Fast-food sector feels the heat

HARARE - Interest in Zimbabwe’s fast-food sector is reaching fever pitch level as international franchises such as KFC, Mugg & Bean and Ocean Basket battle for cash-strapped consumers with local outlets.

With Zimbabwean consumers now taking a keen interest on how they spend their hard-earned money due to the on-going economic crisis, business observers are questioning whether global franchises will manage to weather the economic storm.

Innscor Africa has been forced to slash prices on its fast foods to wad off stiff competition.

Fears are now abound that international franchises might suffer as the majority of Zimbabweans turn to cheaper meals, some retailing for as low as a dollar.

Over the past two years, Zimbabwe has witnessed big global brands taking a keen interest in having a presence in the country, including American fast food chain Burger King.

KFC made a dramatic comeback into Zimbabwe last year, after a five-year absence, attracted mainly by high returns offered by the multi-currency system.

Country Bird Holdings — owners of the local KFC franchise — seem convinced initial demand and support for their one store in Harare is encouraging despite economic challenges still experienced in the country and are betting on setting up 25 other outlets.

With a per-store capital investment estimated to be $713 236, with potential annual revenue of $5,9 million per store on an above-average operating margin, the Johannesburg Securities Exchange listed firm seem convinced that it would be able to exorcise demons of the past, that saw the initial Yum Restaurants International’s  brand entrance onto the market falter.

Although the outlet along Second Street Extension in Harare was a hive of activity when it opened in July, with winding queues being witnessed as chicken lovers jostled to have a piece of the “new thing in town”, life has returned to normal.

Vinal Investments, owners of Mugg and Bean, News Café and Ocean Basket franchises are optimistic about the growth and success of their business.

“The brands appeal to the middle and upper class market that is fashion conscious people, and are trend setting and that market exists,” said an official with the company. “We are doing very, very well. Our franchisees are very happy as they come and monitor the progress being made and are happy, so are we with the volumes.

“People always have to meet and eat, and going into the future, people would eat more, that’s our view.

“Research shows that people are cooking less and less at home, buying out more often, that’s where the issue of quality becomes key and these international brands provide that.

“You have to discount the current economic situation and have a long-term view. It will pass and you have to be positioned when that happens, that’s our view, long-term approach to the business. When things improve, people tend to want to catch up with the new trends and things happen at a very faster rate.”

The food-focused entity argues that operational conditions for its portfolio of brands is conducive, providing a positive outlook for business.

“The introduction of the multi-currency system allows us to have a stable pricing system, compared to those that operated during the Zim dollar era,” a top Vinal official said.

“An unstable pricing regime impacts on competitiveness and also affected the quality of service. Under the current situation, we can deliver on quality,” he added.

On whether franchise costs do not become a hindrance on the business, the company notes it actually provides a competitive edge.

“Franchise have a cost mainly because they allow you to operate while they do the research and development for you, allowing you to remain competitive and relevant. As you know, research and development can be very costly for a business,” the company said.

Zimbabwe has witnessed its fair share of failed ventures to introduce global fast foods brands such as TA Holdings when it brought Subway.

Franchise brands Wimpy and Debonairs Pizza owned by South Africa’s Famous Brands also had their flirtation with the local market but disappeared due to viability challenges.

 

Comments (1)

So with big franchises storming into Zimbabwe will local individual be able to run franchises at par with the fast food giants currrently and in the future

Everson - 29 November 2015

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