QUESTION 1 (21 marks)

Read the following extracts of Famous Brands Ltd (“Famous Brands”)’s 2022 Integrated Annual Report:

Famous Brands Ltd (“Famous Brands”) began as a family business in the early 1960s with the brand Steers. Today, the Group is Africa’s leading Quick Service and Casual Dining restaurant franchisor, owns several well-known brands and has operations on three continents.
Famous Brands is listed on the JSE in the Travel and Leisure sector.

Famous Brands operates franchised, master licensed and company-owned restaurants. Our business model comprises four core pillars: Brands, Manufacturing, Logistics, and Retail. Famous Brands is the franchisor and various franchisees use the Famous Brands brand and intellectual property and sell menu items to customers. Famous Brands earns sales-based royalties income (franchisee revenue), based on a percentage of these restaurant turnovers. Therefore, based on our business model, our customer is the franchisee.

The Brands portfolio consists of 17 restaurant brands, represented by a network of 2 824 restaurants across:
1. South Africa (“SA”): 2 470 restaurants
2. The rest of Africa and the Middle East (“AME”): 287 restaurants in 16 countries
3. The United Kingdom (“UK”): 67 restaurants.

Our brands include:
1. Steers (Wholly owned)
2. Debonairs Pizza (Wholly owned)
3. Fishaways (Wholly owned)
4. Milky Lane (Wholly owned)
5. Mugg& Bean (Wholly owned)
6. Wimpy (Wholly owned)
7. Salsa Mexican Grill (Wholly owned)
8. House of Coffees (Subsidiary / Associate)
9. Fego Caffe (Wholly owned)
10. Coffee culture (Wholly owned)
11. NetCafe (Wholly owned)
12. Vovo Telo Bakery & Café (Wholly owned)
13. Aqua Monte (Wholly owned)
14. TRUFruit (Subsidiary / Associate)

In April 2022, Famous Brands acquired a 51% shareholding in Lexi’s Healthy Eatery. Lexi’s Healthy Eatery, whose slogan is ‘Eat more plants’, is a Casual Dining Restaurant brand, offering a full-service, sit-down, plant-based dining experience across breakfast, lunch, and dinner.

Our Brands are supported by a vertically integrated business. Our Supply Chain comprises our Manufacturing, Logistics, and Retail operations.
The primary function of our Supply Chain is to sell ingredients and products to our franchisees providing a competitive advantage through efficient supply, product innovation, and margin management. The Manufacturing, Logistics, and Retail businesses are managed and measured independently.

Manufacturing: Our manufacturing plants are wholly and partly owned subsidiaries. Logistics: Internal logistics capability ensures that restaurants and retail outlets receive ingredients and products.
Retail: Sells condiments (sauces, dressings, spices), frozen meat products, coffee (ground and beans), frozen chips, and other value-added products to major retailers.

During manufacturing, plant managers are incentivised to reduce their electricity and water usage. Famous Brands have initiatives to encourage recycling among franchisees, and many landlords facilitate recycling at their malls. We have operational standards regarding the responsible disposal of waste products, such as cooking oil. Famous Brands aim to decrease our carbon footprint by 25% by 2026 and to reduce our water usage by 25% by 2026.

In 2019:
• Our Logistics Supply Chain operation ceased stocking plastic straws.
• All plastic straws were removed from the SA and UK restaurant network and replaced with paper straws.
• We removed all shrink-wrap packaging from our Retail sauce bottles and replaced it with recycled cardboard boxes.

In 2020:
• We began converting all hot takeaway coffee cups to fully recyclable or compostable alternatives.
• Recycling logos were added to all our plastic cutlery to drive awareness that the material can be recycled and responsibly disposed of.
• Cage-free eggs are in use by Vovo Telo, Mugg & Bean, Fego Caffé, PAUL, and Creative Coffees. Effective October 2019, egg products were removed from all manufactured sauces, and a phased roll-out of the sauces commenced.
• All polystyrene was eliminated from our Leading Brands restaurant network and replaced with recyclable packaging.

In 2021:
• Eliminated balloons in Debonairs Pizza, Fishaways, Wimpy SA, and AME restaurants.
• Steers concluded the cage-free egg transition in October 2020.
• All brand packaging ranges are 100% recyclable.
• Famous Brands became a signatory to the South Africa Food Loss and Waste Agreement.
• We launched our fully recyclable, compostable, and biodegradable packaging into Wimpy to replace the widely used grill and breakfast box.

