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The South African consumer has proven resilient in the face of high inflation and interest rates.
This is over and above challenges like load shedding and poor local government service delivery, among others.
This is the assessment of restaurant industry player, Famous Brands, which released its half year results ended August 2023, today.
Despite a challenging operating environment, the company reported half year revenue up 10% at R3.9 billion, with profit margins being hit by the higher cost of doing business.
Famous Brands a vertically integrated business model comprising brands, manufacturing, logistics and retail.
Famous Brands franchises include Steers, Debonairs, Wimpy, Mugg & Bean, Fish Aways, Mythos, Turn n Tender and Milky Lane.
Famous Brands revenue up by 10%
The business landscape has faced extremely challenges due to frequent power outages, a major contributor of the overall difficulty of the operating environment, this resulted in the cost of the business increasing.
Famous Brands CEO Darren Hele says, “We still trade in a highly competitive landscape and we have fierce competitors. We like to rise to that challenge and take each other on but certainly we all have to work particularly hard and that’s on the backdrop of us all experiencing rising input costs, particularly around food and alternative power costs which are primarily driven by diesel in the South African context.”
Hele says essential food items such as chicken, eggs, pork, and vegetables experienced an increase in prices, which also affected the company’s revenue.
The company also observed that the disruption caused by load shedding was significant, impacting its online delivery operations due to weakened internet connectivity, which, in turn, hindered the process of placing food orders.
“The consumer is evolving to the conditions that they face and, quite interestingly, we’re seeing that even in a lower disposable income environment that sit down restaurants are actually a good time out for people, I think driven particularly in the South African context by load shedding, casual dining not necessarily prevalent across Africa to the same degree, but it’s seen as an indulgent treat outside of the difficulties that people face.”
Famous Brands says it has financially assisted its franchise partners with R11.6 million to cope with the challenges of load shedding.
Despite this, the company highlighted that more than 91% of its franchisees have alternative power solutions.
However, the associated costs have disrupted their profit and the sustainability of the franchisers.
This has further raised concerns that the escalating expenses may discourage potential partners from entering the business. – Reporting by Matimu Khosa
Source: https://www.sabcnews.com/sabcnews/887546-2/
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