The Spur Corporation has warned that South Africa’s pizza franchise industry hs grown incredibly competitive, with consumers having a clear appetite for heavy discounts and good food.
In a sales update for the six months ended December 2019, the group said it has been a bit of a struggle when it comes to pizza, with competition stiff, and price-points from competitors shrinking to stand out.
“The pizza market in South Africa is extremely competitive with local quick-service restaurant brands discounting products significantly to maintain sales volumes.
“Panarottis’ move away from significant discounting to maintain franchisee profitability and ensure the sustainability of the brand, combined with competitor activity, has impacted the brand’s turnover growth,” it said.
This competition can be clearly seen in a recent BusinessTech poll, and readers have clear favourites when it comes to the pizza franchises they enjoy.
In the poll of more than 600 readers, Roman’s Pizza is the current frontrunner with 29% of the votes. It was followed by Debonairs (22%) and Pizza Perfect (14%).
Pizza is the third-largest fast-food category in South Africa, making up 21% of the over 5,000 fast food stores in the country.
Below BusinessTech looked at some of the costs of opening a top pizza franchise in South Africa right now.
Andiccio24 said that its franchise costs are highly dependent on the site chosen by the stakeholder. Interested applicants can complete a franchise form on its website.
“Payment of an application fee/deposit in the sum of R6 900,00 (including Vat). Should your application be successful, the full amount of R6,900 (including Vat) will be credited to your set up costs.
“In the event that your application is unsuccessful, regardless of the reason, you will be refunded R3,450 (including Vat).
“We rely largely on our applicant franchisees to identify potential Andiccio24 sites and to forward the following information to us so that we can conduct a preliminary off-site assessment.”
Some of the factors considered for a site include:
- The physical address of the premises;
- Salient terms and conditions of the offer to lease;
- Centre/building and store plans;
- Tenant mix;
- Photographs of the interior and exterior of the premises;
- Details of all Quick Service Restaurants (QSR’S) within a 3 km radius of the proposed premises;
- Details from the Landlord on Extraction facilities (if available), Electricity and Plumbing supply details, Ablution facilities, Parking arrangements and slab load-bearing capacity due to weight of the pizza oven.
A Famous Brands spokesperson told BusinessTech that they are in the process of updating Debonairs’ costings for 2021 which will be available in April.
However, they provided a generic costing for a 135 m2 store, indicating that interested franchisees can expect to pay around R2.3 million (including VAT).
Debonairs said that this is just a generic costing and that the final costings will be done on the scope of work when it identifies a specific site.
The estimated development cost for a Panarottis is R3,480,000 for a store of 375 to 400m2.
“Spur Corporation operates predominantly as a franchise operation, with each individual outlet owned and operated by independent franchisees,” it said.
“This model encourages entrepreneurship and business success. The Group provides a full range of ongoing head office support systems including operations, marketing, procurement support, business intelligence, information technology, accounting and administration.”
While Pizza hut does not specific prices for individual franchises, its website indicates that it is actively looking for franchise partners in South Africa.
The group said it was specifically looking for partners that have:
- Proved retail multi-unit operational experience (preferably in the food industry);
- The ability to source and build a minimum of 210 Pizza Hut delivery outlets in a 3-year period;
- Access to verifiable development capital of R25 million (a minimum 40% of which must be equity).
Pizza Perfect said that the average set up cost for a franchise start at R950,000 excluding vat (depending on the extent of works to be undertaken and size of tenancy).
This includes a minimum 50% of set up costs in unencumbered capital with the balance financed through a financial institution in the form of a loan or a lease on movable assets.
“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.
“The costs reflected are thus a ballpark figure and not a guaranteed amount.”
Roman’s Pizza said that interested stakeholders can expect to make a total investment of ±R2.2 million, made up of the following costs (excluding VAT):
- Initial joining fee: Initial joining fee is ±R90,000 (3.48%), which is required from the franchisee to confirm commitment.
- Establishment costs: Establishment Costs are approximately ± R2 300 000.00 (92.17%) based on a 120m² store size. Costs, however, do vary in accordance with various factors. Size of the store, exchange rates, and numerous other factors affect this estimate. Have a minimum of R1,250,000 unencumbered cash.
- Initial working capital: Initial Working Capital is ± R100, 000.00 (4.35%). This cost however does vary and is merely an estimate.