How much it costs to open a top fast food franchise in South Africa

Despite a flat economy, South Africa’s fast food franchises sector has shown strong growth in revenue over the past couple of years.

The franchising sector as a whole, contributed an estimated 15% to the country’s GDP, according to the Franchising Association South Africa 2018 survey.

A 2018 report by global analytics group Euromonitor showed that revenue across 20 major fast food franchises in South Africa increased between 2016 and 2017 – with brands like KFC and Steers showing impressive growth.

The table below outlines the growth in revenue, as reported by Euromonitor, as well as how much money each brand makes per franchise.

Taking the data above into account, its understandable why so many consider opening a franchise to be such a good business opportunity, as the potential revenues can certainly make up the costs of opening an outlet.

However, not all of these franchises are open to public applications, with some requiring interested franchisees to make first contact before releasing financial information.

Other restaurants – such as KFC – do not currently accept applications at all.

Below BusinessTech looked at the costs of opening some of the most popular fast food franchises in South Africa.

McDonald’s

McDonald’s said that the cost of a franchise varies, and that actual costs are only determined when an individual franchise is offered to an applicant.

“The size of the restaurant, location, pre-opening expenses, inventory, selection of equipment, signage, seating and style of decor and landscaping will affect cost,” it said.

The estimated cost can be somewhere from R4 million – R6 million, depending on the type of restaurant and other factors.

“An applicant must have a minimum of 35% of the purchase price of a restaurant in unencumbered, non-borrowed cash.

“Institutional finance through e.g. banks can be used to fund the balance (McDonald’s does not provide financing or loan guarantees nor does it permit any form of borrowing from any third parties for purposes of financing the franchisee’s initial 35% contribution).”

Nando’s

Nando’s charges a franchise application fee of R25,000 (VAT inclusive) and a franchise fee of R230,000.

This fee includes:

• The right to use and operate under the Nando’s name and concept;
• Initial owner and staff training;
• Assistance with site selection and evaluation;
• Initial legal costs incurred in the conclusion of the Franchise Agreement;
• Assistance with Lease negotiations; and
• Initial pre-opening/launch assistance.

Nando’s also estimates that you will need approximately R6,560,000 (plus VAT) for establishment costs when setting up your restaurant.

Fish and Chip Co.

The Fish & Chip Co estimates that the average setup cost for a franchise is R699,000 including VAT.

Franchisees are also expected to pay an initial joining fee of R140,000 – however, this is included in the setup fee.

Prior to the construction of the store, the full amount of R699 000 needs to be paid in full, Fish & Chip Co said.

“The full payment, as well as a signed Franchise and Lease Agreement, must be present before the commencement of construction.

“The balance can either be cash or \financed through any institution of your choice. If assistance is needed with the balance that is financed, we will provide a business profile, which is a requirement of the bank,” it said.

Steers

To become a Steers franchisee, you need to pay a joining fee of R130,000 (excluding VAT). The total investment starts at approximately R1,207,000.

Historically the company has offered three different models including a cheaper kiosk, a standard store, and a drive-thru option.

Roman’s Pizza

The initial joining fee for a Roman’s Pizza is R90,000. Roman’s estimates that establishment costs are approximately R2.3 million based on a 120m² store size.

Costs, however, do vary in accordance with various factors including the size of store, and exchange rates it said.

Franchisees are also expected to have initial working capital of R100,000.

Pizza Perfect

Pizza Perfect charges an application fee of R10,000 and a joining fee of R75,000.

Based on a 90 square meter take-out unit, it said that you can expect to pay average setup costs starting from R950,000 excluding VAT.

“The setup costs will vary depending from site to site, on the size of the outlet, the product combination, the extent of the building works required to set up the outlet, costs and market conditions,” it said.

Sandwich Baron

Sandwich Baron opened its first franchise in Germiston in 1997 and currently, there are 46 stores across the country – 5 being company owned.

The company estimates that a delivery store will cost R620,000 (excl VAT).

It also provides general franchising costs based on a number of currently available franchise opportunities.

Chicken Licken 

According to its website, the estimated establishment costs for a Chicken Licken restaurant is R4.8 million.

In comparison, you can expect to pay a minimum of R6.8 million for a ‘fly-thru’ store.

In both cases, you can expect to pay an initial franchise fee of R150,000.

Chicken Licken also extracts a royalty fee (6%) and advertising share (6%) that account for 12% of the franchise’s turnover.

King Pie

King Pie has a wide range of franchise options across every major major price point.

A traditional King Pie store will cost between R450,000 – R550,000 (excluding VAT) depending on the site chosen.

You can also purchase an express unit (from R289,00) or a kiosk (from R180,000).

Existing franchisees can also purchase trailers (from R289,000), Tuc Tucs (from R100,500) and a ‘piecycle’ (R12,500).

Kauai

Kauai estimates that the capital costs of setting a store up should come to around R2,000,000 (excluding VAT).

Franchisees are also expected to pay a franchise fee of  R120,000 (excluding VAT) per store.

Franchisees are also expected to have working capital including:

• R30,000 for the training of staff;
• R50,000 for a rental deposit;
• R3,500 for legal fees;
• R3,200 for a franchise application fee;
• R60,000 for uniforms and smalls.

Read: 6 trends you need to know about if you want to open a franchise in South Africa in 2019