CAPE TOWN - Grand Parade Investments (GPI) is shedding part of its 18.5% stake in the Spur Corporation to focus on its franchise interest, Burger King which has shown robust potential over the past year.
GPI which owns majority of the franchise agreement for Burger King SA today said that it wants to reduce a portion of its stake in the Spur Corporation. The main reason for this decision is to because Burger King SA has shown very positive results over the past year, said the group.
According to GPI, the strong performance of Burger King SA has made it possible for the group to satisfy their contractual commitment in terms of the Burger King Master Franchise Development Agreement requirement of establishing 80 stores within a 5-year period.
“In the last year we were able to roll-out more than 20 stores (mainly drive-thru’s) to achieve this. Whilst our ongoing contractual commitment is 5 stores per year we are able to do this without gearing the business and this is therefore self-funding”, said Executive Chairman of GPI, Hassen Adams.
In light of Burger King SA’s key performance, GPI will now try to roll out between 20 and 25 stores per year, added Adams.
“This will require initial funding, however, the results of this investment could be extremely positive. We have looked at funding this roll-out strategy and have decided to liquidate some of our shares in the Spur Corporation which is ungeared and in our opinion is better invested in Burger King SA and will deliver better returns”.
GPI’s plans to increase Burger King SA’s footprint includes franchise Dunkin Donuts whose business model has been changed. While Burger King SA has performed reasonably well over the last year, Adams said that by changing Dunkin Donuts’ business model, the group is confident that they will be able to take the franchise into profitability within 2 years
Although light has been cast on the exit of two executives from GPI within the past year, Adams said that their departure from the group was based purely on pursuing personal interests.
“The 2 Executives have left GPI on a basis of pursuing personal interests and our relationship is still cordial and on-going in the sense that we are negotiating consultancy contracts with them to continue to provide a seamless handover to enable a sustainable environment. These posts will be filled and will be announced shortly. In the interim, I have taken over the position as acting CEO and an acting deputy CFO who is well positioned within the existing financial activities will be appointed. The performance of the group has remained intact and has improved in terms of the commitment from all executives. We are committed to the budgets and the delivery deadlines which will can only give positive results”, concluded Adams.
FILE - This Oct. 21, 2016, file photo shows a Burger King restaurant logo in Philadelphia. GPI is shedding part of its 18.5% stake in the Spur Corporation to focus on its franchise interest, Burger King which has shown robust performance. (AP Photo/Matt Rourke, File)
Meanwhile, Business Report has contacted Spur Corporation to enquire whether GPI’s withdrawal is concerning for the group and whether shareholders should be concerned about Spur Corporation’s share price. The group did however not respond.
*This is a developing story.