Burger King South Africa registers improvement in loss on back of higher turnover

SOUTH AFRICA – Grand Parade Investments (GPI), the master franchise holder for Burger King in South Africa has showcased stellar performance in its full year ended June 2021, as it awaits finalization of the disposal plan.

The fast-food chain saw its revenue grow to R1.349 billion (US$90m) compared to R1.010 billion (US$67.62m) in the prior year.

The chain of hamburger fast-food restaurant’s headline contribution improved by R11.8 million (US$790,000) during the year from a loss of R25.5 million (US$1.7m) in the prior period to a loss of R13.7 million (US$917,000) in the current period.

GPI indicated on its financial statement that the average monthly restaurant revenues (ARS) for BKSA increased by 31% from R0.896 million (US$60,000) last year to R1.171 million (US$78,000) this year, largely as a result of the strong growth in drive-thru offering.

It noted that the current financial period observed substantial changes in consumer traffic trends. Comparative traffic for 2021 was -4.5%, versus -11.0% in 2020.

The changes in service mode mix towards home delivery and drive-thru sales, resulted in a net comparative sales gain of 11%.

Overall comparative sales growth in 2021 was 5.9%, excluding April and May 2020, when stores were closed due to a hard lockdown.

The restrictions on takeaway & dine in-service modes resulted in mall & in-line traffic reducing even further by 12.3% from prior year’s 16.6%, resulting in the mix of cash positive locations deteriorating substantially versus pre-Covid performance.

The sales growth landscape has changed fundamentally for quick-service restaurants in South Africa, said Grand Parade Investments, with restaurants in general under pressure.

“With our focus since 2015 on suburban drive-thru location growth, we need to look at mechanisms to capitalise in the home delivery growth of 141% we saw in 2021,” it said.

The group has seen its drive-thru portfolio mix climb to 60%, from 55% in 2020, and 21% in 2015.

The total number of Burger King restaurants at the end of June 2021 was 102, of which 95 are corporate-owned.

“The net restaurant movement for the year totalled five, which included the opening of seven new restaurants and the closure of two unprofitable restaurants,” it said.

Burger King realised a company EBITDA of R51.70 million (US$3.4m) during FY2021 compared to R34.62 million (US$2.32m) in the prior year, the group said.

GPI to dispose Burger King South Africa

GPI is patiently waiting for the finalization of the planned sale of the restaurant chain to Emerging Capital Partners (ECP) which received the green light from the Competition Tribunal.

The approval came with a host of conditions attached and requirements to be met within a period of five years.

At the top of the list is that ECP will have to channel at least R500 million (US$33.8m) aggregate capital expenditure and establish at least 60 new Burger King outlets in the country, increasing the total number of outlets to at least 150.

The number of permanent BKSA employees will have to be increased by at least 1 250 historically disadvantaged persons, and the total value of payroll and employee benefits in respect of the 1, 250 employees to be not less than R120 million (US$8.12m).

The company would also have to improve its rating for the Enterprise and Supplier Development element under its B-BBEE scorecard.

Additional merger conditions require that Burger King establish an employee share ownership programme for an effective 5% interest in BKSA.

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