HANNA ZIADY: April is Franchising month and the franchise Association of South Africa is holding its international expo this week at the Sandton Convention Centre. Earlier today I spoke to Greg Solomon, the CEO of McDonalds South Africa about a franchise that has been in South Africa for more than 20 years. McDonalds has around 240 restaurants in South Africa, approximately half of which are franchised. McDonalds franchisees own on average 3.5 restaurants with some owning as many as ten restaurants.
I aked Greg how difficult it is to become a McDonalds franchisee.
GREG SOLOMON: It’s not difficult to qualify to be an owner operator but it is quite difficult to get into the McDonalds system – and maybe let me tackle the first one first.
Our franchisees come from a diverse business and a diverse cultural background. So we don’t have a certain qualification that you need to have this sort of financial skill. We’ve got builders, we’ve got teachers, we’ve got accountants, we’ve got bankers, we’ve got lawyers, as our franchisees. These are all people who have different skills. But we unite together on a common culture, on a common culture that centres around the customer and centres around people and centres around food.
Unfortunately the hard part to get into McDonalds is we’ve only got a few spaces every year and we are inundated with applications. So it’s really only the few that would get into McDonalds. We have this long waiting list of people who want to get into McDonalds. We try and make it as transparent as possible. We try and make it as credible as possible. But unfortunately we can only take a few franchisees every year.
McDonalds is still quite ambitious on our growth. I guess we and all your listeners know that we are living in a very tough time right now in the economy. Things are tough. Tomorrow the petrol price goes up. We’ve seen the drought that hit our business, we’ve seen the rand/dollar run since November of last year. And if you talk about what challenges the franchise or the franchise relationship, often it is in the profitability in the organisation. And market share is tough and the competition landscape is becoming quite murky. We can talk about that in a few minutes’ time.
But we still remain quite bullish from a growth perspective. We will continue to grow this business at 10 or 20 restaurants every single year and we will gauge that growth pace on the profitability and the readiness for our business and the economy to take more McDonalds. We can’t see the end line yet. We have still got a lot of work do.
HANNA ZIADY: You mentioned being inundated with applications for franchise registrations every year. What would you say is the ratio each year of available positions and applications that you get?
GREG SOLOMON: It would be under 10% of people. If I am taking on two or three new franchisees every year I’m sure – I’ve haven’t got the exact number – I’d comfortably say we have over 100 applicants every year. So unfortunately that’s in a mature market where I’ve got a lot of existing franchisees, and those franchisees are growing as well. I’m growing ten or 20 restaurants and if we can just do our maths I can probably only absorb two, three, four max franchisees per year.
HANNA ZIADY: We are seeing a number of American fast-food chains entering South Africa or with plans to enter South Africa including Burger King, Krispy Kreme, Dunkin’ Donuts, Baskin-Robbins and Starbucks of course on their way here. McDonalds was one of the first to set up shop in the country, as you say, 20 years ago. Why do you think there has been such an influx of new chains in recent months and years?
GREG SOLOMON: Well, I guess they see the same opportunity we see. When you get an influx of any business beyond food, any businesses into this country, they see potential. And so while we’ve been talking a little bit about a tough economy that’s the performance of our country and our businesses, we talk about the potential of the future.
And if we go back the last 20 years, this country has grown beautifully, especially if you become relevant and indicative of the country. And I’m proud to say that our customer base and our client base is very, very relevant of the South African community. We cut across a broad base of all South African people that frequent McDonalds. And I think these new businesses that are coming into the country are seeing the same potential and that’s why I’m so bullish about the future of our business and so bullish about the continued growth and aspirations of our brand.