Burger King restaurants keep losing money in South Africa – but a whole lot more are due to open anyway

By Phillip de Wet , Business Insider SA

Burger King outlets are losing it an increasing amount of money, the chain’s South African parent company Grand Parade Investments (GPI) said on Monday morning – but it is not backing down on plans to roll out a lot more of them.

A month ago GPI announced that it will liquidate Dunkin Donuts and the American ice cream brand Baskin Robbins in South Africa, after it could not make them profitable nor find a buyer interested in taking them over.

But things will be very different with Burger King. In interim results for the last half of 2018, GPI said it will roll out 15 new Burger King outlets every year for the next three years, which will increase its footprint by exactly half, to 135 stores.

Some existing stores may be changing location too; with many rental agreements coming towards their end Burger King intents to “either renegotiate better rental terms or to relocate these restaurants in order to improve performance,” GPI said.

Burger King has been selling a lot more food, GPI’s numbers show. In the last half of 2018 it opened four new Burger Kings and closed one, for an increase of 3.5% in outlets. Yet revenues jumped by 27%, to more than R500 million.

But GPI lost 66% more on its Burger King business than it did during the same six months in 2017, swallowing nearly R9.5 million in net losses.

The strong growth in revenue was help by “actively managing menu pricing architecture”, GPI said, but was more than outweighed by higher raw material prices, the VAT increase, and the new sugar tax.