20 June 2011
Burger King said on Tuesday that it was mulling opportunities for establishing a foothold in South Africa to counter sluggish economic growth in the US market, according to a Business Day report.
Yum Brands, which owns KFC, Taco Bell and Pizza Hut, have also shown interest in South Africa, Sanford C Bernstein analyst Sara Senatore told the business daily. “We are currently assessing the opportunity in SA for the Burger King brand,” she said.
Burger King said it continuously reviews its “worldwide restaurant portfolio in the course of business. We make strategic decisions based on many factors, including development opportunities, market conditions and restaurant profitability.”
Emerging markets ‘attractive’
Senatore said emerging markets were attractive to US companies as their growth had outpaced progress in developed markets. “There are difficulties when entering developing markets such as infrastructure and regulatory differences, but what any company is looking for is market depth and market growth and SA has that,” she said.
“They are looking for markets which will provide fast growth and are rapidly developing. Any company that can partake in these types of economies will want to, despite these challenges.”
Burger King was founded in 1954 and is the second-largest fast-food hamburger chain in the world after McDonald’s. It has about 12 000 outlets in 73 countries and 90% of those are owned and operated by independent franchisees.
Franchise licences vary depending on the region, with some regional franchises, known as master franchises, responsible for selling franchise sub-licences on the company’s behalf.
Tough rival in Famous Brands
Absa Securities analyst Chris Gilmour told Business Day that the local burger market was saturated: “I am very surprised they would consider this, unless they are using SA as a springboard into Africa.”
However, Vestact fund manager Sasha Naryshkine holds a different view: “The fast-food sector has done astonishingly well over the past few years, and there is still potential for growth. Burger King is a well-known international brand and could compete with Famous Brands’ Steers division.
“But its fame would not guarantee its success. Subway is a well- recognised brand and it has not managed to capture the imagination of South Africans,” he said.
Burger King would find a tough SA rival in Famous Brands, with its 520 Steers outlets across the country. Steers grew sales 6.5% in the year to February, and said it planned to open a further 20 stores this year, according to the report.
Justin Divaris, CEO of the Daytona Group that brought the Aston Martin brand to SA, is rumoured to be involved in the deal. He declined requests for comment from Business Day.