Supersizing Big Mac franchises

Only a few coveted spaces are made available each year. The fast-food chain has been in South Africa more than 20 years and is inundated with applications from hopeful franchisees annually, says McDonalds South Africa CEO, Greg Solomon.

Although no specific qualifications are required, it’s difficult to get into the McDonalds system, Solomon acknowledges.

McDonalds franchisees hail from diverse business backgrounds and include builders, teachers, accountants, bankers and lawyers.

Franchisees, referred to as owner operators, own on average 3.5 outlets each, says Solomon.

There are many single restaurant owner operators, with the largest franchisees owning between eight and ten restaurants.

“These are hands on business people. Our franchisees need to be Mr and Mrs McDonalds in their neighbourhood and spending their best endeavours, 100% of their time in their businesses with their people and with their customers,” Solomon tells Moneyweb.

Half of McDonalds’s 240-odd outlets in South Africa are owner operated, but only a handful of the more than 100 franchisee applications it receives each year are accepted.

“In a mature market, where we have a lot of existing franchisees growing, we can absorb two, three, maybe five max new franchisees a year,” Solomon notes.

Despite tough economic conditions, McDonalds remains bullish on its domestic growth prospects.

“We’ll continue to grow this business at ten or 20 restaurants every single year, which will be gauged on profitability and the readiness of our business and the economy to take more McDonalds. We can’t see the end line yet,” says Solomon.

New American fast-food chains that have plans to enter the continent, including Dunkin’ Donuts and Starbucks, have seen this same potential, he adds.

While the McDonalds menu has continued to evolve – only 30-40% of its menu is international and it now offers grilled chicken and mielies – the chain’s number one selling meal (which has been best selling for the past 20 years) remains the Big Mac.

Naturally, its world-famous French fries sold with every McMeal are the number one selling menu item.

On Wednesday, McDonalds launches its ‘single, double, triple’ menu, offering meals for R19.90, R29 and R39, respectively.

“No one out there can play with McDonalds on value,” Solomon maintains. “We know that our consumers will support us for supporting them.”

He says it is not true that McDonalds milkshakes contain animal fat, as has been alleged, noting, “our food is so delicious because we try to strip it down to very few ingredients”.

“There are really only three things in our beef. It’s beef, salt and pepper.”

Aside from food, McDonalds takes a large position on real estate, owning roughly 100 properties in South Africa.

“This is done because we take a long-term view of a business. When McDonalds comes into your neighbourhood, we’re pretty much there for life,” Solomon says.

Franchisees do not pay rent, but pay the group income based on their turnover. “If our franchisees do well, we do well,” he says.

The Franchise Association of South Africa’s (FASA) annual Franchise Week takes place this week. The event follows the gazetting of the Franchise Industry Code of Conduct and the imminent appointment of an ombudsman.

Listen to the full interview with McDonalds SA CEO, Greg Solomon.

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