The success and popularity of fast food franchises in South Africa are well known, and to hop on the gravy train will cost you millions at the least.
Fast food has become increasingly popular in South Africa, with numerous international chains setting up shops in cities nationwide. The fast-paced lifestyle and busy work schedules of many South Africans have led to a demand for quick and convenient meal options.
Burger chains, in particular, such as McDonald’s, have become household names and are frequently visited by people of all ages.
Additionally, the rise of delivery services has made it even easier for South Africans to enjoy fast food in the comfort of their own homes.
The trend is expected to continue as more international fast-food chains enter the market and local businesses adopt the fast-food model.
However, fast food franchises have a poor reputation regarding healthy eating, and the current state of load shedding has meant that many South Africans turn to these foods as meal preparation times across households are disrupted.
This has also created a double-edged sword. While demand for fast food has increased due to nationwide power cuts, some of South Africa’s favourite fast-food chains are struggling with stock and being forced to close as load shedding hampers their operations.
In December last year, KFC announced that load shedding had impacted the supply of some essential menu items. The company is not alone in its struggle, with Nando’s also falling victim.
Mike Cathie, the CEO of Nando’s South Africa, told the Sunday Times that the intensifying blackouts are leading to a supply crunch on chicken – threatening the company’s fresh food supply.
He said that while none of its restaurants has closed due to chicken shortages, it continues to be tough to manage supply across its national footprint with seemingly nonstop load-shedding.
Despite this, according to an Allied Market Research report, South Africa’s fast food market is expected to grow by 7.9% annually and reach a valuation of $4.9 billion (R85 billion) by 2026.
The fast food industry is still a very lucrative business, and getting your foot in the door will cost you a hefty sum of money.
How much it costs to own a franchise
To give you an idea of the costs involved in owning some of South Africa’s most popular fast-food franchises, BusinessTech compared the fee requirements of several franchises.
The franchises listed in this article are those that had the relevant information available and include: Nando’s, Steers, McDonald’s, RocoMamas, KFC, and Simply Asia.
Apart from the financial contributions and as part of the franchising process, most of these brands require prospective franchisees to undergo training for a duration of between six and eight weeks to a whole year in McDonald’s case.
They also require a percentage of unencumbered cash, which is the franchisee’s cash available in liquid form and should not be obtained from a bond or other loan that would increase the debt.
These brands and their respective financial requirements to own and operate under the franchise are listed below.
Nando’s was founded in 1987, opening its first restaurant in Rosettenville, Johannesburg. In 2023, Nandos will have thousands of restaurants across 23 countries – including hundreds of those in South Africa.
According to Nando’s estimates, the total investment to own a branch includes the following:
- Application fee – R35,000
- Franchise fee – R250,000
- Average investment required – Drive-Thru: R6.8 million | Inline: R5 million
- 50% unencumbered cash contribution – Drive-Thru: R3.5 million | Inline: R2.6 million
Steers is one of the most popular local burger chains in South Africa, opening its first branch in the 1960s, and today there are 648 nationwide.
Steers franchising fees include:
- Franchise fee – Drive-Thru: R75,000 | Inline: R68,000
- Average investment required – Drive-Thru: R3.75 million | Inline: R1.97 million
- Monthly royalties – 11% of monthly Net Sales.
McDonald’s started as a single restaurant in Illinois in 1955 and today spans the globe with more than 35,000 restaurants in 120 countries – 300 of these in South Africa.
While Mcdonald’s doesn’t present updated franchising costs, the total investment to own a branch as of the end of 2022 includes the following:
- Average investment required – between R4 million and R6 million.
- 35% unencumbered cash contribution – between R1.4 million and R2.1 million.
The total investment needed depends on location, size, styling, and varying pre-operation expenses.
Founded in July 2013, RocoMamas has fast become one of the trendiest restaurants in South Africa, garnering a loyal following of burger enthusiasts.
RocoMamas has just shy of 100 restaurants nationwide and 17 international restaurants.
The total investment to own a branch includes the following:
- Average investment required – R4.6 million
- 60% unencumbered cash contribution – R2.7 million
- Surety – R2.2 million
Colonel (Harland) Sanders started selling his famed southern fried chicken in 1964, and today, there are over 26,000 KFC restaurants worldwide.
Despite KFC being by far the most popular fast food franchise in South Africa, KFC South Africa brand owner, Yum International, has noted that the company is not currently looking for new franchisees.
However, existing KFC franchisees may elect to sell their businesses, and it is possible to become a new KFC franchisee by purchasing an existing KFC business.
According to the latest franchise data available from KFC, new franchise owners could expect to pay close to R6 million for a new franchise.
This number may vary depending on location, size, and operation requirements.
Thai national Chai Lekcharoensuk opened the first Simply Asia Thai Food & Noodle Bar in Cape Town in 2003. Today, there are dozens of stores in and around the Western Cape and in Gauteng and KwaZulu-Natal.
According to Simply Asia’s estimates, the total investment to own a branch includes the following:
- Commitment fee – R20,000. This will be utilised for any costs associated with the application process regarding assessments, interviews and tests.
- Franchise fee –R100,000
- Joining fee – R100,000. This includes the right to use and operate under the name as well as training, lease negotiations and initial pre-opening launch.
- Average investment required – Sit-down: R1.5 million | Express: R1.1 million
- 50% unencumbered cash contribution – Sit-down: R750,000 | Express: R550,000.
- Monthly royalties:
- Franchise Fee – 7% of monthly Net Sales
- Marketing Royalty – 3% of monthly Net sales