By April 4, 2019

Playing A Waiting Game On Africa Or Too Careful To Try: Why Golden Arches Are Few In The Continent

By April 4, 2019

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If there is any name in the world that is almost synonymous with fast food, there’s hardly any chance it won’t be McDonald’s. From popularity to market dominance, this chain of restaurants can be found almost everywhere on the planet, having established a fervent reputation in the regional fast food sectors around the world.

The American hamburger king who originally sold hot dogs, is believed to have one branch being opened every 14.5 hours, feeding no less than 68 million people daily while earning USD 75 Mn every 24 hours.

Asides selling world-class beef and hoisting its golden arches around the world; the company is also one of the largest suppliers of toys on the planet. Whether it was because it created a better hamburger or on the backs of its better business system, McDonald’s has a lion share of the growth of the fast food industry in the United States today, from USD 6 Bn to USD 100 Bn.



Little Beginnings, Big Aftermaths

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Forbes

The legendary McDonald brothers Dick and Mac moved to California in search of opportunities which they felt were not obtainable in England. Finding the apple of their eyes in the movie business, they later proved successful operation drive-in restaurants.

Seeing the right signs, they decided to take the risk by streamlining their operations and introducing their Speedee Service System to feature 15 cent hamburgers. As the business saw significant success, the brother began to franchise their concept.

Even as it was then envisaged that there would be 1,000 McDonald’s restaurant in the United States alone, the business never stopped growing into international markets as from 1967, opening in Canada and Puerto Rico.

Today, there are more than 36,000 McDonald’s restaurants in more than 100 countries, with the most recent opening being in Kazakhstan in 2016.

The success of McDonald’s is the enterprise equivalent of the American Dream. While the company was definitely not the first franchise business, it has possibly become the premier example of the business model.

“Is it widely successful?” in some cases, is not a question that can be answered concisely, because the business is first-class in every segment of its operation.

The company became the leader in an industry which it supposedly made large by channeling a great deal of energy on customer service, response to competition, and the employment of marketing techniques early on in their development.

An interesting case study, the contrivance of two brothers, has become a force to be reckoned with, as its voice often overshadows that of other fast food chains on the planet. But even as it seems like it’s been a fairytale run for the company, McDonald’s may not be that all-powerful.

Not So Global After All?


From the ears of Roswell to the toe tips of Guantanamo Bay, no matter where you find yourself in the world, the famous Golden Arches are not so far away. With a proliferated number of stores in pockets of unthinkable places, McDonald’s has set itself as a global brand committed to serving you wherever you are. But the African chapter of the fast-food narrative is filled with an abysmal blank, one which is most of euphemized to be “yet to be fully established.” With swaths of restaurants in other places, when you map out the locations where McDonald’s are not, it shows the African region hugely lacking the Big Mac.

While there are several McDonald’s restaurants in the country already, the chain restaurant is not found in every nation on the continent. Morocco, Egypt and South Africa have their shares of the Happy Meal. And perhaps that’s because their supply chains are fair enough to sustain the company’s operations.

Per information obtained from Wikipedia, McDonald’s opened its first store in Egypt in 1994, and has since then established 104 outlets, serving a tentative figure of 1,260,621.

Making its foray into the country on November 11 1995, the company now has 252 outlets in South Africa, serving more than 244,000 people in the Southern African nation.

In the city of Casablanca, the fast food king has taken the number up to a fair 45 ever since it made an entry in December 1992. While the burger giant was believed to make plans to establish an outlet in the Kenyan capital of Nairobi, there was a report which entailed McDonald’s refuting the claims about planning to open a franchised branch at a Total fuel station on Dennis Pritt Road in Kilimani.


American Reproach Or African Problem?

There are over 1 billion people in Africa, and yet McDonald’s does not seem to thrive fairly on the continent. Based on data drawn from the four African countries where the company has footing, there are less than 400 McDonald restaurants in Africa.

For the sake of perspective, there are 393 McDonald outlets in Mexico alone. As core Western markets seem to be stagnated, fast food companies are gradually turning to the largely unsaturated African market, with big plans particularly for the economic powerhouse of Nigeria.

