Here's how much it costs to open a bar franchise like News Cafe and Cubaña
- Several pubs and restaurant groups are currently looking for franchisees, including News Cafe, Cubaña and Stones.
- Stones franchisees need about R1.5 million, while set-up costs for a Cubaña outlet could set you back R10 million.
- For more stories, go to Business Insider SA.
There was a time in South Africa when a trip to the local pub was an urban tradition.
But the market has changed amid the emergence of specialist bars serving craft beers and high-end cocktails as well as the growing restaurant culture.
Famous Brands, which bought The Keg, O’Hagans and McGinty’s in South Africa nine years ago, admitted to Business Insider South Africa that no new franchised outlets have been established for some time.
And food and beverages figures released by StatsSA suggest that South Africans may be spending less time drinking at pubs and bars, and more time consuming alcohol at restaurants.
Still, if you’ve always dreamed of opening up your own turnkey watering hole, there are still several brands actively pursuing new franchisees.
Depending on your preference, location and target market, you might be able to get away with opening a new bar for as little as R2 million. But if you want to aim for a higher-earning sector of the population with a high-end cocktail bar, you can expect to pay upwards of R6 million.
News Cafe is an established bar and entertainment franchise in South Africa. The chain combines a cafe, cocktail bar and restaurant.
The first store opened in South Africa in 1995. They currently have 23 branches in South Africa, and have also opened branches in Botswana, Kenya, Namibia and Tanzania.
The holding company, Four News, is still taking on interested franchisees. They have strict requirements when it comes to store size, layout and location.
New sites must be at street level with a “high street view” and good visibility. News Cafe branches should also be between 300m² and 450m² in size, with 100m² of outside seating.
Set-up costs for a new branch is R6 million. News Café says 50% of this must be paid from unencumbered cash. On top of this, franchisees must pay 9% in franchise fees, 6% of which goes to royalties, and 3% to marketing.
News Cafe estimates monthly sales to be R1.2 million, with a gross profit of 65%. They estimate the net monthly profit of a new News Cafe at 20%.
The Brazen Head
The Brazen Head is a traditional Irish pub and restaurant with seven branches in Johannesburg and Cape Town.
The business started in Edenvale in 2003, with the intention of creating a chain of authentically-Irish pubs and restaurants in South Africa.
They are currently looking for new franchisees to continue growing the brand.
They charge a franchise fee of R120,000 excluding VAT. Depending on size, the establishment costs for a new Brazen Head branch are between R2.4 million and R3.5 million, excluding VAT. They also recommend that franchisees have a minimum working capital of R150,000.
Prior to opening, successful franchisees must undergo four weeks of training at an existing branch. Two operational staff must undergo 10 to 14 days of training.
Cubaña claims to be South Africa’s only “Latino social cafe and eatery”. It’s a themed cocktail bar and restaurant concept with 15 outlets around the country.
They are currently looking for new venues around the country, and will also consider franchise opportunities elsewhere in the continent.
The cost of establishing a new Cubaña branch varies according to the specifics of the size and location of the branch. They also offer existing establishments the opportunity to convert to the Cubaña brand, which will likely be cheaper than establishing a new branch from the ground up.
The company charges an initial joining fee of R750,000, which is due on successful application.
They estimate the set-up costs of a new Cubaña to be in the region of R10 million, depending on the exact specifications. This amount excludes initial liquor licensing and stock that must be purchased prior to opening.
Cubaña charges an ongoing franchise fee of 8% of outlet turnover.
Stones is a successful bar, nightclub and pool hall franchise that has 15 branches throughout South Africa.
They target a mid-LSM crowd between the ages of 18 to 28. Each franchise in the Stones network is unique, but the parent company aims to create an atmosphere that is welcoming and unpretentious across all branches.
The parent company, Rayhas Investments, is currently looking for franchisees to invest in new Stones branches, subject to availability of locations.
Stones claims to offer franchisees a business with low overheads and high margins. They report that some franchisees in their network receive returns of up to 300%.
They offer ongoing training as well as national and regional marketing,
They require that franchisees have at least R1.5 million available. The actual cost of starting a Stones branch from the ground up depends on the size and location of the venue.
The Slug and Lettuce
The Slug and Lettuce is a pub and social cafe concept based in Cape Town. They aim to emulate a London pub feel in their six branches currently in the city.
The Slug and Lettuce Franchise Company is open to applications from prospective franchisees. They offer a turnkey pub business with full franchise support and training.
New Slug and Lettuce branches must be located in high traffic areas and be at least 80m², preferably public facing with an outdoor seating area. They’re also open to existing pubs and restaurants converting to become a part of the Slug and Lettuce stable.
They charge franchisees a R100,000 joining fee. This gives franchisees access to operation manuals and a complete breakdown of development costs.
Franchisees must pay an ongoing fee of 6% of net turnover, which the franchise company splits between royalties (5%) and marketing (1%).
Once the application has been approved and location secured, the company will provide a full turnkey pub operation in three to four months.
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