Famous Brands has published its integrated annual report for 2019, showing significant growth in the number of restaurants across some of its most popular brands.
Fast food franchising has been a very successful industry over the last few years, with a number of international brands entering into the South African market and rapid expansion among local brands.
However, a low growth economy, high levels of unemployment and infrastructure issues including load shedding have put immense pressure on consumers and businesses alike, leading to a rocky year for most franchise owners.
According to Famous Brands, its 2019 financial year has been characterised by economic and political uncertainty, subdued consumer sentiment, reduced consumer spending and issues like load shedding, service delivery protests, the Cape droughts and fires – all of which impacted its margins.
Despite these economic pressures, franchising still remains a growing industry in South Africa, with most franchisees optimistic about their businesses.
According to the Franchising Association of South Africa, at the end of 2018, the estimated turnover for the entire franchising sector totalled R721 billion for the year – equivalent to 15.7% of the total South African GDP (up from 3.3% the year before).
A survey among franchisors found that one in three made a turnover of R20 million or more, and most expressed optimism that their business future remains positive.
However, the segment is not without its challenges, particularly from wider economic issues like slow growth and lack of skilled workers – while consumer spending is also under pressure.
Among those who are expecting their business to grow, there is an above average number of Business-to-Business Services (96%) and Health, Beauty & Body Culture (96%) franchisees who are upbeat – while those in Fast Foods & Restaurants are more likely to expect no change in their turnover in 2019 (30%).
Fast food franchises
South African fast food franchises had a year of mixed fortunes.
Taste Holdings was forced to reassess its launch strategy for its exclusively-held Starbucks stores in the country (opting to slow things down and focus on more targeted expansion), while other US brands Dunkin Donuts and Baskin Robbins exited the country completely.
Popular local grill house ChesaNyama moved to new ownership after closing 90% of its stores, and many other well known brands saw a slight reduction in their local footprint.
On the positive side, Famous Brands properties like Steers opened new stores, while the likes of Pizza Hut and Rocomamas continued their rapid expansion.
Even South Africa’s biggest fast food franchise, KFC, managed to grow, with the group now crossing over 900 locations in the country.
In 2019, we counted 5,287 stores, including the more ‘vague’ tallies such as Chicken Licken’s “over 200 stores” and Roman’s Pizza’s “over 220 stores”. We also included smaller shops like Sausage Saloon and King Pie for the first time.
The numbers for other franchises were sourced from brand owner annual reports, location counts from the respective brands’ websites and social media pages, as well as media releases from the brands themselves.
Nando’s, which has historically been quiet on the exact number of franchises it has, did not return a request for its latest numbers. In 2018, the group’s franchising department confirmed that there were around 340 restaurants in the country.
South Africa’s favourite food
South Africa’s preferred food has always been a fight between chicken and burgers, with pizza coming in third.
In 2019, the number of burger joints has passed chicken, despite KFC’s large impact.
The graph below includes the total tally across the different types of franchises.