Chance for a bite of Big Mac
Cyril Ramaphosa's acquisition of the local McDonald's franchise is intended to "turbo boost" the local operation's expansion strategy.
According to managing director Greg Solomon, the transaction, announced in March, comes down to one word: growth.
This could be good news for a handful of entrepreneurs if they are able to secure new franchises.
Of the 145 restaurants operating in the country, approximately 60% are franchisee owned. Solomon says that there are 34 franchisees who, on average, own just under three outlets each.
He says the 40/60 split between company- and franchisee-owned restaurants will remain for the foreseeable future.
In addition, the global chain will intensify its local expansion strategy and Solomon expects between 15% and 25% growth in the number of outlets every year for the next four years.
This means two or three new entrepreneurs will be given the opportunity to become franchisees each year.
Solomon says that their expansion strategy will continue to focus on mainly urban areas, with 60% to 70% of new outlets in populated districts. He adds, however, that there has been a good response to restaurants in smaller centres such as Ermelo, for example.
From an investment point of view, Solomon says that 80% of their restaurants have drive-through facilities, which account for 50% of turnover. Breakfast items account for 12% of McDonald's SA's business.
New franchises cost in the region of R4-million to R5-million with a payback period of between four and five years.
Solomon adds that there are also opportunities that remain within their supplier network. At the moment approximately 90% of the goods and services needed are procured locally, including 82% of food: "McDonald's is a large sourcing company, so there is still a huge opportunity."
Ramaphosa has been appointed as the local "developmental licensee" for 20 years. This means that he becomes the owner and master franchisee of the South African operation, which has been company owned for the past 15 years.
Of the 117 countries McDonald's operates in, 50 employ the developmental licensee model .
According to the 2010 McDonald's annual report, the developmental licensee pays royalties based on a percentage of sales. It also generally includes initial fees that "vary by type of site, amount of company investment, if any, and local business conditions".
The Asia/Pacific, Middle East and Africa business unit accounted for 21% of total revenues. McDonald's SA won the group's 2010 excellence award for best-performing country.