Impact of COVID-19 on the industry

COVID-19 forced restaurants to adapt quickly and changed the way consumers experience dining.

Some of these shifts include the adoption of contactless technology, a rise in take away and delivery sales, a preference for outdoor dining, adjusted staffing levels, and menu rationalisation. Consumers remain under financial pressure in most markets, and many can no longer eat out as frequently.

COVID-19 directly impacted our business along four key themes:

Restrictions and health concerns

  • Trading activity remains muted due to restrictions related to sit-down dining, seated capacity, trading times and alcohol sales.
  • Research indicates that fear of contracting COVID-19 remains a first or second barrier to consumers eating at a sit-down restaurant.

Financial-related impacts

  • Consumers are eating out less due to financial constraints.
  • Consumers increasingly look for value purchases.
  • Work from home has reduced the frequency of dining at Casual Dining Restaurants.

Travel-related impacts

  • Lower domestic and international travel levels resulted in lower numbers of travellers through airports, leading to lower turnover from these sites.
  • Lower levels of domestic travel and restrictions on travel to and from Gauteng decreased turnover for our highway and transient sites.

School, sport and event-related impacts

  • Limited in-person schooling and no school sport limit movement, directly impacting impulse purchases to and from venues.
  • Limited sporting and cultural events also limit impulse purchases as consumers are on the road less.

Famous Brands has explored several ways to draw foot traffic and boost revenues. All our brands ensured that hygiene standards and COVID-19 protocols were upheld.

Menus

We continue to operate with reduced menus for many brands to simplify restaurant operations without compromising consumer choice.

We continue our menu engineering principles to improve delivery menus to ensure that consumers receive the best quality take away product.

Price increases and promotions

We strive to keep menu price increases below food inflation to remain competitive, and this is essential when consumer spending power has declined significantly.

Promotional activities focus on value for money propositions. Reduced trading hours in SA and other AME markets have required a renewed focus for casual dining on lunch and breakfast promotions as evening trade has been subdued.

Take away and delivery channels

Both Leading and Signature Brands embraced take away and delivery, including kerbside pick-up, own delivery and third-party delivery, order ahead options and increasing drive-through capacity. Adopting technology to enable enhanced service is critical to this channel shift. Tamper-proof food safety stickers were implemented across own delivery and third-party aggregators and have proven to be an industry differentiator.

Operational planning

Our operational planning focuses on business sustainability, adherence to all COVID-19 health and safety protocols and maintaining the highest brand and quality standards while offering a superior customer experience.

Customer safety remains at the heart of all we do.

Important definitions

System-wide sales refer to sales reported by all restaurants across the network, including new restaurants opened during the year.

Like-for-like sales refer to sales reported by all restaurants across the network, excluding restaurants opened or closed during the year.

Leading Brands’ sales refer to sales of the Leading Brands trading in SA.

Signature Brands’ sales refer to franchises and Company-owned store sales in SA as well as cross-border sales where the brand is not managed by the AME management team.

Brands summary

Our Brands portfolio consists of Leading Brands and Signature Brands. The Leading (mainstream) Brands portfolio is segmented into Quick Service Restaurants and Casual Dining Restaurants brands.

Our brands are represented through a network of 2 758 franchised and 66 Company-owned restaurants in SA, AME and the UK.

Salient features – Global footprint

SA

In 2022, the South African restaurant industry faced headwinds due to COVID-19 restrictions, consumer apprehension regarding eating out and poor economic conditions. The civil unrest experienced in July slowed the local economic recovery, COVID-19 restrictions related to the third and fourth wave and a poor tourism season in December.

This has been an incredibly challenging period for our franchise partners. Famous Brands continues to provide ongoing direct financial support to affected franchise partners in the form of royalty and marketing fee breaks.

For the first three months of the financial year, capacity was limited to 100 people or 50% of the available capacity. For the second three months, the capacity limit was 50 people. Sit-down dining was not permitted for the first two weeks of July. Alcohol and trading time restrictions due to curfews further dampened performance.

Combined system-wide sales across our Leading and Signature Brands improved 37.1%, and like- for-like sales increased by 34.7%. Leading Brands’ system-wide sales improved by 35.8%, while like-for-like sales grew by 33.0%. Signature Brands’ system-wide sales improved 55.1%, and like-for-like sales improved by 59.3%.

Impact of July’s unrest on SA operations

Civil unrest occurred in South Africa’s KwaZulu-Natal and Gauteng provinces from 9 to 18 July 2021, and several Famous Brands’ and franchisee properties suffered varying degrees of damage. The total number of restaurants damaged and rendered non-operational was 99, the majority being in KwaZulu-Natal.

At the height of the unrest, all our KwaZulu-Natal restaurants and numerous in Gauteng closed for a few days. Across all brands, we recorded a total loss of 4 111 restaurant trading days due to these closures.

Famous Brands provided ongoing support to franchisees impacted by the riots in royalty relief, assistance with insurance claims and bridging finance between restoration and insurance payouts.