Kauai, the quick service health restaurant chain, plans to open 40 new stores in the next three years as the group evolves from a niche brand to a mainstream fast food business.
Hendrik Coetsee, who was recently appointed as Kauai’s new chief executive, said the target was to open 40 new stand-alone stores, of which two-thirds would be in Gauteng. Expansion this year might be slow as the group was still looking for property, but new store openings would accelerate next year and in 2013.
The group will have to consider increased competition in the health food segment following Famous Brands’ recent acquisition of Juicy Lucy.
At the time that deal was announced Kevin Hedderwick, the chief executive of Famous Brands, said the initial plan for Juicy Lucy was to take it back to its roots of offering freshly prepared healthy food. There are 18 Juicy Lucy outlets.
Coetsee said: “Famous Brands has got bulk behind them and clout and Hedderwick is astute so we will watch this space.”
But Coetsee added that Kauai was the leading brand in healthy fast food and it would take time to fix Juicy Lucy, which was not well positioned in consumers’ minds.
Kauai has 45 full stores, 48 outlets at Virgin Active gyms known as Kauai in Motion and two branches at schools.
New stores will be franchise stores, which will cost a franchisee about R1.3 million. Of the group’s stores currently a third are franchised and the balance are mostly corporate-owned. A few stores are joint ventures between the group and individuals.
Coetsee said extending the company’s footprint would also include opening further outlets at Virgin Active gyms.
Kauai in Motion had had “phenomenal growth”, with double-digit annual growth in top-line sales in the past four years, Coetsee said.
A new concept of Kauai in Motion has been opened at the Moses Mabhida stadium in Durban, where Virgin has opened an upmarket Classic gym. This includes table service and additional items on the menu, including a steak and rocket sandwich – the most expensive item but the best seller.
Expansion of the school business, where the group essentially runs the tuckshop, had not been actively pursued as there was significant price sensitivity among parents, even at the top private schools targeted by Kauai, he said.
The long-term plan was to expand into schools, “but with the recession we decided to focus our core business.
Overall the group has seen sales growth in the first two months of the year of about 7 percent, which is slower than the double-digit same-store growth seen last year.
Coetsee said last year’s growth was driven by a value offering that the group had developed and introduced at the end of 2009 following the margin squeeze in the year before as high food inflation and interest rates crimped consumers. - Business Report