Restaurant franchisor Spur Corporation‚ struggled to lift half year sales as it battled a weak economic climate‚ increased competition and a social media storm following a racist incident at one of its outlets.

The share price fell by as much as 7% on Monday morning after the group announced that half-year restaurant sales had declined by 2.6% to R3.7bn.

By the end of the day it gained 0.93% to close at R28.26. The share price has gained 2.76% so far in 2018.

In an increasingly competitive environment‚ Spur – which houses brands such as Spur Steak Ranches‚ Panarotti’s‚ Casa Bella and RocoMamas - battled to draw customers to its restaurants. In SA‚ franchise restaurant sales dropped 3%‚ while sales from international restaurants increased 1.3% in rand terms and 3.2% on a constant exchange rate basis.

The group attributed the weaker performance mainly to a constrained financial environment in most of its markets‚ as well as the release on social media of a video of a racially charged altercation between two customers that went viral and saw some consumers boycotting Spur Steak Ranches.

“Spur underestimated the effect that the social media episode would have on their results. They didn’t see it coming and they could’ve handled it much better‚” said Equity analyst at Gryphon Asset Managers Casparus Treurnicht. Spur clearly hadn’t won back those people that now dine at their competitors”.

The Great Burger Company and Hudsons The Burger Joint are appealing to millennials and the higher LSM groups‚ while Spur remains predominantly a family affair‚ catering for parents and kids.

Analyst at Vunani Securities‚ Anthony Clark‚ said the sector as a whole has had challenges in the various territories of operation. However‚ he was “satisfied” with Spur’s update given the sluggish growth in the economy.

“It’s no bed of fast food roses out there but Spur ‘smells better than most‚’” Clarke said.

Spur’s biggest loser was Captain DoRegos‚ which recorded a 12.2% drop in sales suffered‚ followed by Spur Steak Ranches with 9.3%. The Spur segment is responsible for almost 50% of the groups revenue.

Spur CE Pierre van Tonder reiterated that the group had also moved its promotional strategies away from discounting in the second half of the previous financial year‚ to protect franchisee margins.

“This has had the expected negative impact on turnover in the short term‚ but is critical to the sustainability of the franchise model‚ particularly in the case of Spur Steak Ranches‚ and has been successful in restoring acceptable profitability for franchisees‚” van Tonder said.

Fund manager at Old Mutual‚ Warren Jervis‚ said that stopping special discounts during a time when consumers were cash strapped could have had a significant effect on foot traffic.

“They are pretty good operators but have been hit by families not having as much disposable income ‚” Jervis said.

Treurnicht added that the removal of the “Monday Night Burger Special” confused another group of loyal patrons.

“It was a ritual that they simply removed and communicated it poorly”. RocoMamas and Hussar Grill brands produced stellar results with double digit growth of 37.5% and 24.1% respectively.

“These businesses are approaching a maturity phase but there is still space for growth” said Treurnicht.

Despite the drop in sales‚ the group opened 35 new outlets‚ while 13 closed their doors. Internationally five outlets were opened and another five were closed.