In 2022:
• All brands, except for Fego Caffé, have converted to fully recyclable takeaway cups.
• All operations using cage-free eggs, ahead of the 2025 target.
• Meat plant solar system commissioned.
• Clean-in-place improvement project to step change effectiveness and reduce water usage at the same time for Sauce Plant.
• Refrigeration system for the new KwaZulu-Natal depot will be waterless and reduce electricity usage.

Famous Brands aims to ensure equal work for equal pay across the Group. We observe the principles of equality and fair treatment in all operations and interactions with employees. Famous Brands engages, develops, and retains a high-value workforce by investing in skills development programmes. The skills development element measures the extent to which the Company provides ongoing training and development of the core technical skills and competencies of employees to support their performance and career progression while also enriching the local labour pool.

The entity also aims to develop Small Medium and Micro-Enterprises (“SMMEs”) within the enterprise and supplier development programme, with a focus on developing one supplier per year. Famous Brands has created more than two jobs through SMMEs participating in the enterprise and supplier development programme.

The financial results of Famous Brands’ 2022 financial year indicated revenue of R6.5 billion (compared to R4.7 billion in 2021); an operating profit of R630 million (compared to R119 million in 2021) and earnings per share of R3.56 per share (compared to R0.53 per share in 2021).

Source: Famous Brand. 2022.Integrated Annual Report2022. Retrieved from: https://famousbrands.co.za/iar2022/pdf/Famous_Brands_IAR_2022.pdf [Accessed 22 August 2023]

REQUIRED:

Explain the following two terms to the board of directors of Famous Brands:
Sustainability (4 marks)
Sustainable development (5 marks)

Explain to Famous Brands’ board of directors the six (6) levels of an organisation’s commitment to sustainability. (9 marks)

Keeping your answers to questions 1.1. and 1.2 in mind, evaluate Famous Brands’ level of commitment to sustainability.

QUESTION 2 (11 marks)

Refer to the scenario “Famous Brands” provided in question 1 and evaluate the organisation’s structure.

REQUIRED:

One of the organisational structures that Famous Brands could be considered utilising, is the holding company structure. Explain the theoretical characteristics of this organisational structure. (8 marks)

Motivate why Famous Brands could be considered utilising the structure in question 2.1. (3 marks)

QUESTION 3 (19 marks)

Refer to the scenario “Famous Brands” provided in question 1 and answer the questions below.

REQUIRED:

Analyse Famous Brands and state who is responsible for:
strategic management at the corporate level within Famous Brands. (1 mark)
strategic management at the business level within Famous Brands. (1 mark)

Explain to Famous Brands the roles that the strategists at the corporate level have. (5 marks)

Explain to Famous Brands the roles that strategists at business level have. (12 marks)

QUESTION 4 (17 marks)

Refer to the scenario “Famous Brands” provided in question 1.

A negative consequence of the holding company organisational structure which Famous Brands may be incorporating, as identified in question 2, is that there can be a lack of organisational culture.

REQUIRED:

Briefly explain in your own words what is meant by “organisational culture”. (1 mark)

Explain to Famous Brands, which indicators the organisation can use to measure the level of its organisational culture.
Supplement your answer by proposing suggestions for each indicator in the context of Famous Brands.
(10 marks) Explain to Famous Brands how the organisation can instil a culture that supports good strategy implementation. (6 marks)

QUESTION 5 (32 marks)

Refer to the scenario “Famous Brands” provided in question 1.

At the corporate level, an organisation can use one or a combination of the following strategies: Internal growth strategies; external growth strategies, co-operative or combination strategies, and, lastly, turnaround and exit strategies.

From the Famous Brands scenario, it can be identified that Famous Brands is actively using corporate-level strategies.

REQUIRED:

Explain the various external growth strategies to Famous Brands.
Identify and motivate which one of these external growth strategies, Famous Brands is using. (10 marks)

Explain the various internal growth strategies to Famous Brands.
Identify and motivate which internal growth strategies, Famous Brands is using. (7 marks)

Explain the various co-operative or combinations strategies to Famous Brands. Identify and motivate which one or more of these co-operative and combination strategies Famous Brands is using. (13 marks)

One of Famous Brands’ brands is the Steers fast-food restaurant brand. Identify and motivate which business level strategy Steers restaurants make use of. (2 marks)

Answers to Above Questions on Famous Brands 

Answer 1: Sustainability is an important concept that implies the responsible decision making process with the objective of meeting out the present need without compromising the ability of future generations to meet their own needs. In the given case scenario of Famous brand, sustainability in the context of the case organisation is defined as addressing the environmental, social and economic impacts of the company’s operations.