Using restaurant turnover data published by the group, along with the number of restaurants as at the end of the period, it is possible to calculate an average turnover per store per month. Obviously, the July to December half of the year is the seasonal peak for any retailer (including casual dining). There will be smaller restaurants that book far lower turnovers and there will be gorillas that will do many more times the average (such is the nature of crude averages).
The table above only tells one half of the story, however. Costs and margins at a store level are (obviously) not disclosed by the group.
The year-on-year increase in Spur restaurant turnover (from H1 2016 (July-Dec 2015) to H1 2017 (July-Dec 2016)) as disclosed by the group is 4%.
But, it passed a 3.3% average menu price increase in December 2015 and a further 2.1% increase in June 2016, both of which would’ve flowed through to the most recent comparative period. In other words, if a menu item was R69.90 in November 2015, by November 2016 – on an average basis – it would’ve been nearly R74. This is an increase of 5.5%.
Now, compare that 4% turnover growth to the (average) price increases and you’ll realise that sales – after inflation – are in decline.
Average menu price increases at Spur Steak Ranches
- 4%: November 2013
- 9%: May 2014
- 9%: December 2014
- 6%: June 2015
- 3%: December 2015
- 1%: June 2016
- 5%: December 2016
Spur has arguably battled to contain its menu price inflation (especially when compared to official CPI data). It has used menu item innovation (changing items/portion sizes) as well as efficiencies from central procurement to try and manage price increases.
There is further evidence of the strains that franchisees are under in the results of Spur Corporation’s manufacturing (and distribution) division where it makes and distributes sauces and certain meat products for its franchisees. Its operating margin declined by 80 basis points (nearly one percentage point) between H1 2016 and H1 2017, to 37.7%.
In its sauce manufacturing business, it increased selling prices by 5.7% this month (subs: March 2017) which it has been “unable to pass… onto franchisees”.
Spur says it will replace the Monday special with a R50 burger, along with a sauce at a discounted price. Other promotions and menu items will replace those being removed.
Perhaps the writing is on the wall for rival Steers’ longer-running Wacky Wednesday promotion too (two price burgers for the price of one (R45.90)?
Hilton Tarrant works at immedia. He can still be contacted at hilton@moneyweb.co.za.
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