In 2015, the CEO of McDonald’s South Africa was quoted to have said that: “It’s not about if, but when the brand would be entering Nigeria”. And since then talks about the subject and with the general African context, has pretty much dried up.

Apart from supply chain issues facing the major parts of the continent, it has been analysed that the country (Nigeria) does not get regular supplies of beef, chicken, potatoes, bread, and lettuce, amongst other provisions needed for fast food to thrive.

But when the firm presence of other brands such as KFC, Chicken Republic and Dominos Pizza are taken into consideration, one could very well say that McDonald’s should have the upper hand.

Nonetheless, there is a significant factor at play – the near absence of organised retail in many Sub-Saharan African countries, where there are relatively few malls and scanty suitable spaces for standalone stores.

Since McDonald’s is the emperor of franchising, it perhaps looks upon expanding fully into Africa as a pretty dicey game as the region is not in tune with its much-heralded business model.

The underdeveloped supply chains in Africa differ widely across nations, posing as major challenges for retailers looking to move into the continent. According to Bart van Dijk, a Partner at AT Kearney and Co-Author of the African Retail Development Index, supply chains remain a massive challenge in the region, undergoing pressures that even the most seasoned supply-chain professionals have to contend with.

“The route to market for products can involve any combination of rivers, mountains, deserts, jungles, floods, and drought, not to mention road and railway difficulties and governance issues that can stymie the transporting of goods across international boundaries.”

Numbers of well-known international franchisors have already established footprints in both north African countries such as Egypt, Morocco and Tunisia, and in Sub-Saharan Africa in Nigeria and South Africa.

Nevertheless, there is a staggering lack of resources associated with opening a franchise in these countries, or their less appealing counterparts. While most African countries do not require franchisors to provide pre-sale disclosure, Tunisia and South Africa are considerable expectations, with other African jurisdictions such as Nigeria requiring the central bank to approve payments across their borders.


Working Smart, Not Hard

If the recent exits on the part of McDonald’s from certain countries mean anything, then it is that the company is not ready to spend millions on a project that will not yield anything.

In Macedonia, McDonald’s once had seven restaurants, mostly in the eastern European country’s capital Skopje. But in 2013, the company packed its’ luggage and left entirely after the group that ran the franchises lost its license.

In Iceland, the fast food giant soired with the economic boom experienced in the country, until it took a hit particularly hard by the credit crunch, which led to the closure of fast food operation as soon as it could.

This was a country that had 15,000 Icelandic flocking to the golden arches each day during its last week of operation. Today, the only McDonald’s outlet in the country sits as a makeshift relic, preserved behind the glass at Reykjavik Bus Hotel – a homage to a bygone age.

McDonald’s exiled itself from Bolivia in 2002 after poor sales at its branches, as it turned out that the South Americans who were indeed fond of burgers opted to not buy from the global corporation.

Due to an appearing disdain and negative comments from former President, Evo Morales, McDonald’s made a dramatic exit, seemingly so without much contemplation. As for the lack of outlets in Jamaica, it has been blamed on the company for not having enough burgers to satisfy the appetite of the Caribbean, which led to the shutting of its doors for the last time in the country.

With these strides, it is evident that McDonald’s would rather not stress itself by trying to survive in a place where the economy or the people does not welcome it.

Rather than spending millions trying to scale, the company simply walks out the door and searches for a new opportunity elsewhere. With McDonald’s years of experience and billions in revenue, I don’t think expanding significantly into Africa is the problem, but rather how it will remain.

With the difficulties unicorns such as Jumia face just to keep breathing in Africa, it is understandable that McDonald’s does not want to be in the position where it will have to gasp for air.

Taking Ethiopia for instance, in order for McDonald’s to develop in the landlocked East African country, it will have to face many factors such as location analysis, market, competition, facilities style, and menu considerations.

Most Ethiopian cultures will allow for the consumption of red meat in hamburgers, but not pork. The bacon used for breakfast and on certain sandwiches can be obtainable, but they can be substituted with turkey bacon. So, now, do you still wonder why there are no McDonalds in Ethiopia?


