Company Analysis: Famous Brands

What is Famous Brands?

Famous Brands Ltd is an investment holding company listed on the JSE Securities Exchange under the category Cyclical Services: Leisure & Hotels. The company is an integrated food and beverage company whose primary activities include the franchising of trademarks, either company owned or licensed, to Quick Service Restaurant franchises and the manufacture and supply of products to these franchisees and the retail trade.

1. History of Famous Brands

Famous Brands was started in the 50's by a family called Halamandaris (well that's their actual name, but were referred to as Halamandres because of a mistake by an immigration official). The family had just 50$ between them and wanted to work hard to achieve something. An idea that was to pave the road of success for this family in the 1960's was by George, one of the brothers, to give Johannesburg an American style steakhouse by the name of Steers. Steers was a huge success and because of this many more restaurants were opened and franchising was introduced to the South African market. Unfortunately at the end of 37 years of hard graft the family's combined stake in the business only amounted to R35 R 40 million. The family wanted more than just a family business and so they turned to a man by the name Kevin Hedderwick (now currently the CEO of Famous Brands). Hedderwick joined what was then known as Steers Holdings as MD and revolutionised the business, turning it into a South African franchising giant. The five core members, Panayiotis, Theofanis, Periklis, John and Babis took the company public on the Johannesburg Stock Exchange on 9 November 1994 with a share price of R1. Then in August 2012 the company hits a share price of R74. From one store worth very little to over 2,000 stores and a company worth in excess of R6 billion. Every brand held by Famous Brands Limited is the leader in their category. Famous Brands is in fact so successful that they were voted as the first and overall winner in the Financial Mail Top 20 Companies. Famous Brands is today Africa's biggest quick service and casual dining restaurant franchisor and also has representation in the United Kingdom. The global footprint of the group stands at more than 2 000 franchised restaurants spread across South Africa, 16 African countries and the United Kingdom. Following their already successful journey, the stock price hit R100 in August 2013 and is now as of April 2015 sitting at R122.00. The company owns many businesses, but their claim to fame and biggest mainstream brands include: Steers, Wimpy, Debonairs Pizza, FishAways, M&B, Keg, O'Hagan's and Milky Lane.

2. Swot Analysis

No business can be truly successful unless they have undergone a SWOT analysis which aims to illustrate the strengths and weaknesses of the business as well as the opportunities and threats present.

Strengths:

• First and overall winner in the Financial Mail Top 20 Companies
• The company has strong ethical values which allows trust, integrity and honesty within the business.
• Profits are more than adequate to grow the business. This is certainly the case for Famous Brands, they are a spiral of upward success.
• The symbolFamous Brands is immediately recognised and trusted by customers.
• Competent planning means that there is always time for creative thinking and organisation

Weaknesses:

• Business could become too dependent on Kevin Hedderwick
  • Solution: It is important that every member of the business takes equal amount of responsibility. This will ensure smooth flowing and effectiveness within the business.
• Size and scale of global business - Making it hard to control standards and quality
  • Solution: This is actually a positive as it means the business is operating outside of its local barrier. The one thing that could be done in this case is having more members to make the global issue easier.
• The need for low cost products - This needs to be balanced in order to produce good quality products.
  • Solution: There is a need for low cost products amongst customers. This needs to be balanced, the business has to charge a reasonable amount so that they can make a profit whilst keeping customers happy with a price they are happy to pay because they know they are paying for quality.
• Differentiation of products from competitors it is hard for the business to continually differentiate themselves in a market which has many similar competitors
  • Solution: To have workers that are extremely creative and innovative; always 5thinking of new ideas to spark life into their products.
• Future competition Famous Brands has no control of new arrivals in the market, this could pose a threat to the profitability of the company
  • Solution: nothing can be done about this, the business has no control. The best way to compete with this is to have a positive mind set and only focus about your own business.

Opportunities:

• Kevin Hedderwick is an experienced entrepreneur and is the CEO of Famous Brands. The company is in good hands
• If proper market research is conducted, it will give the company a good idea of what they can do to improve their business as well as what their competitors are doing.
• Global business – companies oversees owned by Famous Brands are a healthy flow of income. This also raises company popularity
• Innovative business culture – have a culture within the business that allows for innovation and creativity to assist in staying on top of market trends and adapting to external factors to help the business thrive
• New products which are better than competition products

Threats:

• Growing competition - New entrants to the market who are selling the same good quality products
  • Solution: Ensure that your business is the best. Make sure that there is a strong ethical value within the business. But most importantly, treat your customers with the utmost respect.
• Rising cost of raw materials the business will be nowhere without the raw materials and if the price of those is rising, the company will lose money
  • Solution: Try find a store that sells fresh produce at a reasonable price. But keep in mind, one must never substitute quality produce for a cheaper price.
• Market demand shift in consumers tastes. Consumers might get over a particular taste (in this case a particular style of fast food) and switch to a competitor.
  • Solution: This is a tough one. Because the reason you are successful is because of the original taste of your products. So changing this up may repel customers and send them to your competition.

