The Group’s stated objective is to open 100 stores within South Africa by June 2015.



BURGER KING®‘s beef patty plant, a joint venture with Excellent Meat, officially opened in May 2014 and was certified by BURGER KING® Worldwide in June 2014, further enforcing our commitment to localising our supply chain. This dedicated plant is the first of its kind in Africa and can meet the growing demand of BURGER KING® South Africa and service an export market.

OVERVIEW

BURGER KING® strives to be the most profitable QSR in South Africa serving high-quality food in an environment that is accessible and friendly at a price that is affordable.

This will be achieved through leveraging the franchise’s significant heritage – which dates back to 1954 – and profile as a giant in the global QSR industry serving over a million customers a day in 13 000 restaurants in over 88 countries.

KEY HIGHLIGHTS

During the financial year, BURGER KING® South Africa opened a total of 18 stores in Gauteng, Western Cape and KwaZulu-Natal, and served more than 1.8 million customers. In addition, the company has trained and certified more than 1 000 employees.

BURGER KING®‘s beef patty plant, a joint venture with Excellent Meat, officially opened in May 2014 and was certified by BURGER KING® Worldwide in June 2014, further enforcing our commitment to localising our supply chain. This dedicated plant is the first of its kind in Africa and can meet the growing demand of BURGER KING® South Africa and service an export market.

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CHALLENGES

Our most significant challenge is finding and training the right people to meet our rigorous roll-out plan. GPI has overcome this by establishing dedicated training facilities in the three provinces where GPI currently operates, and by partnering with Harambee, a recruitment NGO.

Supply chain challenges arose around identifying local suppliers that can meet BURGER KING® Worldwide’s exacting and stringent criteria, and that have the capacity and willingness to develop and deliver products consistently.

All our local suppliers have met the standards set and have committed to the development and investment required to meet our growing national demand.

OPERATING CONTEXT

The South African QSR market was valued at R26.7 billion (2012: R24.6 billion) at the end of December 2013 (growth rate: 8.6%).

The burger section represented 16.8% of the QSR market in 2013 and grew by 8.6%.

Market Size

2013

2012

Growth

Share

QSR

26 670.30

24 563.60

8.58%

Chained

19 245.40

17 685.40

8.82%

72.16%

Independent

7 424.90

6 878.20

7.95%

27.84%

The number of people who purchased goods from QSR establishments have grown considerably over the past few years and are forecast to continue growing at a robust rate.

The amount of people who spend more than R100.00 at QSRs per instance has increased from 23% in 2009 to 32% in 2013.

The most prolific users of the QSR market come from the Living Standards Measure (LSM) 6 and are aged +16 with an evenly split between male and female.

On a national level, the largest sales at QSR are in Gauteng followed by KwaZulu-Natal and Western Cape. Therefore, this confirms that our roll-out plan is in line with QSR spend and GPI is operating in the top three provinces.

As much as the South African economy remains under pressure, the QSR market continues growing. This is mainly due to time pressure on families during dinner times, and as a result, convenience encourages more people to make use of the QSR market.

GPI is making sure that our roll-out strategy, pricing models and product offerings allow all users of the QSR market access to our stores.

FINANCIAL PERFORMANCE

2014

2013

Change
%

Total revenue (Rm)

126.8

4.9

2 488

Loss after tax (Rm)

(52.7)

(16.2)

225

Percentage contribution to Group revenue

17%

1%

Percentage contribution to Group profit

(83%)

(13%)

OPPORTUNITIES AND RISKS

Opportunity

Associated risk

GPI response

Rapid growth of BURGER KING®

Supply chain and distribution not able to meet demand.

Partnering with market leaders in their respective fields.

Expansion into Africa

Availability of product from suitably qualified suppliers and distributors.

Expansion into Africa will progress in a responsible manner once GPI is confident that the supply chain and distribution centres are able to deliver the necessary product at the required quality and standards.

Training employees to meet the exacting standards required by BURGER KING®.

Training facilities are being established throughout South Africa to accommodate training of employees across Africa.

Local supply (Excellent Meat partnership)

Reliant on supply from a single plant.

GPI has ensured that adequate insurance is in place to cover any unforeseen event that could affect the plant’s operations, and a second plant is being investigated.

Maintaining international BURGER KING® standards

Failing to maintain standards and objectives could lead to the cancellation of the master franchise and development agreement.

Constant internal and external monitoring within the guidelines stipulated by BURGER KING® to ensure any deviation is flagged and rectified within suitable time frames.