Ripping Pages From Other Fast Food Kings

To a large extent, the African fast food sector is being bedevilled by a set of problems, even if it seems the continent has enough to literally chew on. Uncertainties hovering around supply chains have been the major historical deterrent in this regard, especially in Sub-Saharan Africa.

The unarguable predominance of smallholder farmers across the continent makes it somewhat Herculean for restaurant chains to ensure that they deliver the exact product every single time. As a result, these chains have always resorted to the importation of ingredients, most times making pledges to source more ingredients locally when that becomes something possible.

This is the approach Kentucky Fried Chicken is using in Ghana, where producers have, thus far, proven unable to supply sufficient and consistent quantity of meat.

More so, chicken farmers in Ghana are in the tussle to produce and expand, with many filing complaints that they have been squeezed out by the cheap imports of European frozen chicken products.

Based on this, KFC Ghana imports chicken from South Africa and Egypt, where the supply chain with smallholder farmers performed much better – little wonder why McDonald’s also is well established in these countries compared to others.


Fried chicken is not the only fast food that has gained popularity in Africa, Pizza chains such as South Africa’s Debonair and the American Domino’s are gaining momentum.

Part of Famous Brands South Africa, Debonairs has stores in no less than 14 African countries, backed up by a Dubai presence. Domino’s is a relative newcomer, but that doesn’t make it short of the boasting, as it has successful shops in South Africa, Nigeria, and Kenya.

What makes for a little irony here is that Domino claims that all of its ingredients for the pizzas are sourced locally, thanks to its investment in local agric supply chains – perhaps this is one thing McDonalds is yet to realize.

Naked Pizza, a health-conscious pizza chain founded in New Orlean made its way to Nairobi. An addition to a lack of truly fast food delivery options, Naked Pizza’s business is going quite well, delivering in an unprecedented 35 minutes in Nairobi.

According to the CEO of  Naked Pizza Kenya, Ritesh Doshi, Africa has some “interesting” growth opportunities, but also some significant challenges, with supply-chain and logistics costs coming [at the] top of that list, very closely followed by duties. The biggest challenges according to Doshi have been “price, consistency of supply, [and] suppliers’ willingness to tailor products for the market.”

Presently, there are more than 100 KFC outlets in Sub-Saharan Africa, with nearly all of them in South Africa, where the company sells as much as 10 percent of the nation’s commercially-grown chicken.

Again, it is no surprise why the Southern African country houses most of KFC’s supply-chain significance. According to recent reports, the chain’s parent company, Yum Brands has declared a major expansion northwards, with plans to sell drumsticks in Senegal, Ethiopia and the DRC, perhaps replicating whatever strategy it used to cement its place in South Africa.

It was in mid-November 2015 that Burger King – another international fast food player – announced that it would be entering South Africa, against the odds stacked against them by existing competitors with just about the same or maybe even more caliber.

Today, there are Burger King restaurants in Central African Republic, Egypt, Ghana, Kenya. Morocco and Ivory Coast, countries where it has seen incredible growth and from there looks to expands into more African territories – made possible by sourcing products from local farmers.



So, What’s The Real Gist?

Africa has entered the game of the fast food, doing so with increasing demand but most times having to deal with uncertainties in supply. While there is this challenge, there is also the opportunity for farmers and suppliers, as well as a better connection between the two.

There is also an opportunity for food processing facilities to shine, which are lacking through the most parts of sub-Saharan Africa. There is still the avenue to produce premium quality, value-added agricultural products.

On the flipside of the algebraic expression, the heavy rise of fast food in Africa is a representation of the unique opportunity for owners of traditional fast food chains in the west, most of whom may be in the quagmire of finding the business more difficult as a result of the increasing health consciousness.

At the same time, African fast food companies can strive to create more fast-casual brands such as the Nando’s that market uniquely indigenous cuisine on an international front, and be a member of a niche that fairs significantly better than traditional fast food in the West.

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