How much it costs to open a top fast-food franchise in South Africa?
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.
While fast-food chains have experienced the challenges faced by many other businesses in South Africa, they continue to grow due to their convenience and increasing demand during load shedding.
A study conducted by Discovery Bank and Visa showed that, as load-shedding stages increase, so does the amount of money spent on eating out, with the highest peaks seen during stages 5 and 6.
South Africans tend to spend 60% more on eating out during these stages compared to when there is no load-shedding.
This has helped the industry compared to many others who have struggled during rampant power cuts.
Property Sector Strategist at FNB Commercial Property Finance, John Loos, told 702’s The Money Show that South Africa’s food and beverages sector grew 15.5% nominally year-on-year.
Additionally, while restaurants and coffee shops declined by as much as 35% in 2023 compared to provide 2019 due to various economic headwinds in South Africa, takeaways and fast food has grown by 33.1% in real terms over the same period.
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 KFC, McDonald’s, Debonairs Pizza, Steers, Nando’s, RocoMamas, Chicken Licken, Simply Asia, and Roman’s Pizza.
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.
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! Brands 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.
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 – 335 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.
With nothing but a dream and R6,000 in their pockets, two university students, Craig MacKenzie and Andrew Harvey, opened the first Debonairs Pizza restaurant at Park Lane Spar in Pietermaritzburg.
From there, the chain became immensely popular, expanding rapidly and was acquired by Famous Brands in 1999. There are now around 681 stores across South Africa in 2023.
While their website doesn’t outline the costs of opening a franchise, Famous Brands’ market research report for March 2023 noted the investment cost and royalties expected, as outlined below:
• Average investment required – R1.7 million.
• Monthly royalties – 12% of monthly Net Sales.
Steers is one of the most popular local burger chains in South Africa, opening its first branch in the 1960s, and today there are 649 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.
Nando’s was founded in 1987, opening its first restaurant in Rosettenville, Johannesburg. In 2023, Nando’s will have thousands of restaurants across 23 countries – including 925 of those in South Africa.
According to Nando’s estimates, the total investment to own a branch includes the following:
• Application fee – R37,500
• Franchise fee – R250,000
• Average investment required – Drive-Thru: R6.7 million | Inline: R5.4 million.
• 50% unencumbered cash contribution – Drive-Thru: R3.5 million | Inline: R2.8 million
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 88 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
Since the first Chicken Licken opened in Ridgeway in 1981 by the founder George Sombonos, the chain has grown into the largest non-American-owned fried chicken franchise in the world, with 286 stores across South Africa.
According to Chicken Licken’s estimates, the total investment to own a branch includes the following:
• Franchise fee – R180,000
• Average investment required – Fly-Thru: R6.8 million | Inline: R4.8 million
• 50% unencumbered cash contribution – Drive-Thru: R3.4 million | Inline: R2.4 million
• Monthly royalties:
o Franchise royalty – 6% of monthly Net Sales
o Marketing royalty – 6% of monthly Net sales
Thai national Chai Lekcharoensuk opened the first Simply Asia Thai Food & Noodle Bar in Cape Town in 2003. Today, there are approximately 64 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:
o Franchise Fee – 7% of monthly Net Sales
o Marketing royalty – 3% of monthly Net sales
Roman’s Pizza chain franchise was founded in 1993. Originally named Little Caesar’s (copied from the American brand Little Caesars Pizza) when it was founded by Arthur Nicolakakis in Pretoria. The chain was rebranded in 2002 and renamed Roman’s Pizza, and now stands with 248 outlets across South Africa.
According to Roman’s estimates, the total investment to own a branch includes the following:
• Franchise fee – R90,000
• Average investment required – R2.7 million (including R100,000 working capital).
• Unencumbered cash contribution – Minimum of R130,000.
• Monthly royalties:
o Franchise Fee – 4% of monthly Net Sales
o Marketing royalty – 4% of monthly Net sales
Source: BusinessTech – https://businesstech.co.za/