Reputational damage

Service or product-related issues that will cause the brands reputation or image to be questioned.

GPI has a dedicated call centre that logs all calls and complaints, which are escalated to the relevant parties to ensure GPI addresses any issues immediately.

Social media is continually monitored to make sure no comments or posts are left unanswered.

Employee training and retention

Ensuring consistency of product and service across the brand to maintain customer support and loyalty.

GPI have dedicated training facilities in Johannesburg, KwaZulu-Natal and the Western Cape, providing BURGER KING® approved training modules along with life skills training.

Rapid growth nationally requires sufficiently skilled and qualified employees at store and corporate level.

GPI constantly evaluates employees to ensure standards are being maintained.

Suitable franchisees

Franchisees that do not meet BURGER KING® requirements could jeopardise the master franchise agreement.

To ensure GPI complies with the requirements in terms of our master agreement, background checks are performed on all applicants along with a financial due diligence.

GEOGRAPHIC FOOTPRINT

KEY STAKEHOLDERS

To identify our key stakeholders, GPI applied the following criteria:

  • GPI must be able to clearly identify what GPI wants from the stakeholder.
  • The stakeholder must have a fundamental impact on our business performance.
  • GPI must want the dynamic relationship to grow.
  • The stakeholder must be crucial to success.

Excellent Meat partnership

BURGER KING®‘s joint venture with Excellent Meat – an established, family-run meat manufacturer and distributor – to develop a standalone dedicated beef patty plant is critical to the vertical integration of the business. The partnership ensures that the constant demand for quality patties in South Africa is, and will continue being, met as the scalability of the plant allows for rapid expansion. Once the plant is fully operational, GPI expects a production capacity of three million patties a month.

Mac Brothers

Mac Brothers is a kitchen equipment supplier that services the broad catering industry with a dealer network that extends throughout sub-Saharan Africa. Mac Brothers has been approved as a BURGER KING® equipment supplier. Through their extensive network they are able to help us meet our roll-out plan and to provide support and ongoing maintenance to our existing stores.

Sasol

Through our exclusive agreement with Sasol GPI can open BURGER KING® stores within Sasol’s entire national network, further aiding our national roll-out and meeting fundamental milestones in development. This exclusive partnership allows us to create brand synergy and maximises our ability to leverage the brand in South Africa through retail opportunities that would not have been available to us otherwise.

Corporate social investment initiatives

During the year, BURGER KING® participated in numerous CSI projects as part of the broader group’s commitment to corporate responsibility and community development:

  • On 21 December 2013, BURGER KING® South Africa hosted 400 underprivileged children from shelters and orphanages around Cape Town to an early Christmas party.
  • On 24 June 2014, Burger King Corporation (BKC) and Burger King South Africa executives handed over a $485 403 (R5.2 million) donation to the Burger King McLamoreSM Foundation’s Room to read.
  • To celebrate Mandela Day on 18 July, BURGER KING® South Africa employees devoted their time to the elderly at the Kensington Old Age Home in Cape Town. BURGER KING® donated 90 new mattresses on the day, as well as toiletry hampers, food hampers, linen, curtains, cosmetics and slippers.
  • Along with GPI, BURGER KING® donated R3 million to the under 17 and under 19 men’s and women’s provincial soccer tournaments as part of the SAFA development programme.

Employees

GPI’s human resources goal and primary aim is to maximise the value of human capital within BURGER KING® and to balance the needs of the employees with the needs of the company by:

  • Ensuring a diverse workforce in a safe environment that is free from discrimination and harassment by complying with employment laws and government regulations, international BURGER KING® standards, providing management and employee training, and developing policies and procedures.
  • Hiring the most qualified employees by preplanning staffing needs, ensuring an effective internal interview process, increasing company visibility in the employment marketplace, identifying the best and most cost-effective recruitment resources, and conducting thorough reference checks.
  • By partnering with Harambee, in the spirit of responsible recruiting in line with community upliftment, to ensure that GPI provides first-time job seekers from historically disadvantaged backgrounds with employment opportunities.
  • Retaining our valued employees by assuring effective leadership qualities in our managers, providing competitive wages and benefits; and enhancing two-way communication between employees and management.

OUTLOOK

Our targets for 2015:

  • To have 100 stores within South Africa
  • To increase the gross margin
  • To reduce capital expenditure costs associated with fitting out new restaurants

The long-term goals are to increase BURGER KING®‘s market share in the QSR segment within South Africa, and to constantly evaluate opportunities within the African market.

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