Little respite for the franchise industry as restaurants brace for a Level 4 impact


South African Franchise Revenue at Spur Down 43.6%

  • Some sectors, notably mining and manufacturing, are experiencing a return to pre-pandemic income levels, FNB says; however, the hardest hit sectors are struggling to recover.
  • The recovery in the food and beverage industry in particular is lagging behind.
  • The franchise sector’s exposure to the food and beverage industry affected it negatively.

While some franchise sectors are experiencing a return to pre-pandemic income levels, those hardest hit are struggling to recover, according to a new report.

The 2021 FNB franchise and economic outlook, released this week, indicate that the franchise industry has been hit particularly hard by the Covid-19 pandemic, due to its exposure to the food and beverage industry.

He further said the recovery in the food and beverage industry, in particular, was lagging behind, with cumulative revenues from restaurants and cafes down 35%, and revenues from food services. down 50% in 2020.

Takeaway and fast food revenues were flat compared to 2019, down just 0.8%.

Morne Cronje, Franchise Manager at FNB, reviewed the franchise industry’s experience during the pandemic and said that in 2019 the food and beverage industry saw revenue estimated at 734 billion rand, while revenues in 2020 were 14 billion rand lower than the previous year.

At the height of the foreclosure in April 2020, 94% of the franchise industry went out of business.

Franchisor of restaurant chain Spur Corporation saw group revenue decline 40.2% from R525million reported in the previous comparable period to R314.2million for the half-year ended December 31, 2020.

According to Spur’s results, South African franchise revenues at Spur fell 43.6%, Panarottis and Casa Bella by 46.7%, John Dory’s by 49.8%, The Hussar Grill by 41.5%, RocoMamas by 23.8% and Nikos by 48.7%.

The FNB said the drop in revenue at each of the brands was greater than the drop in store revenue due to concessions (temporary fee waivers) given to franchise partners for franchise fees.

President Cyril Ramaphosa announced on Sunday that South Africa will move to more stringent Level 4 lockdown regulations. Restaurants and other eateries will only be allowed to sell take out or deliver until July 11.

Wendy Alberts, CEO of the Restaurant Association of South Africa, said: “Deliveries will not save restaurants given the large numbers they need to pay for third-party delivery groups.”

According to the Franchise Association of South Africa 2019 survey, South Africa has more than 800 franchise systems operating in 48,000 outlets and employing nearly 500,000 people. The sector’s contribution to the South African economy is equivalent to 14% of GDP, the FNB said.


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