 367 candidates).
|2017 target||Achieved||2018 target|
|Employees trained (franchise and corporate)||12 500||11 835||13 750|
|Spur College of Excellence graduates1||40||20||–|
|1 The Spur College of Excellence was closed during 2017.|
Spur Corporation believes that the long-term success of South Africa is critically dependent on transformation and the group is committed to the principles of B-BBEE. Our transformation initiatives support the development of historically disadvantaged individuals at franchises and Spur Corporation corporate offices.
Transformation is monitored by the transformation committee and progress is measured against the dti Codes of Good Practice. The revised codes led to a decline in the group’s B-BBEE rating from level 5 to a non-compliant score due to the more stringent requirements of the revised codes and the introduction of subminima which we were unable to achieve. A gap analysis against the revised codes has been completed and the transformation committee has approved the BEE targets proposed by management. A detailed plan has been developed to improve the group’s B-BBEE rating in the medium term.
Spur Corporation will fall under the Tourism Charter of the BEE codes.
|dti Codes of Good Practice category||Score 2016||Score 2015*|
|Employment equity (now included in management control)||N/A||2.13/12|
|Preferential procurement (now included in enterprise and supplier development)||N/A||18.09/20|
|Enterprise and supplier development||9.36/40||0.28/10|
|Codes of Good Practice Level||Non-compliant||Level 5|
|* Measured in terms of the previous dti Codes of Good Practice before revision.|
Employment equity (“EE”) is an important aspect of transformation and an area of significant focus for Spur Corporation. The group’s EE Plan aligns the recruitment policy with the EE requirements of the Codes of Good Practice. Improvements in EE will be supported over time by the group’s skills development initiatives and recruitment policy, which support greater transformation in Spur Corporation’s management and workforce.
The employee composition in Spur Corporation’s South African operations at 30 June 2017 was as follows:
|Professionally qualified and experienced specialists and mid-management||27||22||49||13||36||19||19||38||10||28|
|Skilled technical and academically qualified workers, junior management, supervisors, foremen and superintendents||68||86||154||91||63||66||82||148||83||65|
|Semi-skilled and discretionary decision-making||116||124||240||179||61||107||119||226||180||46|
|Unskilled and defined decision-making||18||35||53||53||–||14||30||44||44||–|