Here’s how much it costs to open a Chicken Licken, Nando’s or KFC outlet
- It will cost you upwards of R3 million to set up a franchised chicken fast-food outlet in South Africa.
- Chicken Licken is the cheapest option, while a Nando's outlet will set you back at least R7 million.
- KFC is not accepting new franchisees at the moment.
- For more stories, go to Business Insider SA.
If like many South Africans you’re frustrated with Chicken Licken’s lack of home delivery options, and relatively sparse branch network, you can take matters into your own hands and open your own store - provided you have at least R3 million to invest.
It might sound like a lot, but this is significantly less than Nando’s, whose upfront franchise fees can reach more than double this amount.
If you want to start your own KFC, by far South Africa’s biggest fast-food franchise, you’re out of luck. The holding company is not currently looking to establish new franchises in South Africa. However, there are some options available to businesspeople desperate to get their hands on the Colonel’s secret recipe - but you’ll have to search hard for them.
Read: We’ve compared the fried chicken from KFC, Popeyes, and Hungry Lion – and the winner was clear
On paper, chicken franchises in South Africa seem like a sure-fire business bet. According to Euromonitor, South Africa’s fast food sector continues to perform well - even during tough economic times.
The Franchise Association of South Africa (FASA) also claims that franchises contribute some 10% of the country’s gross domestic product. Of these, fast-food makes up a sizeable portion – and those selling fried chicken dominate.
In fact, almost four million chickens are slaughtered every week for South African fast-food joints.
Although the appeal of a turnkey fast food chicken business may sound appealing, big name franchises don’t come cheap in South Africa.
At the very least you’re in for R3 million in franchise and set-up fees, and an ongoing percentage of your sales. On the top end of the scale, you can expect to double that initial investment.
Nando’s requires prospective franchisees to pay a R25,000 application fee. According to the company website, this is to prove your commitment to the process, and to pay towards “psychometric testing, interviews and in-store assessment”.
The next step requires the payment of a R230,000 franchise fee.
Franchise fees are payable in most franchise agreements. This fee generally includes the right to operate under the company’s name, training, research and assistance regarding site selection and lease negotiations, as well as assistance during the pre-opening and launch process.
With these admin costs out of the way, Nando’s franchisees then need to pay approximately R6.56 million in establishment costs. This includes almost everything you’ll need to get your business started, including shop fittings, kitchen equipment, and point of sale equipment.
In total you’re looking at about R7 million to start your own Nando’s branch in South Africa, excluding the initial working capital required to purchase stock and other items.
Franchisees are also in for an ongoing royalty fee of 7% of net monthly sales. And Nando’s famous adverts don’t pay for themselves, either - according to the franchisee terms they also require a national advertising levy of 5% of net monthly sales.
Chicken Licken charges an initial franchisee fee of R150,000.
According to the company website, the minimum you’ll pay towards set up costs of a Chicken Licken store is R3 million.
This initial store set-up amount will likely be higher. It depends on your rental agreement and the type of store you wish to build. Some stores, such as those that include a drive-through component, cost more.
Franchisees must also pay 12% of their monthly turnover to head office. This is split 50/50 between a royalty fee and advertising share.
The company has aggressively rolled out a network of more than 800 branches in the country since its launch in the early 1970s. But according to the KFC website, they aren’t currently accepting applications from new franchisees.
The holding company allegedly has a waiting list of prospective applications. Some reports also suggest that KFC may be offering new branch opportunities to existing franchisees first. As such, it’s common that one franchisee owns a string of branches, and it’s increasingly uncommon that new franchises are available to those outside of the existing network. This means the only viable way to get your hands on a KFC is to wait for an existing one to come up for sale, or to invest in an existing string of outlets.
Still, assuming they were accepting offers, anecdotal reports online suggest you’ll be in for about R6 million in franchise fees and set-up costs.
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