KENYA: Java Group To Expand In Kenya With Addition Of Nairobi And Mombasa Outlets, Spending Sh100m

Java House will spend Sh100 million on opening two new branches in Nairobi and Mombasa in the next three weeks.

Java booked space at Astrol Petrol station on Lenana Road in Nairobi and at Diani Centre Point, formerly Nakumatt building, on the Diani Beach Road in Mombasa.

The Diani Centre Point branch will be the first Java House outlet in Kwale while the Astrol Petrol Station branch will be the 41st in Nairobi.

We will be opening one more branch in Kilimani area at Astrol Petrol Station just along the Lenana Road and at Diani Centre Point in Kwale in the next three weeks, says Nairobi Java House group CEO Paul Smith.

It will take each branch takes up to Sh50 million in order to get it ready and up to the standards we have set.

The Astrol branch in Nairobi will accommodate up to 140 customers at a go while the Diani Centre Point branch will accommodate up to 64 customers.

Java Group, in which an American private equity firm has bought a majority stake, is the biggest restaurant chain in the region with 64 branches.

It is followed by fast-food brand Kentucky Fried Chicken (KFC), Art Caffe restaurant and Subway.

KFC already has 31 branches, nine in Uganda, five in Tanzania and 17 in Kenya.

Art Caffe, on the other hand, has 12 branches in Kenya. America’s fast-food chain Subways has 12 branches, eight in Kenya, three in Tanzania and one in Uganda.

Uganda-based coffee chain Cafe Javas has entered the local market with a new branch in Nairobi, raising competition for Kenya’s restaurant operator Java House.

Cafe Javas’ new outlet, operating under the name CJ’s, is located at the junction of Biashara and Koinange streets.

The firm’s expansion into Kenya raises its rivalry with Java House with which it was embroiled in a trademark war in its Ugandan home market.

Java moved to the Uganda High Court in 2016 after Mandela Group of Companies, which owns Cafe Javas, successfully objected to the registrar of trademarks’ acceptance of the Nairobi Java House name.

The court gave the coffee house a go-ahead to register name as a trademark and to operate its restaurants.

Justice Christopher Izama last year ruled that no evidence had been produced to prove that customers could easily confuse the two restaurant brands.

Cafe Javas has seven branches within Uganda’s capital Kampala and an additional outlet at Victoria Mall in Entebbe.

Java operates 65 branches across East Africa in addition to outlets under Planet Yoghurt and 360 Degrees Pizza brands.

Java House has set aside Sh5 billion in a renewed expansion drive over the next five years.

About 80 per cent of the firm’s expansion drive will focus on opening more outlets in Kenya.

Java Group is the biggest restaurant chain in the region, followed by fast-food brand Kentucky Fried Chicken (KFC), Art Caffe restaurant and Subway.

Artcaffe, which has 12 branches, has been the main competitor for Java House until recently when smaller coffee houses including Kaldis and Connect set up in Kenya.

In February this year, the upmarket coffee chain unveiled Artcaffe Fairtrade Coffee Blend from coffee sourced in Nyeri and Machakos to grow its revenue streams.

The product is available at all its outlets for Sh290 served in a French press while a 250 grammes ground box goes for Sh690.

America fast food chain Subway has 12 branches in the region — eight in Kenya, three in Tanzania and one in Uganda.

Java Group will inject up to Sh1 billion in expansion drive this year cementing its place as the number one restaurant chain in the region.

Chief executive Ken Kuguru said the firm would open new outlets in emerging towns and within major cities in the country to grow its branch count and create new revenue streams.

The firm will also simultaneously explore new markets in the East African region but most of the new investments are expected to be in Kenya.

Java Group is the biggest restaurant chain in the region with 64 branches, followed by fast-food brand Kentucky Fried Chicken (KFC), Art Caffe restaurant and Subway.

The KFC has 31 branches in the region, 17 of them in Kenya, nine in Uganda and five in Tanzania. Art Caffe has 12 branches in Kenya.

America fast food chain Subway has 12 branches in the region — eight in Kenya, three in Tanzania and one in Uganda.

Mr Kuguru says that 80 per cent of the firm’s expansion drive over the next five years will focus on opening more outlets within the Kenyan borders.

The five-year strategy is estimated to cost the firm up to Sh5 billion.

Java Group runs coffee outlets under Java House, owns 360 Degrees Pizza and Planet Yoghurt brand.

The 64 branches under the label include 56 coffee outlets. The firm is looking to open at least two outlets of its brands every month.

