Nando's hot but not for takeout

28 May 2017 - 02:00 By HANNA ZIADY
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Flame grilled chicken outlet Nando’s has distanced itself from a spoof ad about the Ford Kuga recall.
Flame grilled chicken outlet Nando’s has distanced itself from a spoof ad about the Ford Kuga recall.
Image: Facebook/nando's peri-peri orchard restaurant

At the Nando's head office in central Johannesburg is a wall with the words, "It's the people that make the chicken" etched into it.

Speaking at the Africa Shared Value Summit in Sandton this week, Doug Place, chief marketing officer for India, the Middle East and Africa (IMEA), described the award-winning precinct in the middle of Lorentzville as "the Google of chicken". He said: "If you look after the people, the people will look after the chicken."

Nando's, which opened its first restaurant in Rosettenville in the south of Johannesburg in 1987, appears to have looked after both the people and the chicken very well. Today, it boasts 1,400 restaurants in 22 countries across the world, including the US and, most recently, Saudi Arabia.

Nando's has successfully shared its famous flame-grilled peri-peri chicken and Afro-Portuguese flair with the world. The group's global expansion has piqued the interest of potential investors, eager to pile into an initial public offering.

But Nando's quashed rumours earlier this year that it was considering a listing on the London Stock Exchange. This week, in an e-mail response to questions Geoff Whyte, CEO of Nando's in the IMEA region, reiterated that a listing was not on the cards.

Privately owned, primarily by the Brozin and Enthoven families, Nando's shareholders are notoriously tight-lipped about their ragingly successful restaurant chain.

Not many Nando's restaurant-goers in South Africa would know, for example, that it has about 400 stores across the UK and launched in the US nearly 10 years ago, opening its first restaurant in Washington D.C. in 2008.

Nor would they be aware that Nando's has the largest curated collection of contemporary Southern African art in the world, displaying 20,000 pieces from about 275 artists in its restaurants.

With backing from Dick Enthoven - whose family is also the controlling shareholders in insurance company Hollard and wine farm Spier - Nando's was founded by Robbie Brozin and Fernando Duarte. It was listed on the JSE between 1997 and 2003 but delisted after managers bought more shares in the group.

Brozin was the long-time CEO of Nando's SA but has since handed over to Whyte, with the group taking on a distinctly more corporate appearance.

"While retaining the entrepreneurial spirit that has made us successful, the business had reached a size and scale that required a more professional and co-ordinated global management structure," Nando's noted in group financial statements for the year to February 2016.

It is now organised into four business units: UK and Ireland, North America, Australasia (including Australia, New Zealand, Fiji, Malaysia and Singapore) and IMEA. These business units report to global CEO Andrew Lynch who is based in London and supported by an executive team in that office.

"Our current operating structure is relatively new and working well," Whyte said.

Group financial statements available through the UK's Companies House show that group revenue grew by 38% to £808.6-million (R13.3-billion) for the year to February 2016. Profit before tax halved to £21.3-million for the period on much larger capital investments to expand the restaurant footprint globally and refurbish existing restaurants.

Growing in the US, where it has only 25 restaurants, will no doubt be a focus for the group going forward. Most of its restaurants are in Washington D.C., with a handful in Chicago.

Unlike in South Africa and Australia, Nando's does not franchise restaurants in the UK and US.

"We're still getting used to the American market," said Place, noting that Nando's had had to "tell the story of peri-peri" from scratch there.

Jake Grant, senior consumer analyst at BMI Research, said he was optimistic about Nando's' US expansion but it would face stiff competition from that market's plethora of fast food and fast casual restaurants.

"Nando's falls into the fast casual segment, an area which has outperformed fast food in terms of growth rates over the past few years due to a healthier image and the use of quality sourced ingredients," Grant said.

Offering grilled, spicy chicken differentiated Nando's from many of its fried-chicken competitors, he said.

A listing might be necessary to raise funds in the future in order to build a national presence in the US.

"It does not offer franchising options for its restaurants, which can limit the scope of its investments due to higher burdens from real estate and other management costs. If rivals begin to undercut and offer similar products, this may result in the company looking for additional funding in order to make a further push," said Grant.

An IPO in London would allow Nando's to raise capital in pounds rather than its much weaker home currency.

ziadyh@bdlive.co.za

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