The food franchise industry is experiencing a boom after a long period of stagnation, according to a recent study by franchise consultants Franchize Directions.

In 2000, industry analysts said the sector had reached saturation so the new growth has come as a surprise.  The study found that 34 new franchises had entered the South African market since February 2004, raising the industry’s annual turnover from R12bn to R16bn.  “Back in 2000 we thought the market was saturated, but the situation has changed completely,” said Franchize Directions CEO Bendeta Gordon.

“The size of the market has changed. There are new consumers and markets.”  Chicken seemed to be ruling the roost, with 19% of the fast-food franchise pie.  This could be attributed to the growth in popularity of franchises such as Kentucky Fried Chicken with more than 300 outlets, Chicken Licken with more than 200 and Nando’s with more than 180 stores. But Gordon would not say which of the three was the hottest seller.

In second place were pizza franchises with 13%, followed by burger and sandwich outlets with 7% each.  Among restaurants, coffee shops were a hit, claiming 29% of the total franchise offering, followed by pub and dining (12%) and steakhouses in third place (11%).

Gordon said that in February 2004 there were 51 sustainable fast-food franchises with 3464 outlets. Now there were 64 franchises with 4603 outlets.  There were 68 franchised restaurants with 1398 outlets against 47 franchised restaurants and 1149 outlets in 2004.

“Fast food has been growing by 12 new stores opening annually, while restaurants are growing by four,” said Gordon.  About 38% of the total fast-food franchise ownership was in black hands, while women owned 47% of the restaurant business. Blacks owned only 10% of franchised restaurants. Gordon attributed this to restaurants being “sensitive to market changes such as inflation and interest rates hikes”.

She said fast-food franchises had also become more affordable than they were a few years ago with the average capital investment standing at R786000, the lowest at R250000 and the highest at R1,9m.  Restaurants, on the other hand, had an average capital investment of R1,7m, the lowest at R600000 and the highest at R4,3m. “The industry is bullish and growth is expected to continue,” said Gordon.