Java House will invest between Sh500 million to Sh1 billion in new branches as well as advancements in a state-of-the-art central kitchen and commissary facilities, said Mr Kuguru.

Java Group is keen on Meru and Machakos counties, where it will open its first branches of the year.

The expansion drive indicates a shift to the counties after the devolved governments were established in 2013.


Tourism Observer

SOUTH AFRICA: Fast Food Franchises Increase, But What Are The Costs Of Setting Up One

The fast food and quick service restaurant (QSR) sector has continued to show steady growth inspite of what has been a tough economic climate in South Africa.

This includes a contribution in excess of 29% which means QSR has by far the biggest share in franchising turnover, says Andre Beck, sector head of Fast Food and Restaurants at FNB Business.

According to the Franchise Association of South Africa (FASA), the franchising market is worth R587 billion Rand, which is approximately 13.3% of the South African Gross Domestic Product (GDP), says Beck.

Industry data shows that South Africa has seen more franchises opening fast food and restaurant outlets in spite of the floundering economy.

This clearly paints a picture of a sector that is competitive and lucrative, and more importantly, it shows that the franchising has sustained appetite to grow further in the local economy.

Despite this continued success, Beck said that there were also new trends worth knowing before opening a fast food franchise in the country.

These include:

Focus on healthy food: Customers are mindful of what they consume more than before; they want to know which ingredients you have used to prepare their food.

As a result, health centric franchise brands are penetrating the market.

Speed of delivery: Using technology to effectively serve customers; more fast food franchises have made it possible for customers to use mobile Apps and other digital tools to receive their orders quickly.

Free delivery: In this extremely busy environment, businesses have understood the power of bringing business to the customer’s doorstep step.

Month-end peaks: A lot of consumers tend to visit food outlets during month ends to buy or eat with their families. This has become one of the most treasured habits for most families.

Despite the intense competition for food franchising, this sector has exceptionally demonstrated that franchising remains one of the sectors that needs to be thoroughly explored to grow the economy and create job opportunities.

As a bank, we continue to support businesses in this sector and firmly believe in their potential to flourish.

Despite a weak economy and tough trading conditions, the franchising sector has continued to perform well – especially in the fast-food sector.

Over the past few decades, business format franchising has become the most successful business model the world has ever known, said Tony Da Fonseca, chairman of the Franchise Association of South Africa (FASA).

Seeing that in this fast-moving world of ours, change is seen as the only constant, it is appropriate to ask whether franchising can maintain its momentum. My answer is a resounding yes.

Survey results released by FASA in 2017 showed that the sector’s performance remains on an upward trend.

During the period under review, the sector consisted of 845 franchisors and over 40,000 franchisees.

It employed about 343,000 people and generated sales of R587 billion. This equals 13.3% of the country’s GDP, up from the 9.7% recorded in 2014.

The survey also confirmed the stability of the sector, with some brands operating for over 50 years.

Despite this success, franchisors are notoriously tight-lipped as to how well their respective restaurants are doing, making it almost impossible to say exactly which fast-food franchise is the most popular.

Instead, BusinessTech looked at fan favourite franchises recent, Top Brands awards and how much they currently cost to open.

Kentucky Fried Chicken

Despite KFC being by far the most popular fast food franchise in South Africa, it is not likely to increase its number of restaurants any time soon.

KFC South Africa brand owner, Yum International, has noted that the company is not currently looking for new franchisees.

However, existing KFC franchisees may elect to sell their businesses, and it is therefore possible to become a new KFC franchisee by purchasing an existing KFC business.

According to the latest franchise data available from KFC, new franchise owners could expect to pay close to R6 million for a new franchise.

With the only option to now buy a franchise from a current owner, perspective franchisees can expect this number to increase or decrease slightly depending on a number of factors such as location and demand.

Nando’s – from R7 million

There are two main cost requirements when looking at a Nando’s franchise – establishment costs and standard fees.

A R25,000 application fee is required to show commitment to actually wanting to acquire a Nando’s and to compensate for the costs of Psychometric testing, interviews and in-store assessment, etc.

You are also required to pay a R230,000 franchise fee (excluding VAT), to make use of and operate under the Nando’s name and concept, staff training, site assistance, and launch assistance.

However the biggest expense comes from establishment costs which include everything from setting up the kitchen to light fittings and will set you back approximately R6.95 million (excluding VAT).

Debonairs – from R2 million

According to Debonair’s South Africa’s franchising documentation, new franchise owners can expect to pay around R2 million.

