CAPE TOWN - JSE-listed Grand Parade Investments (GPI) announcement that it is to launch the Burger King franchise in SA is the beginning of a bigger investment in the fast food sector.
The company has registered a company called Grand Foods and plans to expand into the pizza and pasta market and potentially the chicken market too.
This follows the company’s announcement that it is to form a joint venture with the US-based Burger King to establish the fast food brand in South Africa.
“This is a market that is growing well and which we understand,” says Grand Parade Chairman Hassen Adams. “It took us 18 months to negotiate the Burger King deal, but in a similar way we are willing to be patient and work hard for the quality brands that we want.”
Adams was involved in the launch of the Cape Town Fish Market and other Italian and steak restaurant chains.
The first Burger King outlet will open on Adderley Street in Cape Town, around May next year. Initially all the stores will be company owned. “This is to ensure we deliver the quality we want and then entrench that,” he says. “From thereon we will franchise.”
The roll-out of stores is likely to be more aggressive than initially anticipated. “We thought we would expand in a responsible and conservative way,” he says. “But since the news broke, property agents have been calling me, and possible suppliers. I’ve been gobsmacked by the level of interest in this. That is why it is impossible to say exactly how many stores we will be rolling out.”
The financial side of the deal has not been disclosed. The numbers will appear in the group’s financial statements in time, he says. Far from being an expensive franchise, Adams says the deal is good for GPI. “They have come to the party with us as an empowerment company. We are not a dollar-based company and I have been amazed at how they have accommodated us.”
GPI will make a “substantial investment” in the venture, which will be funded from existing cash resources and new debt.
The deal is still subject to SA Reserve Bank approval. This is required because royalties will flow out of the country. Burger King is the minority partner in the joint venture and Adams is confident there will be no hitches in this regard.
While competition in the local quick service restaurant space is fierce, Jose Cil, the president of Burger King for the EMEA region believes the market remains under-served. “We are focused on taste, quality and freshness. We don’t think the consumer is served in this regard,” he said on the CNBC Power Hour on Thursday. “We think the market is ready for someone of our pedigree, in a proud South African manner.”
McDonald’s, Steers and their peers have already snaffled the best locations in the country, but Adams is not too concerned. “We will find the right sites. But also we have 400 slot-machine outlets, [mostly in pubs], and this creates opportunities. Why go the quick service route? In those sites we can create a Burger King that is a hole in the wall. You need to be creative.”
In the longer term Africa is where both joint venture partners are focused. “This operation will be our gateway to Africa,” says Cil. “We have 25 Burger King’s in Egypt and Morocco, and are looking to expand into sub Saharan Africa. First though, Cape Town is our priority. This is an important market entry.”