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South Africa: Taste Sees Downturn As Boon for Cheaper Fast Food
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Business Day (Johannesburg)
7 May 2008
Posted to the web 7 May 2008
Nicola Mawson
Johannesburg
FRANCHISE group Taste Holdings expects to weather the slowdown in consumer spending as South Africans trade down to fast-food outlets that offer value for money.
CEO Carlo Gonzaga said yesterday he expected consumers to continue to eat out, but to switch to cheaper options.
The group aims to open eight to 10 Scooters outlets and four to six Maxi's outlets over the next six months. Gonzaga said the firm had received record inquiries from prospective franchisees.
Taste, which will expand outside fast food when its purchase of NWJ becomes unconditional in August, reported headline earnings up 28% to R10m from R7,8m for the year to February.
Revenue rose 15% to R33,8m from R29,5m and headline earnings per share grew to 8c from 6,6c.
Its purchase of franchised retail jewellery chain NWJ Holdings will grow turnover across the group (excluding discounts and vouchers) to R650m and the total number of outlets to 240.
The group expects its acquisition of BJ's sites at Caltex stations along highways to be earnings enhancing from the start of this year. The deal creates the potential for 13 Maxi's sites and Taste is in the process of converting The Bridge BJ's site on the N1 between Johannesburg and Pretoria into a Maxi's.
The group had 161 outlets by year end, a 9,5% increase on the previous year.
Increased space had bolstered sales and allowed the group to invest in marketing, which included television advertisements for Maxi's .
Scooters Pizza grew its national footprint by 14 outlets, taking the total to 115. The group expects that its introduction of a 20% lower cost outlet option will bolster growth and enhance franchisees' return on investment.
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Maxi's, which has 46 outlets, is undergoing a revamp with 12 stores already upgraded and six to be overhauled this year. Revamping the outlets results in an uptick in turnover of 15%-35%.
Taste, which manages its franchisees' supply chain and sourcing, aimed to limit inflationary input cost increases to ensure the brands remained competitive.
The group was also seeking other franchisees to add to its portfolio and hoped to complete a deal in the next 18 months. It evaluated 15 companies last year. Gonzaga said some of those rejected may become feasible again as the economic climate brought prices down.
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