JSE-listed Famous Brands has acquired a 51% controlling stake in Retail Group, Botswana, its master licence partner in Botswana, for an undisclosed amount, in line with its strategy to either acquire or take a controlling stake in existing master licence territories in neighbouring countries to exercise complete influence over its brands.

Group CE Kevin Hedderwick explained in a statement on Tuesday that the transaction, which was subject to approval from the Competition Commission of Botswana, also provided Famous Brands the opportunity “to test our mettle in company-owned stores in advance of a potential broader foray into that arena”.

“This transaction provides us with the opportunity to achieve both goals at minimum risk,” he noted.

Retail Group comprised 19 company-owned restaurants and managed nine franchised restaurants across Botswana. The portfolio of brands included Wimpy, Debonairs Pizza, Mugg & Bean, Milky Lane and Steers.

Hedderwick advised shareholders that the opportunity existed to grow Famous Brands’ share of this market through the existing brand portfolio and additional and/or new brands.

“While Wimpy is the leading casual dining restaurant brand in Botswana, and Debonairs Pizza the entrenched preferred pizza brand, the recently opened maiden Steers and a second Mugg & Bean restaurant in Gaborone have delivered beyond our expectation and illustrate the potential to grow these offerings into other cities and towns.”

Given the group’s critical mass in Botswana, opportunities would be investigated to provide the business with in-house logistics and manufacturing services, which were currently outsourced.

The operation would also benefit from Famous Brands’ expanding brand portfolio.

Hedderwick noted that Retail Group was very well managed and a role model master licence business. “The management and operational team, which are being retained, are exceptional and central to facilitating a seamless integration of the business into Famous Brands’ structure.”

Established in 2000, Retail Group was currently owned by a consortium of investors, with the majority stake held by Craig Mackenzie, a long-standing business partner of Famous Brands, who founded Debonairs Pizza in 1991.

“This transaction fully aligns Retail Group with Famous Brands, thereby providing the business with more effective access to the extensive resources afforded by Africa’s leading franchise group,” Mackenzie commented.

He said the resulting blend of skills and experience were expected to culminate in strong growth opportunities for the operation in Botswana and beyond.

Hedderwick pointed out that the food services sector in Botswana was growing rapidly, which was reflected by the 44% increase in franchised food service outlets industry-wide in the past five years.

“Per capita gross domestic product of $16 400 is the third highest in Africa, ahead of Mauritius and South Africa,” he said, adding that political and economic stability had resulted in a stable labour market, while relatively lower tax and value-added tax rates, compared with South Africa, offered a further incentive for investment.

Hedderwick emphasised that Famous Brands had frequently stated that it had ambitious and deliberate plans to grow its business outside of South Africa. Famous Brands foresaw its operations in the rest of Africa becoming increasingly significant to the group over time. As at February 28, the contribution from Famous Brands’ rest of Africa business comprised 8.9% of total system-wide franchise sales.

“This acquisition advances our stated strategy to continue to build on existing momentum in [Botswana] in line with our first-to-market and narrow-and-deep strategy,” he concluded.

The purchase consideration fell below the threshold of a categorised transaction in terms of the listings requirements of the JSE and would be settled from Famous Brands’ cash reserves.