Famous Brands Closes Iconic Fast Food Outlets Across South Africa Amid Economic Challenges

South Africa’s fast food industry is undergoing significant shifts, with Famous Brands shutting down several underperforming outlets, including Steers, Debonairs Pizza, and Fishaways locations.

The closures come as the Quick-Service Restaurant (QSR) sector grapples with inflation, shifting consumer behavior, and heightened competition from grocery retailers and coffee shops.

The Current Landscape of South Africa’s QSR Industry

A recent report by Trade Intelligence reveals that the QSR sector grew by 11.2% in 2023. However, this growth was primarily driven by food inflation rather than an increase in consumer demand.

“The same inflation buoying revenue is eroding spending power,” said Sandy Sutton, a retail analyst at Trade Intelligence.

Famous Brands, the largest franchisor in Africa, reported uneven performance across its portfolio for the six months ending August 31, 2024 (H1 FY25).

• Steers, Wimpy, and Fishaways showed resilience, appealing to budget-conscious consumers.
• Signature Brands like Mythos and Vovo Telo, targeting luxury dining markets, struggled as discretionary income declined.

Between March 2023 and February 2024, Famous Brands shut down 47 outlets in South Africa, citing demographic shifts, increased competition, and unviable trading areas.

Closures included:

• 14 Steers outlets
• 11 Fishaways restaurants
• 7 Mugg & Bean stores
• 5 Debonairs Pizza outlets
• 6 Wimpy locations
• 4 Milky Lane branches

Additionally, 10 Fego Caffés were converted into Mugg & Bean restaurants.

The trend continued into FY25, with 18 more outlets shuttered during the first half of the fiscal year.

Despite these closures, Famous Brands reported marginal revenue growth and steady operating profit for H1 FY25. Key performance highlights include:

• 11% increase in basic earnings per share (221 cents).
• 9.5% rise in headline earnings per share (218 cents).
• A 9% dividend hike (150 cents per share).

To mitigate challenges, the group has prioritized:

• Digital transformation to enhance convenience and operational efficiency.
• Promotional campaigns to drive customer engagement during the summer season.
• Opening 89 new stores in H2 FY25, signaling a commitment to growth.

“We are cautiously optimistic about a degree of recovery in the second half of the year,” stated Famous Brands in its financial report.

Famous Brands is banking on anticipated interest rate cuts to improve consumer sentiment. However, experts warn that translating optimism into spending power will take time.

While the fast food industry in South Africa faces undeniable pressures, Famous Brands’ adaptability—through strategic closures, targeted investments, and focus on core strengths—offers a glimpse of hope for recovery.

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