• Famous Brands, like any business, will have competitors. Theirs are as follows:
  • KFC
  • McDonalds
  • Spur
  • Kauai
  • Chicken Licken
  • Burger King
  • Nandos
  • Roman’s Pizza
  • Scooters Pizza
  • Something Fishy

3. Corporate Governance

Famous Brands have certainly incorporated Corporate Social Responsibility as part of its corporate governance. CSR is all about getting businesses to move toward an involvement approach of giving time, skills and effort to improve the lives of other people. Famous Brands corporate governance and sustainability is presented to show its shareholders how the company:

• Applies the principles of good corporate governance
• Manages risk
• Considers its ongoing sustainability
• Invests in the wellbeing of its people and society

Just as an example of good CSR, Steers, a business owned by Famous Brands save a portion of their dough that is not used and bake it into bread to give to the poor and homeless. This is but a small example of where Famous Brands has initiated CSR and proves that they invest in the wellbeing of its people and society. The business itself competes quite well with its competitors and it clearly shows that their customers are loyal and respectful.

4. Ethical Financial Reporting

Financial reporting is the process of producing statements that disclose an organization's financial status to management, investors and the government. This section talks about whether or not Famous Brands implements ethics into their financial reporting.

Financial Reporting 2014 

• Revenue

Up to 8% to R1674 million

• Operating profit

Up 17% to R305 million

• Headline earnings per share

Up 29% to 206 cents

• Cash generated by operations

Up 25% to R346 million

• Return on equity for 2014

Is 36% Code of ethics / Code of Conduct Code of Conduct Compliance with laws and Regulations

Employees must follow applicable laws, rules and regulations at all times. Employees with questions about the applicability or interpretation of any law, rule or regulation, should contact the Legal Department. The Code of Business Conduct of Famous Brands serves to guide the actions of the employees consistent with the Company values. The Code helps the people do the right thing and play by the rules wherever they operate around the world.

Conflict of interest

A Conflict of Interest occurs when personal interests of an employee or the interests of a third party compete with the interests of Famous Brands. In such a situation, it can be difficult for the employee to act fully in the best interests of Famous Brands. Employees shall avoid Conflicts of Interest whenever possible. If a Conflict of Interest situation has occurred or if an employee faces a situation that may involve or lead to a Conflict of Interest, the employee shall disclose it to his or her Line Manager and/or the HR or the Legal or Compliance Function to resolve the situation in a fair and transparent manner.

Code of Ethics

A guide of principles designed to help professionals conduct business honestly and with integrity. A code of ethics document may outline the mission and values of the business or organization, how professionals are supposed to approach problems, the ethical principles based on the organization's core values and the standards to which the professional will be held. The main relation that Famous Brands has to ethics is that it must teach and educate the employees of the company on what is seen as ethical behaviour and what is not. The Company has a system in place where all new employees are required to pass a test. The test is very simple, but yet again ethics is not something difficult to grasp it is merely the correct way to act and behave when involved in the business environment. All new employees are required to pass the test before they are allowed to begin working for the company. Famous Brands also has a system in place that makers certain that existing workers of all levels act in an ethical way when conducting themselves in the Famous Brands business environment. The system also ensures that that all customers feel happy and comfortable when deciding to consult or support the Famous Brands Business.

Sustainability

With regards to the above information and the timeline, I believe Famous Brands is a sustainable business and if they keep going the way they are they will most certainly improve their reputation and continue to grow and develop under the watchful and controlling eye of Kevin Hedderwick. Business sustainability is often defined as managing the triple bottom line - a process by which companies manage their financial, social and environmental risks, obligations and opportunities. These three impacts are sometimes referred to as profits, people and planet. Famous Brands manages their financial, social and environmental risks and obligations and opportunities. It is because of this that I am in favour of Famous Brands being a sustainable business. I believe they will be around for a long time if they carry on the way they are. 

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