Bruce Whitfield:
Restaurant group Spur reporting a 17 percent rise in headline earnings per share for the six months to the end of December. Restaurant turnover, it reflects the royalty income received by the group's franchisees increased by nearly 22 percent. Pierre van Tonder, the Spur managing director, is with us now and the base is what, 334 locally and internationally across the three brands Pierre?

Pierre van Tonder:
Good evening Bruce yes, it's been a good six months.

Bruce Whitfield:
You have got Spur, Panarotti’s, John Dory's fish grill and 13 new outlets during the year as well. I have noticed with a great deal of interest your international portfolio of restaurants, 35 of them now, new Spurs in Gabarone, Windhoek, Swakopmund, a Panarotti’s in Australia but no mention of China. What has been going on in China? You were at one stage going to go quite big in Shanghai.

Pierre van Tonder:
We had an unfortunate experience in China. We opened two restaurants and our master franchisee, we ran into great difficulty there, so it wasn't a very great experience for us in China. We kind of made a decision and reviewed our position with regards to our international expansion and decided to concentrate on the markets where we trade: Australia, Africa, Mauritius and obviously the UK and Ireland.

Bruce Whitfield:
So I mean China is off the map as far as you are concerned then.

Pierre van Tonder:
At the moment it is off the map yes.

Bruce Whitfield:
And the reasons for that? It is not that you are not necessarily suited to China or that China is a particularly difficult market, you just seem to have had a negative experience with the joint-venture partner there.

Pierre van Tonder:
Bruce I have always said I think it is critical when you expand internationally that your partner that you go into business with who understands local market conditions far better than you do which kind of shortens your learning curve and regrettably we didn't have that kind of experience in China and it proved to be very difficult and regrettably not a great experience.

Bruce Whitfield:
Was it the alliance partner that you chose? Was it regulation in the market? I'm just trying to get a better feel of how difficult it is to actually go into the Chinese market. A lot of people see it as a panacea for growth and your experience obviously has been a bit different.

Pierre van Tonder:
Bruce I think it is a great market, I think it is an expanding market and there is a great opportunity there but I think having learned in the two experiences that we have had there that it is a whole different ball game, you need to be in business with the right people with a kind of different strategy than we had and it didn't quite work out for us.

Bruce Whitfield:
But you are maintaining the strategic alliance model in terms of Australia and the UK and those markets have actually worked quite well for you.

Pierre van Tonder:
Very much so. I think if you look in Australia we have just had the successful openings of the first six months, we are actually opening another restaurant there this month. We are busy building two restaurants in the UK at the moment so yes, that is kind of working out pretty well for us. It's been a bit of a long time but we are getting there slowly but surely.

Bruce Whitfield:
And locally you have outsourced the national distribution of restaurants supplies from your central kitchens. What exactly does that entail and what impact has that had?

Pierre van Tonder:
Well our core competency was always in the manufacture of sauces and we grew into what I would call the warehouse business, which really wasn’t our core competency and it became a bit of a distribution nightmare for us. We re-engineered the distribution model and outsourced to our distribution guys all our non-core products.

In other words what we do now is we just stick to our basic fundamentals which is the manufacture of sauces and we also just have distributed all our stuff into Vector Logistics who handle all that side for us now.

Bruce Whitfield:
And does that impact your retail plans? At one stage weren't you going into the retailing of these various products as well?

Pierre van Tonder:
No it doesn't impact at all on our retail stuff because that is a totally separate division.

Bruce Whitfield:
How is that division going?

Pierre van Tonder:
Well again, it is a supermarket business, we all know the very tight margins in the supermarket industry but it is going well for us, it is showing good growth, it is not a huge profit centre at the moment but from a networking point of view it is working very well for us and there is good growth in the area but it is not a huge profit margin at the moment.

Bruce Whitfield:
It’s almost like a billboard in every single supermarket in the country so that is pretty useful as well from a brand perspective.

Pierre van Tonder:
Absolutely.

Bruce Whitfield:
BEE, you have been criticised for a bit of slow action on BEE. You talk in your results that you are making progress on that particular front. How is that going to work from the Spur perspective?

Pierre van Tonder:
On BEE I think you know as we’ve always said, we were kind of waiting for the new code to come out. We are still on track to finalise our transaction no later than the 30th of June this year maybe going into August or September but we are very well aware in terms from a corporate perspective of how to make sure that that happens as per our promises to the market.

I think from a franchisee perspective you know with the IDC funding we have available we are well on track in empowering that particular transaction from our perspective in the franchisee level.

Bruce Whitfield:
Thanks very much to Pierre van Tonder the managing director of Spur making good progress around the world. But China though not nearly the gold mine that they were expecting, pulling out of China and for the time being at least not going anywhere near that market.