28 Jul 2023 Spur takes a 60% stake in Doppio Zero

The Spur Corporation is hoping to strengthen its position in the daytime speciality dining and coffee markets with a 60% acquisition of the Doppio Zero restaurant group.

The Spur Corporation already owns Spur restaurants, The Hussar Grill, Nikos, Panarotti’s and RocoMamas.

Spur did not disclose the value of the transaction to investors when it made the announcement on 27 July.

Spur is buying the business from founders Paul Christie and Miki Milovanovic, who opened the first Doppio Zero in Greenside, Johannesburg, in 2002.

It will now look to grow Doppio Zero brand across South Africa, which includes 37 franchised and company-owned restaurants, including Doppio Zero, Piza e Vino and Modern Tailors.

Spur group CEO Val Nichas said the acquisition will strengthen its position in the daytime speciality dining segment while its high-end restaurants are primarily busy at night time.

Nichas said by drawing on its network of existing franchisees it will be able to expand the Doppio brand countrywide. “As the Doppio group’s restaurants are mainly located in Gauteng, this creates an opportunity for existing Spur franchisees to invest and expand their brand portfolio,” she said.

Doppio, Italian for “double”, represents the double-zero grading of the milled flour it uses to make pizzas, pasta and confectionery.

“Our strategy is to expand into categories, markets and channels where we are underrepresented. Our speciality dining brands currently comprise 40 restaurants across The Hussar Grill, Nikos and Casa Bella, with dinner trade representing about 71% of turnover.”

“We share the ethos of customer hospitality and understand the importance of creating great dining experiences,” Christie said. “Our decision to partner with Spur Corporation is strategically aligned to our vision of expanding our bespoke brands to more regions in SA and across the continent.”

An elegant transaction

Smalltalkdaily analyst Anthony Clark said Spur has been looking to buy a coffee chain for more than 10 years. It lost out in a bid to acquire Vida e caffè. Daytime dining and coffee culture is an attractive, growing segment of the market, he said.

“I think it’s a solid move. Spur Corporation has been looking for decades to augment its brands and I think Doppio Zero is a good fit as it is a franchise business,” he said.

Clark said: “I would say this is an elegant transaction for Spur Corporation. They can rapidly roll out the operation nationally because Spur clearly has relationships with mall owners and landlords. [The group] has the existing footprint of Spur Corporation, Hussar Grill, John Dory’s, and a Doppio can slot into dead space in a mall and compete against the likes of a Mugg & Bean or Bootleggers.”

Spur speciality restaurant chains such as Hussar Grill struggled during Covid-19 lockdowns when alcohol sales were banned and curfews were in place, though sales rebounded as the country opened up in 2022.

Clark said Spur “is significantly smaller than [competitor] Famous Brands [and] it can actually grow its business by buying small companies like this, which add significant increases to the underlying revenue.”

Famous Brands, the owner of Steers, Wimpy and Fishaways, would not benefit as much by buying a smaller chain such as Doppio, he said.

Famous Brands has moved away from its focus on expansion under previous boss Kevin Hedderwick to focus primarily on its main brands, which include Mugg & Bean, Steers and Debonairs Pizza.

In the six months to December, sales at Spur’s speciality restaurant division grew 62.3% off a low base. The restaurants, which pay a percentage of turnover to the group in franchise fees, earned a collective R250m in the last six months of 2022. That compares with turnover of R3bn at its Spur outlets.

In the financial year to end-February, the Doppio group generated total sales of more than R600m.

The deal will take effect on 1 September, once all conditions are met and then given the go ahead by the competition commission.

Altogether 669 employees will be transferred from the Doppio Group and the founders will continue as executives for at least five years.

Spur’s share price was little changed on 27 July, closing 0.43% higher at R23.60, giving it a R2.1bn market value.

Hear Bruce Whitfield interview Spur group CEO Val Nichas here….

Source: BusinessLive.co.za, Radio 702/CapeTalk