SOUTH AFRICA – The steakhouse franchise restaurant chain, Spur Corporation has acquired 51% stake in Nikos Coalgrill Greek chain, a brand that the company believes has the potential to expand to about 50 restaurants nationally over the next few years.
Spur CEO Pierre van Tonder said that Spur was seeking out more opportunities in a largely fragmented restaurant market as long the brands don’t clash internally, reported Business Day.
According to him, restaurant brands that had the potential to expand into 30 or 40 strong franchise chains typically traded at slightly better margins than Spur’s eponymous steakhouse brand, which still accounts for the bulk of the group’s franchise revenue and profits.
Nikos grill is an addition to its own family brands it operates under the Spur Steak Ranches, including Spur Grill & Go, as well as Panarottis Pizza Pasta and John Dory’s Fish Grill Sushi brands.
Others include quick-service takeaways; steakhouses under the Hussar Grill brand; Italian pizza and pasta restaurants under the Casa Bella brand; and gourmet burgers, ribs, and wings restaurants under the RocoMamas brand.
Expansion with diversity
In a diversification drive, the steakhouse franchise has strived to boost earnings away from the Spur brand, which is into pizza, pasta, branded steakhouses, seafood and takeaways under the Captain DoRegos brands.
Analysts say Nikos Coalgrill Greek is a perfect match for Spur as it fits into its already expanded middle-to upper-market restaurant segment.
The JSE-listed multibrand restaurant acquired the majority stake in gourmet brand RocoMamas for US$1.97 million in January 2015.
Since then, the Gauteng-based franchise restaurant, RocoMamas is reported to have grown from five outlets to 64 restaurants in South Africa and six international outlets.
An analyst at Vunani Securities quoted by Business Day said apart from expansion possibilities, Spur could be eying cross-synergies with the Hussar Grill.
The 51% stake deal will see the company’s founding family members retain the balance of the shareholding and continue to manage the business.
No transaction price was disclosed.
“The purchase consideration will be calculated based on a five-time earnings multiple after year three,” said the company in a statement.
“Spur Corporation will have an option to acquire an additional 19 percent shareholding after three years.”