- Coffee shop franchises may be common, but they're still a growing business in South Africa.
- Most leading franchises are still looking for new applications, but there are some smaller and cheaper options available as well.
- In total, buying a branded turnkey coffee shop still costs at least R1 million, with prices increasing with store size and menu options.
- For more stories go to www.BusinessInsider.co.za.
Coffee shops, like many quick-service restaurants in South Africa, took a hit from the coronavirus pandemic. With in-store service paused at various times during the last 18 months, income at restaurants and coffee shops dropped by as much as 32%.
But historically, the coffee industry is one with a clear growth trajectory - and many stores in this sector have already started to show a recovery.
Private and independently owned coffee shops are now commonplace in South Africa - and there are some recognisable brands, like Seattle and Starbucks, that are still keeping their stores in-house. This means only a few brands dominate the coffee shop franchise industry in South Africa, with Vida E Caffè, Mugg & Bean, and Bootlegger Coffee Company holding the majority.
If you've always wanted to run a coffee shop, buying a franchise may be the safest and easiest way to achieve this. Although buying into a recognised brand might be more expensive than starting an independent store and comes with restrictions that might frustrate true coffee enthusiasts, it takes care of several complexities like distribution, shop-fitting, and brand recognition.
Here's how much it costs to buy a leading coffee shop like Mugg & Bean, Vida E Caffè, and Bootlegger.
Mugg & Bean
Mugg & Bean has a wide store footprint of more than 200 branches in South Africa - many of which are full-service restaurants. The coffee shop franchise, owned by franchising giants Famous Brands, has introduced several smaller store formats, including full and limited service On the Move branches.
Successful franchise applicants of larger format stores will undergo extensive training at least one month before opening. The back of house staff attends this in an established restaurant in the area. On the Move stores require three weeks of training.
The upfront franchise fees for Mugg & Bean have come down significantly since 2020. The initial franchise fee for a standard Mugg & Bean Restaurant is currently R95,000, excluding VAT - roughly half of what it was last year. A full service On the Move Mugg & Bean attracts a franchise fee of R45,000 excluding VAT, and the limited-service variation R50,000 - both of which are also lower than in previous years.
Approximate set up fees for a new full-service Mugg & Bean franchise in 2021 will cost roughly the same as last year - it's estimated to cost approximately R3.6 million, excluding VAT.
On the Move branches typically cost between R1.3 million and R1.6 million.
These costs exclude a project management fee, which is calculated at 4% of the build cost. And franchisees must also pay royalty and marketing fees of 10% of gross store sales per month once established.
Vida E Caffè
Vida E Caffè is the biggest coffee shop franchise in South Africa, with 250 branches located throughout the country. Despite this wide footprint, they still accept applications from new franchisees who wish to open their own Vida branch.
Owing to the success of the franchise, the application process is rigorous. Franchisees not only have to be financially sound and have good financial resources, but also demonstrate several other skills, including experience in service, business, and people management.
If your application is successful, a team from Vida will work with you to determine a suitable location based on the region's demographics and franchise catchment area. Franchisees will also need to undergo theoretical and practical training before a branch opens.
The franchise fee for a new Vida E Caffè is R150,000 plus VAT. Establishing a branch costs roughly R1.2 million, with the bulk of the expenses going towards kitchen equipment and shop fittings.
Once a new store opens, franchisees must pay fees equivalent to 10% of their monthly net sales and 5% of loyalty turnover. There are also recurring costs of roughly R2,300 per month for items like point of sale machines, music licenses, and LCD screens.
It's also possible to buy a drive-through style branch. Depending on the format of the branch, you can expect to pay between R900,000 and R1.3 million for a drive-through.
These costs are largely unchanged from 2020.
Bootlegger Coffee Company
Bootlegger Coffee Company is a smaller but growing coffee shop franchise with 26 stores, with another six set to open before the end of the year.
The business started as a retail coffee brand based in Sea Point, but has since expanded to become a quick-service restaurant that serves meals, snacks, alcoholic beverages, and a range of speciality coffee.
Bootlegger is currently expanding its franchise operations in the Western Cape and Gauteng, with a preference given towards applicants with good knowledge of their surrounding area.
To open a new Bootlegger branch in 2021 requires upfront franchise fees of R120,000. A new store costs between R2 million and R3 million to set up, and franchisees are required to pay a monthly franchise fee of 5% and a marketing fee of 2%.
Bootlegger also offers a cheaper kiosk option that sells just coffees and pastries, which costs between R800,000 and R1 million.
The Daily Coffee Café and Express
The Daily Coffee Group runs a network of 30 coffee shop and trailer franchises. They have branches throughout the country, focusing on small towns or locations in strip and community malls and commercial zones.
They currently have two franchise types available for purchase, both of which are cheaper than some of the franchises offered by the more recognisable brands in South Africa.
A full Daily Coffee Café is typically around 100 square metres and seats up to 60 patrons. The franchisor provides a full turnkey coffee shop option that starts at R1.58 million, excluding VAT. Franchisees will also need working capital of R60,000, and pay a monthly management service fee of 6% of turnover.
The Daily Coffee Express is a branded trailer with many of the same features as the cafe but without an indoor seating option. The trailers serve both coffee and food and are movable. This option starts at R310,000 excluding VAT and R10,000 in working capital. There is also a flat monthly franchise fee of R5,000.
The Famous Bean Café
The Famous Bean Café is another franchise that offers several turnkey coffee businesses in South Africa. The company is now in its fourth year and looking to expand beyond its network of six branches. They assist in all aspects of establishing and launching a new coffee shop and offer guidance throughout the process.
The Famous Bean Café offers five shop types that vary in size, from a mobile trailer to a 190 square foot store. The mobile trailer is their cheapest option and costs R350,000, while fixed stores go between R490,000 and R1.45 million, depending on service offerings and size.