I found an interesting article today in the Wall Street Journal regarding the entry of QSR burger players in Sub-Saharan Africa. I have spent extensive time in East Africa working on projects for private equity clients and also had the opportunity to visit South Africa as well. The two areas could not be more different.
Despite all the political and social problems in South Africa, the major cities are very developed with good supply chains to support restaurant growth. There are plenty of successful local and overseas brands operating there and the market is clearly growing. Getting a foothold in South Africa first makes a lot of sense before attempting any market entry in developing Africa. First, household incomes are higher and most people can afford protein. Second, the infrastructure is supportive of food service businesses. Third, there is a basic rule of law and property rights. Fourth, the black African consumer while different in some ways to those in emerging Africa, can still provide good feedback on your concept proposition. Fifth, people from all parts of Africa visit South Africa and learn about new concepts operating successfully there. Finally, there are many South African managers very experienced in operating businesses on the continent and they can be extremely valuable to your development over time.
To my mind, no burger players should contemplate market entry in any African country unless McDonald’s is there already to pave the way. The McDonald’s brand is a stamp of assurance that there is an adequate and reliable supply chain to support a burger business. I have tried burger chain products in Kenya and Uganda and it is obvious that the quality is just not there yet. Why open just a few stores, charge high prices and then close them down a few years later?
I note that Burger King, Johnny Rockets and CKE restaurants are all looking to expand their business in several emerging markets in Africa. I wish them well but i think i know how this story ends!