- Burgers are big business in South Africa – and it’s one fed mainly through fast food joints.
- Many franchises allow people to buy and run a brand name store like Wimpy, McDonald’s, Steers, or RocoMamas.
- Although some burger franchise variations like drive-throughs cost millions, smaller stores like those in forecourts are cheaper and simpler to run.
- Here’s how much it currently costs to buy a turnkey hamburger franchise in South Africa.
- For more stories, go to www.BusinessInsider.co.za.
Although chicken dominates the quick-service restaurant sector in South Africa, burgers are still big business.
There are hundreds of small neighbourhood stores and several dark kitchens servicing delivery platforms – but it’s an industry still dominated by chain stores, many of which are franchises.
Running a burger shop is no easy business, but it can be profitable with the right systems and margins built in. In 2017, the Financial Mail reported that McDonald’s generated over R4 billion in revenue – which is as much as R17 million per outlet. Burger King, Wimpy, and Steers also feature towards the top of the list.
Many of these operations are available to buy as franchises, which means you buy into the branding, logistics, and systems that put you in an excellent place to take advantage of South Africa’s hunger for burgers. But the more recognisable and established the brand, the pricier the up-front fee, and the harder it is to secure an outlet.
Here’s how much it currently costs to buy a hamburger franchise like Wimpy, McDonald’s, RocoMamas, or Burger Perfect in South Africa.
Burger Perfect
Burger Perfect is a spinoff from the South African franchise Pizza Perfect. The company started in 2006 as a standalone store, and the story goes that Burger Perfect was so popular the owner decided to franchise it. Today there are over 100 stores that fall under the Eclectic Brands portfolio, of which Burger Perfect is a part.
Cost of buying a Burger Perfect franchise: Burger Perfect charges a R10,000 application fee and a R65,000 joining fee. The average setup cost for a new branch is R1.45 million. Once operational, franchisees pay 8% of revenue towards royalties and marketing.
McDonald’s
McDonald’s started as a single restaurant in Illinois and today spans the globe with more than 35,000 restaurants in 120 countries. Three hundred of these are in South Africa, and many of them are franchises.
The McDonald’s franchise application and approval process is stringent and involves multiple in-person interviews and assessments. If an initial interview goes well, they make applicants work for three days in a McDonald’s restaurant “to observe the applicant’s hands-on suitability”.
Those who make it through this “On-the-Job-Evaluation” then face a set of panel interviews, and if those go well, they’ll meet McDonald’s South Africa’s managing director, who makes the final call on whether you can pay the fees below to buy and run a branch of your own.
Cost of buying a McDonald’s franchise: According to a franchise document seen by Business Insider South Africa, a local McDonald’s branch costs between R4 million and R6 million. This cost depends on “The size of the restaurant, location, pre-opening expenses, inventory, selection of equipment, signage, seating and style of decor and landscaping…”. Successful applicants must have 35% of this available in cash. There is no mention of ongoing royalties and fees.
RocoMamas
RocoMamas is a recent burger franchise success story in South Africa. It’s majority owned by the Spur Corporation and has grown its South African footprint to 89 stores. Since June last year, they’ve added 21 stores to their network and are still open to franchisees buying into the business – with new models like drive-throughs and children’s entertainment branches now in their portfolio. After Spur, RocoMamas is the most successful in the Spur portfolio – contributing 1.6% to group revenue.
All this is to say that a RocoMamas franchise isn’t cheap – but it’s also part of a bigger ecosystem with established processes worth factoring into a decision to buy into the business.
Cost of buying a RocoMamas franchise: A new RocoMamas franchise costs around R4.6 million, 60% of which must be available, along with surety for R2.2 million to secure the required funds. RocoMamas doesn’t currently publish ongoing fees, but in previous years charged 7% of revenue for royalties and marketing.
Steers
Steers is one of the original and most popular local burger chains in South Africa. It started as a single branch in the 1960s, and today there are 648 nationwide. It became a crucial part of franchising giant Famous Brands’ early success, which still oversees all franchise applications and operations.
Steers now offers several store formats, from forecourt outlets to full drive-throughs. They operate on a strict owner-operated model and offer prospective franchisees the option of both new and existing sites.
Cost of buying a Steers franchise: An average standard Steers costs R1.97 million; an average drive-through Steers costs R3.75 million.
For a standard branch, Steers charges a R68,000 joining fee, plus about R43,500 in design fees, and a project fee calculated at 5% of the overall build cost.
For a Drive Thru Steers, they charge a R75,000 joining fee, about R85,000 in design fees, and a project fee calculated at 5% of the overall build cost.
All Steers franchisees pay 11% in monthly fees towards royalties and advertising.
Wimpy
Wimpy is a full-service fast-food-style restaurant that made a name off its burgers and road trip breakfasts. It has roots in 1954 in Bloomington, Indiana, but has found most of its success in the United Kingdom and South Africa.
The first South African Wimpy opened in Durban in 1967, and today Famous Brands oversees hundreds of franchises throughout the country.
Famous Brands helps franchisees identify new sites by virtue of their contact with developers and letting agents and has a careful policy governing the locations so as not to cannibalise other franchises.
Cost of buying a Wimpy franchise: The franchise fee for a standard Wimpy is R80,000, and setup costs range between R1.75 million and R2.4 million. They charge R92,500 for plans and a project management fee that is 4% of the build cost. Applicants must have 50% of the total cost available in unencumbered cash.
