The fast food and restaurant sector has been a successful industry over the past few years. With rapid expansion occurring through franchising among local brands and international brands entering the fold, the industry demonstrates year-on-year ascension.
Key players in the franchise industry include Spur Steak Ranches, the Nando’s Group, Yum! Brands, Taste Holdings and Famous Brands, which owns companies such as Steers, Debonairs Pizza and Fishaways.
According to industry analysts, the South African fast food market size was valued at $2.7 billion in 2018 and is expected to reach $4.9 billion by 2026.
The large number of domestic and international restaurant chains present in the country are powering the growth of the fast food segment.
According to the Southern Africa Food Lab, there has been a steady upward trajectory in consumption of convenience foods because of the rise in availability of takeaway vendors.
Fast food items have gained immense popularity and have formed part of the daily diet for some.
The convenience of fast food has revolutionised cooking practices by effectively decreasing the frequency of home cooking and increasing the dependency on the availability of fast food services.
It is believed that urbanisation is a major force behind the increased demand for fast food products in South Africa. More than 60% of our population lives in urban areas, where more than half of that statistic relies on fast food products owing to a busy lifestyle.
Food delivery platforms are born out of a necessity for economies of scale as food delivery becomes an integral part of managing a restaurant or fast food outlet.
A business then concludes if it will deliver its own food or entrust a third party with delivering on its behalf. Third-party delivery platforms are preferred owing to their aptitude to gain scale with limited costs and increased efficiency, which results in positive customer service.
First-party delivery – from the restaurant itself – is high-input work which includes high labour and insurance costs. Different delivery platforms offer different experiences to customers, and the onus of choosing whether to exclusively deal with one platform or to allow many platforms to deliver its product is on the business itself.
It must be noted that it is highly unfavourable for a business to select only one or two third-party delivery platforms to work with. By doing so the business caps its customer base on the basis of geographical location.
For example, if the chosen platforms don’t have the capacity deliver to townships then those customers are cut off from services and bargains which are at times exclusive to those who order online.
This inadvertently promotes elitism and sends out a message which insinuates that the product is not meant to be consumed by those who reside in those areas that are cut off from the service.
Some top fast food chains operate walk-in stores in various townships and they receive great support. Community members faithfully swarm these restaurants to purchase their favourite foods.
However, said restaurants don’t provide a food delivery service to those communities or offer adequate support to those who are ready and willing to bridge this gap.
Black entrepreneurs are systematically barred from seizing opportunities which present themselves within the industry.
It is apparent that black-owned start-ups are not given a fair chance to establish their place in the fast food and restaurant food delivery business because the doors to the market are shut.
This kind of marginalisation has kept black people from participating in business and in the economy.
Seemingly, large fast food and restaurant franchise groups such as Yum Brands, Taste Holdings and Famous Brands have not demonstrated any willingness to collaborate with nor support black-owned start-up food delivery ventures.
Alongside the food delivery duopoly, they operate like a cartel by restricting competition to maintain their stronghold in the market.
They unashamedly collude with a few businesses, which are also backed by big business themselves, to uphold barriers to enter the food delivery market, adversely affecting young black people with fervent aspirations to penetrate the industry.
The food delivery industry in South Africa is a high-growth market, yet a large portion of its market share, which is quantified at 90%, is only split between two businesses – Uber Eats and Mr D Food.
Both companies are owned by multinational corporations – Mr D Food is a Naspers-owned venture.
This alone presents a huge challenge to local entrepreneurs looking to penetrate this lucrative industry since the aforementioned businesses are highly resourced and seem to have cemented relations with many top fast food chains which seek to work exclusively with them.
Barriers of entrance for food delivery entrepreneurs who are not backed by big business are high in what is deemed an easily penetrable market.
It is a known fact that the South African economy has soaringly high unemployment rates. The International Monetary Fund has forecasted an unemployment rate of about 35.313% in South Africa for December 2020.
Business and government alike ought to be playing their roles to alleviate this socioeconomic issue which is set to be exacerbated by the Covid-19 coronavirus pandemic.
The food delivery industry, if strategic in its approach of conducting business, could prove to be an asset at a time such as this.
In 2018, local entrepreneur Priven Reddy founded Dryvar, a local ride-sharing app. In 2019 he launched Dryvar Foods, an on-demand food delivery platform that caters to customers who reside in any corner of the country, whether it be a township, suburb or city.
Dryvar Foods has differentiated its services by providing holographic tamper-proof seals for food bags. Restaurants place a sticker-like seal on their food packets, but this can be easily removed once heat from the food is transferred to the seal.
However, if a driver from Dryvar Foods tries to open a customer’s food, it will be evident on delivery and this will serve as a sign for the customer to not accept the order.
Dryvar Foods has employed this technology to strengthen its quality of service delivery and to differentiate itself from its competitors.
Dryvar focuses on empowering local communities by providing first-time entrepreneurship opportunities to disadvantaged black South African youth.
Dryvar Foods is implementing a progressive programme where young black employees from disadvantaged backgrounds with motorbike licenses are given the opportunity to acquire a delivery franchise, which the company finances at 0% interest, to be paid over 24 months.
A franchisee may start with one bike and go up to five bikes. This programme is designed to create business opportunities, uplift the communities in which Dryvar Foods operates, and improve the lives of unemployed youth in the country.
To capitalise on the rapid growth of the prepared food delivery sector, Dryvar Foods has sourced and invested millions into technology to enhance operations and support expansion from South African townships all the way to Mozambique.
The service announced the roll-out of its cloud kitchen, a start-up business model where purpose-built facilities are leased to restaurants to prepare food for delivery off-site from their full-service/walk-in location.
There are more than 100 of these “ghost kitchens” throughout South Africa’s major metropolitan areas and townships. Cloud kitchens also allow virtual restaurants, which are establishments with no walk-in location, to launch brands and offer delivery-only service. Dryvar Foods’ cloud kitchen operates under the name CloudKitchens (Pty) Ltd.
Dryvar Foods previously announced that it would start a venture fund focused on job growth. The fund is supposedly going to tackle large-scale unemployment by investing in e-commerce, innovation and real estate in South Africa.
Undeniably, Dryvar Foods is a viable alternative to existing food delivery companies and has taken to actively ploughing back into the communities which it aims to become fully operational in.
Its business strategy is commendable and displays the sort of business leadership the South African economy is in need of.
Such leadership fosters sustainable business growth and prioritises stakeholder inclusivity in aid of providing proper solutions to South Africa’s economic issues.
Phahle is managing director SIP Media