South Africa’s Famous Brands shuts down 14 Gourmet Burger Kitchen stores

SOUTH AFRICA – Famous Brands, a South African holding company and food service franchiser has closed 14 out of its 17 Gourmet Burger Kitchen (GBK) under-performing stores after the approval of a restructuring plan by creditors,reports Business Day.

Indications are that the UK –based stores have been struggling with low consumer spending,rising cost of labour, increased taxes and the growing inline competition.

“While the other three sites have improved their performance, they remain under review, pending further action,” the firm said in a statement.

The strategic closures come as part of the company’s Voluntary Arrangement restructuring allowing Famous Brands to skive insolvency.

Famous Brands acquired GBK in 2016 from Nando’s but its contribution to group turn-over has been greatly hampered by pressure on consumer spending and high costs of operation.

GBK and its 97 stores costed Famous Brands US$136.52 million but its underperformance has resulted to a US$61.76 million write-down.

The group also acknowledged that other than the over-traded premium burger market, the stores have been operating under a sub-optimal management capacity resulting in the underperformance.

The CVA allowed negotiation between the company and its creditors but lack of objections raised towards the restructuring proposals brought forward led to the shutdown of the 14 stores.

However, analysts have retaliated that the franchiser failure in the UK market has partly been contributed by lack of expertise in the corporate owned restaurants.

Famous Brands said the CVA process has positioned GBK to improve its performance because its existing debt has been refinanced, and the restructuring gave it a debt profile that is better aligned to its operational requirements.

At the time of acquisition, Famous Brands said it had plans to double the burger chain’s stores in the next five years at a rate of 10 -15 new restaurants per year and expand further in Ireland and open outlets in South Africa.

Famous Brands operates about 25 brands portfolio which include Tashas, Wimpy, Netcafe,Fego Coffee, Vovo Telo, Giramondu, Fishaways and Deboniars Pizza.