Homegrown Meets International in SA’s Franchising Mix
Franchising is one of the most global of market models, yet South Africa differs from that trend in that a high proportion of franchise brands in South Africa are homegrown. This is primarily due to sanctions against South Africa prior to 1993. Since then, there has been a noticeable increase in the number of international brands entering the South African market like Burger King, Pizza Hut, Domino’s, Krispy Kreme, Starbucks and Dunkin Donuts, but locally-born franchises still dominate.
This increased competition is of course good news for the sector: we may bemoan increased competition but it improves market awareness, service levels, quality and price – and is therefore good for the consumer.
There were 156 franchise systems in South Africa in 1994, according to FASA’s latest report, increasing to 757 in 2016. International brands in South Africa are represented primarily by quick service restaurants.
The homegrown nature of South Africa’s franchising sector means it has a big advantage in one of the last great expansion opportunities in the world: Africa. Most international franchises coming to South Africa do so to use this country as a springboard to launch into Africa. Local franchises should be doing the same.
The Africa business model (as far as one can generalize about such a huge and diverse continent) favours small business, and start-up businesses. Large businesses simply do not exist to any great degree on the continent. Locally developed franchises have recent experience of growing in South Africa, and can now replicate that in Africa.
Franchising also has an uncanny ability to create jobs – precisely what Africa needs more than anything else. According to latest FASA figures, 329,245 people were employed within franchised operations in 2016.
The growth of franchising in South Africa
The growth of franchising in Africa has been dramatic: just three years ago, 138 franchised systems were operating on the continent outside of South Africa– a number that increased to 182 brands last year in the rest of Africa outside South Africa..
In a part of the world which favours a DIY culture, franchises
systems such as automotive services and hardware franchises will thrive.
The South African food franchise sector is dominated by three major players: Spur Corporation (Spur and Panarottis), Famous Brands (Wimpy, Steers and Debonairs) , and Taste Holdings (Domino’s Pizza, Fish and Chips Co., Maxi’s and Zebros). Many of these franchises have flourished by adjusting their menu to cater to the market with less disposable income.
Here are some of South Africa’s top home-grown franchises:
*Please note, Whichfranchise South Africa does not represent any of these brands.
The first Steers fast food outlet opened in 1960 by George Halamandaris, a Greek-South African entrepreneur who got the idea for a uniquely South African steakhouse after holidaying in the US. According to Famous Brand’s annual report, Steers has an 8% market share of the fast food industry and 18% of all burger brands. There are 542 stores in South Africa and 49 internationally for a total of 591 stores.
Established in 1981, Chicken Licken’s ‘Soul Food’ chain is the second largest fast food brand in South Africa behind KFC. Founded by George Sombonos after buying a secret spice from an American restaurateur for $1 000, last year there were 250 Chicken Licken stores. Chicken Licken sells over 400 000 chickens and five million hot wings a month, and has an annual turnover of R1.3 billion. According to the Wall Street Journal, the food chain holds a 5% market share of South Africa’s fast food market, tying with McDonalds and is the largest non-American-owned fried chicken franchise in the world.
Debonairs pizza delivery business was founded in 1991 by university student, Craig Mckenzie. Delivery turned out to the key strategy as Debonairs is now the number one pizza franchise in South Africa. There are 473 Debonairs stores in South Africa and 90 internationally, to give a total of 563. According to the South African Customer Satisfaction Index (SAcsi) the Debonairs franchise holds a 3.6% market share in the fast food industry.
Nando’s was started in 1987 by South African and Portuguese entrepreneurs, Robert Brozin and Fernando Duarte (Nando for short). The fast-growing spicy-chicken chain has 1,100 locations in 22 countries with a 3.5% market share of the fast food industry. There are as many Nando’s in the UK as South Africa. According to CNBC Africa, Nando’s is South Africa’s most successful restaurant group export.
The Spur steakhouse franchise is a family-orientated brand established over 40 years ago. There are 277 outlets in South Africa and 43 internationally. The brand has 320 outlets according to its latest annual report (2015). The restaurant holds a market share of 3.26% in the food industry. Spur also owns the brands Panarotti’s, John Dory’s, RocoMamas, Captain Dorego’s and Hussar Grill.