Here’s how much it costs to open a McDonald’s, Wimpy, Steers, or RocoMamas restaurant
- Four out of the top 10 fast food franchise brands in SA primarily sell hamburgers.
- They generate an annual revenue of approximately R8 billion.
- Opening typical franchise fast food in the country costs between roughly R2 million to R6 million.
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Burgers in South Africa are big business. According to revenue per outlet, four of the top 10 fast food franchise brands in South Africa deal primarily in hamburgers.
The biggest burger brands in the country generate a collective annual revenue of more than R8 billion. The largest of these, McDonalds, generated revenue in excess of R17 million per outlet in 2017.
Although chicken franchises in South Africa generate more revenue than any other food type, revenue from burgers is never far behind. And in some cases, the initial franchise fees required to start your own store in this sector are lower.
Steers and Wimpy, for example, are still among the cheapest fast food franchises in the country - it’s still possible to start a new branch for under R2 million.
If you have your sights set on the golden arches, or some of RocoMamas’s growing revenue, though, you’ll need to dig a little deeper.
Steers has been around since the 1960s, and has grown from a single American-style steakhouse into one of South Africa’s most ubiquitous - and successful - franchises.
It’s part of the Famous Brands family, which owns several leading brands across the quick service food industry in South Africa.
There are now more than 600 Steers franchises, but they’re still looking for partners who fit the bill to open up new franchises. And in spite of the various joining fees and set up costs, the chain remains one of the better-value fast food franchises in the country.
If you’re interested in buying a store of your own, you’ll need to pay a joining fee, set up fee, and ongoing royalties.
The joining fee for a standard Steers is R67,840, excluding VAT. You'll then need to pay 5% of the overall build cost of the new restaurant, and R43,500 in design fees.
The relatively new drive-through Steers operations are more expensive. The joining fee for these is R73,140, excluding VAT. You'll also need to pay the standard 5% project fee, but design fees are nearly double - at R85,000.
Additional set up fees for store fitting and kitchen equipment will set you back more - the company estimates that the total initial investment for a standard Steers will be approximately R 1,753,487, excluding VAT, while the drive through is R3,107,258. Working capital and stock cost approximately R480,000.
Franchisees are also required to pay 11 percent of their monthly revenue to the holding company, which is split between royalties and marketing.
Wimpy is also part of the Famous Brands stable.
The first Wimpy opened in Durban in 1967, and there are now hundreds of stores, that include sit-down restaurants, classic roadhouses, and the famous Engen 1 Stop outlets on major highways.
New franchisees in 2020 will need to put down R213,500, excluding VAT, in joining and development fees. The cost of kitting out a new Wimpy branch is significantly more - depending on the type of branch you want to open, you can expect to pay between R2.6 million and R3.4 million.
McDonald’s is easily the biggest international burger brand in South Africa. The first store in the country opened in 1995, and today the company operates over 200 outlets. Just over half of these restaurants are franchised.
According to the McDonald’s website, they serve over 8 million customers every month, and in 2017 their 245 franchises generated R4.34 billion in revenue. This translates into revenue of R17.7 million per branch, significantly more than any other burger-focused franchise in the country.
Understandably, owning a slice of the global burger giant doesn’t come cheaply or easily.
If you fit the requirements to be a new franchisee, you’ll need to pay between R4 million and R6 million for the privilege. Franchisees must have 35% of this in unencumbered, non-borrowed cash.
McDonald’s also requires that franchisees be “geographically flexible”, in that they cannot guarantee applicants will be able to establish a restaurant in a preferred location. Still, they promise to work alongside the franchisee to find locations most likely to succeed.
RocoMamas is the newest success story on the local burger block. The chain of trendy fast-food stores is now owned by Spur, and they’ve rolled out dozens of outlets since they formed in 2013. There are now 78 local branches that form part of the RocoMamas chain, with presences in all nine provinces.
Buying into this burger franchise success story requires a substantial amount of cash, though. According to the company website, you’ll need 60% - up from 50% last year - of the total setup cost of R4.96 million. This is an increase of about R300,000 from 2019. Without this R2.76 million in cash they won’t entertain your application - and the restaurant has previously recommend starting off with a working capital of R120,000.
One benefit of this large upfront payment is slightly lower monthly management fees - as part of the franchise agreement, you’ll also need to pay monthly royalties totalling 7% that covers management services (5%) and marketing (2%).
Burger Perfect is a small but growing burger franchise with branches across Gauteng. They are looking to add more franchises to their network, and they offer a competitively priced business for those looking to get into the burger flipping game.
Franchise and joining fees amount to R75,000, and royalty and marketing fees are 8%. The average setup cost of a Burger Perfect restaurant is about R1.45 million, excluding VAT, and 50% of the set up costs must be available in unencumbered capital. This cost excludes additional expenses like rental deposits, legal fees, training costs, opening stock, and delivery vehicles.
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