McDonald’s to expand in SA

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Bloomberg

McDonald's is competing head-on with Famous Brands' burger chain, Steers, and the entry of Burger King will intensify competition. Photo: Bloomberg.

McDonald’s plans to open 20 to 30 new restaurants in the next few years with more focus on urban areas and smaller towns. Although it wants to spread its wings to other parts of Africa, it still sees a lot of potential for growth in South Africa.

“We have experienced a lot of growth coming from South Africa. A lot of it is coming from the growing urbanisation which is still a big trend in this country. There are still a lot of people flocking into urban areas,” McDonald’s South Africa managing director Greg Solomon said yesterday.

The quick-service restaurant chain, which has about 180 restaurants across the nine provinces, said about 50 percent to 60 percent of its new business would focus in urban areas. “It is also time for us to stretch our wings to rural and small town parts of South Africa or in places where the brand is not represented.”

Solomon said although McDonald’s had seen changes in consumer buying patterns as a result of the slowing economy, the restaurant still served about 7.5 million people every month and had seen an increase to about 9 million customers in December. He said more than 50 percent of the stores were franchised and the rest were corporate-owned stores.

“At the moment we have about 75 percent of our restaurant open 24 hours a day and seven days a week, and we would have more of these once we expand.”

Solomon said while identifying retail space for these new restaurants would be a challenge, the company preferred to have stand-alone McDonald’s with a drive-through facility.

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While identifying retail space for the new restaurants will be a challenge, the firm prefers stand-alone sites with a drive-through facility. Photo: Bloomberg.

Bloomberg

Absa Investments equity analyst Chris Gilmour said McDonald’s was still facing head-on competition with Famous Brands’ hamburger restaurant, Steers, and was likely to have a much harder face-off with the entrance of Burger King.

Burger King has partnered with gaming firm Grand Parade Investments to roll out outlets in South Africa, starting with Cape Town this year.

In South Africa, Burger King will compete with Steers, Wimpy, KFC and McDonald’s.

Gilmour said both Burger King and McDonald’s would struggle to compete with Steers, which was far more entrenched in all areas.

“It has taken McDonald’s a long time to reach the 180 restaurants mark and it is understandable because Famous Brands has managed to penetrate the market so well and for a long time.”

Gilmour said that maybe McDonald’s still needed to work on its local offering in order to attract more people.

However, Solomon said McDonald’s had over the years introduced a chicken fold-over and had recently added roasted mielies and hot and cold desserts.

Gilmour said it was surprising that McDonald’s had only about 50 percent of its restaurant franchised, saying this was not a good model for business. “In my view franchised restaurants are better run compared with corporate-owned ones because the owners’ livelihood depended on it.”

Although Solomon did not want to single out Burger King as the only competition, he said the quick-service business was very competitive and McDonald’s had gained traction because it offered consumers products with a unique taste.


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