Once applicants have been granted and guaranteed a franchise, Debonairs will assist you with a business banker for your application.

This includes help when applying for financing and any other general enquiries you may have about the financing of a franchised business.

Steers – from R1.7 million

One of the cheapest franchise options on the list, Steers franchisees can expect to pay around R1.7 million when starting a new franchise.

However this differs greatly depending on the type of Steers you wish to open, with standard, drive thru and kiosk options available.

The approximate set up cost for a standard Steers is R1.65 million excluding VAT, joining fee and contingency. Set up cost includes equipment, shopfitting, wet works, furniture and fixtures.

McDonald’s – from R4 million

According to McDonald’s South Africa, the cost of a franchise will vary, with actual costs only determined when an individual franchise is offered to an applicant.

The size of the restaurant, location, pre-opening expenses, inventory, selection of equipment, signage, seating and style of decor and landscaping will affect this cost.

This means that McDonald’s South Africa estimates the cost of a franchise to be anywhere between R4 million – R6 million, depending on the type of restaurant and other factors.

Applicants are are also expected to have a minimum of 35% of the purchase price of a restaurant in unencumbered, non-borrowed cash.

Chicken Licken – from R4.8 million

According to its website, a standard Chicken Licken store costs R4.8 million while a drive through (Fly-Thru) restaurant will cost a minimum of R6.8 million.

In both cases the cost will be dependent on the landlord contributions and which store you choose to build as well as which store best suits the area, it said.

Roman’s Pizza – from R2.4 million

Franchisees looking to open a Roman’s Pizza can expect to pay around R2.5 million for a new store.

This includes an initial joining fee of R90,000, while the cost of a 120 square metre store is expected to set you back around R2.3 million.

Fish and Chip Co – from R850,000

There is an average set up cost of R699,000 for a Fish and Chip Co franchise and, you can expect to pay an initial joining and set up fee of R140,000.

As it falls under the Taste holdings group, franchise owners can also expect to receive assistance when preparing finance applications, identifying suitable sites, as well as initial and ongoing training and support.

All franchisees are required to complete a five-day training program that covers day-to-day operations, staffing, stock control, marketing, and management skills.

Something Fishy – from R900,000

While franchising costs are not available on Something Fishy’s website, opening a new franchise will set you back around R900,000 according to SA Franchise Warehouse.

This includes an approximate setup cost of R850,000 (excluding VAT), and an initial franchise fee of R55,000 (also excluding VAT).

Galito’s – from R1.75 million

According to the Galito’s website, the cost of opening a standard 180 square metre outlet is in the region of R1,750,000 (excl vat).

However it notes that this cost is heavily dependent on the location, size and initial condition of the premises.

“This includes all development costs from project initiation (store design & staff training), to store launch promotions. This cost also includes a franchise joining fee of R110,000 (excluding VAT),” it said.


Tourism Observer

KENYA: Cafe Javas Opens In Nairobi As CJ's

Uganda coffee chain Café Javas has entered the local market with a new branch in Nairobi, raising competition for Kenya’s restaurant operator Java House.

Café Javas’ new outlet, operating under the name CJ’s, is located at the junction of Biashara and Koinange streets.

The firm’s expansion into Kenya raises its rivalry with Java House with which it was embroiled in a trademark war in its Ugandan home market.

Java moved to the Uganda High Court in 2016 after Mandela Group of Companies, which owns Café Javas, successfully objected to the registrar of trademarks’ acceptance of the Nairobi Java House name.

The court gave the coffee house a go-ahead to register name as a trademark and to operate its restaurants.

Justice Christopher Izama last year ruled that no evidence had been produced to prove that customers could easily confuse the two restaurant brands.

Café Javas has seven branches within Uganda’s capital Kampala and an additional outlet at Victoria Mall in Entebbe.

Java operates 65 branches across East Africa in addition to outlets under Planet Yoghurt and 360 Degrees Pizza brands.

Kenya based Java House has set aside Sh5 billion in a renewed expansion drive over the next five years. About 80 per cent of the firm’s expansion drive will focus on opening more outlets in Kenya.

Java Group is the biggest restaurant chain in the region, followed by fast-food brand Kentucky Fried Chicken (KFC), Art Caffe restaurant and Subway.

Artcaffe, which has 12 branches, has been the main competitor for Java House until recently when smaller coffee houses including Kaldis and Connect set up shop locally.

