Burger King gets a big welcome in Gauteng
Global fast-food chain Burger King is hoping to replicate its success in the Western Cape in the more lucrative Gauteng market, with lengthy queues marking the opening of its first three stores in the province this past weekend.
The chain — which first launched in South Africa in May last year — has opened three stores, at Park Station and on Rivonia Road in Johannesburg, and at a Sasol forecourt in Centurion.
Burger King entered the local market through a joint venture with JSE-listed Grand Parade Investments, and recently signed an exclusive agreement with Sasol to roll out stores at Sasol’s fuel retail sites, initially in Gauteng.
Burger King SA CEO, Jaye Sinclair, said the chain’s performance at its six Western Cape stores had been “absolutely phenomenal — way beyond any sort of expectation we might have had”.
Burger King was hoping to achieve similar success in Gauteng, which holds the biggest share of South Africa’s quick-service restaurant market.
Naturally, he attributes the excitement to Burger King’s superior quality and value for money offering. But a strong and focused public relations and advertising campaign, combined with a strong brand, can’t be ignored as contributors to the hype.
Sinclair said Gauteng “historically fetches about a 30% premium on the ticket price compared to the rest of the country, so we are expecting Gauteng to be a big market for us”.
Burger King would have five stores open in Gauteng by the end of next month and would also look to enter the KwaZulu-Natal market this year. The US-based group is a new entrant in a competitive South African fast-food-chain market that includes the likes of McDonald’s and strong local incumbents such as Steers and Wimpy, owned by Famous Brands.
Sinclair said the group needed to be “very cognisant that there is competition out there, but we are just keeping our heads down and we don’t want to worry about someone else’s business”.
“We are worrying about the growth of our business and we have got to ensure that we serve customers the finest quality at very competitive prices in an environment that the public are wanting.”
Meanwhile, Burger King also plans to use South Africa as a platform to expand into fast-growing African countries. Its local licence agreement includes Namibia, Botswana, Zambia, Zimbabwe, Mozambique and Mauritius.
Sinclair said the group’s main focus at the moment was on the South African market, where it was establishing its local supply chain, including its distribution and logistics network. A move north of South Africa’s borders was only likely to happen in 18 to 24 months’ time.
According to Sinclair, outlets generally employ up to 30 people – 15 per shift. With its big expansion plans, the hope is to create 5 000 jobs in five years.
Its Cape Town branch currently sells about three tons of Whopper patties per week and its 2 500 sq m patty factory in Elsiesriver will be completed in February.
The factory is being developed in a JV with Excellent Meats. It will be Halaal and will be certified to supply any of the 13 000 Burger King outlets in 88 countries.
While not disclosing the value, he says “many millions of euros” have been invested in the factory, that will have the capacity to produce 40 tons of patties per shift.
By December Burger King wants to have 90% of its supply chain localised. Currently Rainbow Chickens is in the process of being accredited as an approved supplier. Other suppliers currently include McCain South Africa for fries, East Balt bakery for buns, Dew Crisp that supplies fresh produce mainly from the Wellington area, and DairyBelle for dairy products.
Currently some of the Burger King outlets are company-owned and others are franchises. In the case of the Sasol partnership in Centurion, the Sasol franchise owner may extend his forecourt store by also taking up a Burger King franchise.
The one in Centurion was converted from an existing bakery and the cost of such a franchise would be R3-3.5 million, Sinclair says. Normally it may be up to R5-million. He adds that the group strives for a pay-back period of three years.
Burger King is looking for franchisees with business experience, the necessary capital to invest and a willingness to undergo the Burger King training programme, Sinclair says.
Source: BDLive.co.za; Moneyweb.co.za
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