Fast food has been the go-to franchise opportunity in South Africa for close to a decade.
Fast food franchises in the country typically cost anywhere from R500,000 and R6 million to open, and have proven to be the bright spot for the franchise sector.
In 2017, the franchising sector consisted of 845 franchisors and over 40,000 franchisees. It employed about 343,000 people and generated sales of R587 billion. This equals 13.3% of the country’s GDP, up from the 9.7% recorded in 2014.
However, according to a new report by the Franchising Association of South Africa (FASA) for the first time in many years, the income from fast food and take-away outlets have declined substantially during the first half of 2018.
This is putting significant stress on the fast food industry, FASA said – and the saviour for the industry may potentially be the continued development of online food delivery services that have simplified access.
Saviour of SA fast food?
“Technological innovation will be one of the key drivers of growth for the fast food industry in the future. In South Africa, it has become particularly important for fast food franchises to ensure they have effective systems in place that enable consumers to order and buy online,” FASA said.
“A rapidly growing number of consumers are opting for the convenience of online delivery services when purchasing fast food.
“Currently, Mr D Food and UberEats are South Africa’s top two online ordering platforms.”
Mr D Food, which is owned by multinational Naspers, has a network of over 1,400 restaurants and delivers to over 1,900 suburbs in South Africa, while UberEats has a network of approximately 1,200 restaurants across Gauteng and Cape Town.
Devin Sinclair, the CEO of Mr D Food, said that the company’s success has been strongly related to its ability to transform from a phone ordering business to an online ordering service.
The transition has been particularly successful as the Mr D Foods mobile app has been downloaded over one million times and over R500m in orders were processed through the app in the last year. Mr D Foods also claims to have 270,000 active users per month and 2.6 deliveries per customer per month.
UberEats, which operates in 100 cities in 27 countries, is another influential player in online food delivery services in South Africa. In October 2017, the food delivery app stated that it had surpassed over half a million downloads in its first year in South Africa.
UberEats also introduced restaurant ratings, which allows consumers to see how users in their city have rated a specific restaurant.
“Despite the significant growth of online delivery in South Africa over the last few years, there is still the potential for more growth in the future. Larry Illg, Naspers Ventures CEO, says that food delivery in South Africa is still under-penetrated and will continue to show rapid growth in the future,” FASA said.