Burger King sizzles in Cape Town

2013-05-12 14:00

Global fast food giant faces stiff and ­well-entrenched competition in SA

The world’s second-largest fast food brand, Burger King, opened its first outlet in the Cape Town city centre this week in the biggest development in local food franchising since McDonald’s arrived in 1995.

In a R20?billion business that is all about volumes, the newly arrived giant has made a relatively modest initial move.

The plan is for a rapid expansion once the business beds down its supply chain and logistics around four initial outlets across Cape Town this year. The others will be in Durbanville, Claremont and Athlone.

The brand will only accept franchisees later on, says José Cil, Burger King’s president for Europe, the Middle East and Africa.

First it will expand nationally next year with outlets it still owns and runs itself.

Within five years, the network will probably comprise at least 100 outlets, based on Burger King SA CEO Jaye Sinclair’s promise of 5?000 jobs.

A large Burger King like the flagship in Cape Town has 45 staff members.

For Burger King, the South African business is, however, a “launching pad” into sub-Saharan Africa, says Cil.

While Burger King is starting from zero, it faces stiff and ­well-entrenched competition.

The R6.3?billion local burger business is “fiercely competitive with high standards and sophisticated operations”, says Bendeta Gordon, founder of Franchize Directions and author of the yearly Franchise Factor survey covering most of the industry.

The major burger operators like McDonald’s and Steers stand to lose market share, but it isn’t always as clear-cut as that.

“When McDonald’s arrived, there was fear in the market, but what happened is that the whole market grew and standards got elevated. I hope Burger King puts in the resources to grow the fast food space too.”

There is a limit to how many chicken, burger and pizza joints a country can support and the local giants are basically starting their moves into the rest of Africa at the same time as Burger King.

KFC is the most ubiquitous local franchise, with something close to 700 outlets countrywide and an incumbency of four decades.

KFC is still experiencing “double-digit” volume growth in South Africa and a large part of that is driven by new outlets, says Doug Smart, KFC’s managing director in southern Africa. That growth is coming from “new areas in townships and rural areas”.

KFC has only 17 outlets in Nigeria and a total of 70 in sub-Saharan Africa outside South Africa.

All told, there are 65 fast food franchise brands in South Africa and 5?400 outlets between them.

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