{"id":782976,"date":"2024-07-18T13:00:00","date_gmt":"2024-07-18T11:00:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=782976"},"modified":"2024-07-18T12:43:10","modified_gmt":"2024-07-18T10:43:10","slug":"mcdonalds-paying-r420000-per-month-for-an-iconic-site-in-cape-town","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/business\/782976\/mcdonalds-paying-r420000-per-month-for-an-iconic-site-in-cape-town\/","title":{"rendered":"McDonald’s paying R420,000 per month for an iconic site in Cape Town"},"content":{"rendered":"\n

McDonald’s in Green Point, Cape Town, recently renewed its lease at R420,000 per month for the prime site after a bidding war with KFC.<\/p>\n\n\n\n

The highly recognisable 24HR McDonald\u2019s drive-thru location has a lease agreement with the City of Cape Town. <\/p>\n\n\n\n

The property lease was recently auctioned, sparking a competitive bidding war between McDonald\u2019s and KFC. <\/p>\n\n\n\n

Both renowned brands vied for the top location at the entrance to the DHL Stadium.<\/p>\n\n\n\n

With a seating capacity 55,000, the stadium is set to host the eagerly anticipated Springboks vs New Zealand rugby match in September of this year. <\/p>\n\n\n\n

Ultimately, McDonald\u2019s emerged as the successful bidder, securing the site at a monthly rental rate of R420,000, equating to R5.04 million per annum. <\/strong><\/p>\n\n\n\n

Speaking to 94.7<\/a>, Chris Teague, the director of property development and investments firm Flanagan and Gerard, said this is no ordinary rental – but fitting for what is no ordinary location.<\/p>\n\n\n\n

Teague said the location is one of the best real estate in the country, and the rental amount is always a function of turnover.<\/p>\n\n\n\n

“When you understand the performance potential of this site and the turnover potential of a business, rental should be a reasonable function of that. <\/p>\n\n\n\n

“While it may differ from property company to property company, what typically happens is the tenant [McDonald’s] and landlord [the city] agree on what a reasonable turnover is likely to be, and then this is used to calculate a rental that the tenant can reasonably sustain.<\/p>\n\n\n\n

“This means that this fee of R420,000 is reasonable when you consider the amount of money this site can generate, which is astonishing,” said Teague.<\/p>\n\n\n

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McDonald’s drive-thru, Green Point, Cape Town.<\/em><\/figcaption><\/figure><\/div>\n\n
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Google Maps view of site<\/em>.<\/figcaption><\/figure><\/div>\n\n\n

How much it costs to own a fast-food chain<\/strong><\/p>\n\n\n\n

The success and popularity of fast food franchises in South Africa is clearly evident based on the recent auction, but to hop on the gravy train will cost you millions.<\/p>\n\n\n\n

Apart from the financial contributions and as part of the franchising process, most of these brands require prospective franchisees to undergo training lasting between six and eight weeks to a whole year in McDonald\u2019s case.<\/p>\n\n\n\n

They also require a percentage of unencumbered cash, which is the franchisee\u2019s cash available in liquid form and should not be obtained from a bond or other loan that would increase the debt.<\/p>\n\n\n\n

McDonald\u2019s started as a single restaurant in Illinois in 1955 and today spans the globe with more than 35,000 restaurants in 120 countries \u2013 335 of these in South Africa.<\/p>\n\n\n\n

While Mcdonald\u2019s doesn\u2019t present updated franchising costs, the total investment to own a branch as of the end of 2022 includes the following:<\/p>\n\n\n\n