Thu, 30 Jan 2014
SOUTH AFRICA - Taste Holdings on Wednesday (29 January) said it acquired fast food chain Zebro’s Chicken for R17m.
BusinessDay reports that the deal, which targets lower income consumers, a market currently under-served by the formalised quick service restaurant category is complementary to Taste Holding’s existing Fish & Chip brand.
Zebro’s is a 15-year-old brand with 40 outlets mainly in the Western and Eastern Cape. The chain has one store in Namibia and site locations include shopping malls, rural towns, taxi ranks and selected higher living standard measure locations.
Taste Holdings CEO Carlo Gonzaga said there was significant opportunity for expansion of the brand within South Africa.
"The current footprint does not include any meaningful penetration outside of the Western and Eastern Cape. Taste envisages accelerated store growth due to Zebro’s similarity to its existing The Fish & Chip business," he said.
Other players in the fast-food space have also been acquisitive, Spur Corporation recently bought Cape-based steakhouse chain Hussar Grill for R35m. Meanwhile, Famous Brands last year bought a 51 per cent controlling stake in The Bread Basket and Turn n Tender.
Taste’s deal is effective 1 March and will be paid equally in cash and Taste shares to the sellers. Zebro’s co-founder John Hickman will remain with the company for at least a year from the effective date.
Taste is currently represented in more than 600 southern African locations through Scooters Pizza, Maxi’s, St Elmo’s Woodfired Pizza, and NWJ Jewellers.
Mr Gonzaga said Zebro’s was unique in the South African chicken market in that products were prepared over an open fire similar to a braai, offering a unique and well understood flavour profile to the market. "It is arguably the only chain of its size using this preparation method and flavour profile. Honestly when I first heard of a chain that actually braai’d its product I didn’t think it was possible. Yet, after 15 years and over 40 stores, these guys have built a unique system and preparation method that is unbelievably tasty," he said.
The Zebro’s business is not vertically integrated, offering opportunity for unlocking value by adding its volume to the existing Taste capabilities. Taste established the Buon Gusto Food Services distribution business 18 months ago and through backward integration, it provides products such as spices, cheese and sauces to its franchise network, at a more competitive price, ultimately supporting its overall franchise model. Previously, the group made use of a third-party distributor.
Famous Brands, whose brands include Steers and Debonairs, derives more than one-third of its operating profit from manufacturing and logistics.