South African restaurant franchise group Famous Brands plans to introduce new restaurant chains in the Kenyan market in 2015 to get a bigger share of a growing industry, driven by the rapidly expanding middle class.
Kenya’s hotel and restaurant sector is increasingly attracting local and foreign investment. US-based chains Naked Pizza, KFC and Subway are some of the latest international brands to enter the market.
Louis Venter, East Africa country manager for Famous Brands, says the company plans to launch its Mugg & Bean chain in Nairobi. The coffee shop franchise will compete with leading local brands Java House, Artcaffe Coffee & Bakery, Dormans Coffee and Savanna Coffee Lounge.
“The Mugg & Bean brand will be the next focus point for us. It’s going to be in Nairobi in one of the bigger shopping centres.”
Mugg & Bean restaurants have a presence in South Africa, Namibia, Botswana, the United Arab Emirates and Saudi Arabia, among others. Famous Brands operates 13 franchise stores in Kenya where the company has primarily focused on its Debonairs Pizza and Steers brands.
Venter explains that Debonairs Pizza and Steers have been ideal in the market because they can fit into any available shopping centre in the country. The pizza, and chips and burgers restaurants are also competitive in Kenya where chicken is very popular and thousands of low-cost chicken and chips stores exist.
“Because of the strength of chicken as a takeaway and takeout business it is a difficult market to compete against. The only product that can really take on chicken as very good competition, as a tummy full and as value for money, is Debonairs Pizza. It has done extremely well for us [and] it is perceived as value for money. Debonairs and Steers are performing so well… in East Africa. Those are the brands that I would try to push as hard as we can but nothing stops us from bringing in the Mugg & Beans.”
Venter says Famous Brands also plans to introduce a “cake brand” in Kenya.
The quick service and casual dining restaurant franchisor has about 2,400 stores in Africa, 52 of which are in East Africa.
Venter says East Africa is increasingly becoming an attractive market for Famous Brands due to the region’s growing middle class, increasing number of shopping centres and rising interest among local investors to become franchisees.
“It is the new hub and it is experiencing growth. It is very much a stable market. A lot of investors all around the world are now getting into this market. From a value proposition point of view and return on investment, I also think the Kenyan market particularly is ready to take our brands. Local people are interested in becoming our investors.”
Venter notes that the boom in the restaurant business is partly driven by an “up and coming, new era market”.
“[These are customers] who don’t necessarily own a car or spend a big amount of money monthly on property, but they do have disposable income. That is what makes our business so attractive because it’s all about convenience and choice. People have busy schedules and they spend a lot of time stuck in traffic… [and face] shortages of electricity. That means my convenience as a value for money pizza or burger could be the answer for them not going home to cook.”
The youth and upcoming middle class whom he describes as trendsetters are “the answer for the food business going forward”.
“Takeouts and takeaway is where the industry is going. That is what we are aiming for.”
Although there are a number of shopping malls under construction in the region, Venter says there are not enough of them opening up which keeps the company looking for potential sites and scouting new developments.
Franchising in Kenya
“We are also facing the challenge of changing the culture of people getting involved in franchising. It’s new for a lot of people in the market. If you give someone KSh. 20m (US$230,500) in Kenya he is going to buy a piece of land and do farming. So we need to change that attitude… [because] if you invest KSh. 20m I can give you a return of 20%-25% a month. That means I can enrich you even more.
“[A franchisee] is very much an entrepreneur who can work very hard in his own business but he doesn’t have naturally or automatically that ability to think out something new [or] start something from scratch. I will give that entrepreneur the package already. All the hard work is done, all the know-how is done and he can become an investor in his own business and make money. Our business is about enriching people in the country because we only derive our income from a percentage of royalty income and [therefore] all the profits stay within the country.”
Venter says Famous Brands franchisees have to go through a “vigorous recruitment process” and training. The company looks for entrepreneurs who have more than just money.
“They should have willingness to work very hard, the ability to work with people [and] they should be meticulous.”