In February this year, the upmarket coffee chain unveiled Artcaffe Fairtrade Coffee Blend from coffee sourced in Nyeri and Machakos to grow its revenue streams.

The product is available at all its outlets for Sh290 served in a French press while a 250 grammes ground box goes for Sh690.

America fast food chain Subway has 12 branches in the region — eight in Kenya, three in Tanzania and one in Uganda.

Java Group will inject up to KSh1 billion in expansion drive this year cementing its place as the number one restaurant chain in the region.

Chief executive Ken Kuguru said the firm would open new outlets in emerging towns and within major cities in the country to grow its branch count and create new revenue streams.

The firm will also simultaneously explore new markets in the East African region but most of the new investments are expected to be in Kenya.

Java Group is the biggest restaurant chain in the region with 64 branches, followed by fast-food brand Kentucky Fried Chicken (KFC), Art Caffe restaurant and Subway.

The KFC has 31 branches in the region, 17 of them in Kenya, nine in Uganda and five in Tanzania. Art Caffe has 12 branches in Kenya.

America fast food chain Subway has 12 branches in the region — eight in Kenya, three in Tanzania and one in Uganda.

Mr Kuguru said that 80 per cent of the firm’s expansion drive over the next five years will focus on opening more outlets within the Kenyan borders.

The five-year strategy is estimated to cost the firm up to Sh5 billion.

Java Group runs coffee outlets under Java House, owns 360 Degrees Pizza and Planet Yoghurt brand.

The 64 branches under the label include 56 coffee outlets. The firm is looking to open at least two outlets of its brands every month.

Java House will invest between Sh500 million to Sh1 billion in new branches as well as advancements in a state-of-the-art central kitchen and commissary facilities,said Mr Kuguru.

Java Group is keen on Meru and Machakos counties, where it will open its first branches of the year.

The expansion drive indicates a shift to the counties after the devolved governments were established in 2013.


Tourism Observer

South African And Nigerian Cities To Be Outgrown By Kenyan

Kenyan cities are tipped to register the highest growth rates in consumer spending over the next 15 years, outpacing the Nigeria, South Africa and Cameroon metropolises.

Research firm Euromonitor International in a new report covering 24 cities projects that consumer expenditure in Kisumu will rise by 277 per cent from $0.6 billion (Sh60.6 billion) in 2015 to $2.2 billion (Sh228 billion) in 2030 at the equivalent of last year’s prices.

The Kenyan lakeside city is followed by Mombasa whose consumer spending is forecast to rise 221 per cent from $1.6 billion (Sh161.6 billion) to $5.1 billion (Sh518.7 billion) over the same period as per the Euromonitor projections.

Nairobi is third with a predicted 208 per cent expansion rate in consumer expenditure from $5.6 billion (Sh565.6 billion) to $17.2 billion (Sh1.7 trillion).

The anticipated growth rates mean Kenya’s cities are expected to be more attractive to businesses dealing in consumer goods and services compared to other leading African cities.

The local cities are followed by Cameroon’s Yaoundé, Nigeria’s Abuja and Cameroon’s Douala whose consumption is forecast to rise by 172 per cent, 170 per cent and 134 per cent from the current levels of $4.6 billion, $9.6 billion and $4.2 billion respectively.

While Kenyan cities are poised to register the fastest growth in consumption over the review period, the report notes that they are relatively poorer than those in Nigeria and South Africa that have larger absolute consumer spending.

“In contrast, Kenyan cities are relatively poorer. Yet on the positive side, the country’s relatively high Internet usage paves the way for innovative, tech-savvy solutions,” says the Euromonitor report.

“E-commerce companies and tech entrepreneurs will find Kenyan cities particularly appealing.”

The majority of the households, about 92 per cent in Nairobi, Mombasa and Kisumu have an annual income of between zero and $10,000 (Sh1 million).

About six per cent earn between $10,000 (Sh1 million) and $25,000 (Sh2.5 million), with two per cent having an income of more than $25,000 (Sh2.5 million).

The report notes that consumers in the Kenyan cities spend most of their money on basic goods and services including food, transport, housing and leisure.

Food is the largest expenditure item, accounting for 44.3 per cent of Kisumu’s consumer spending, 39.5 per cent of Mombasa’s and 35.1 per cent of Nairobi’s.

Several international food brands have entered Nairobi over the past few years, targeting demand from the growing middle class whose tastes have partly been shaped by global travel. These include Kentucky Fried Chicken, Pizza Hut, and Subway.