Burger King Takes on McDonald’s, KFC in South African Push

Burger King Worldwide Inc. plans to ramp up expansion in South Africa after opening its first restaurant in the country and enter other parts of the continent to take advantage of a growing middle class.

The maker of the Whopper burger has partnered with Johannesburg-based Grand Parade Investments Ltd. to set up Burger King South Africa and opened its first local outlet in Cape Town last month. That was 18 years after McDonald’s Corp. started operating in Africa’s biggest economy and 42 years after YUM! Brands Inc.’s fried chicken chain KFC.

Burger King plans to open about 12 branches in South Africa next year as it seeks to tap into the country’s $1.9 billion rand a year fast-food market, Jaye Sinclair, chief executive officer of Burger King South Africa, said in a telephone interview from Cape Town on June 7. It will then seek to expand in other African countries.

“The South African consumer is looking for value,” Sinclair, 42, said. “There are more and more households where both partners work, so the demand for quick food climbs.” The Whopper sells for 23.90 rand, compared with the 22.95 rand price of McDonald’s signature Big Mac burger.

Burger King, which was taken private by New York investment firm 3G Capital Inc. in 2010 and relisted on the stockmarket last year, is expanding in new countries amid tougher competition in its home U.S. market. It began selling burgers in Russia in 2010 and formed a joint venture to open 1,000 outlets in China last year.

Way Behind

The Miami-based company named Daniel Schwartz as its new chief executive officer on June 7, putting him in charge of a strategy focused on international expansion.

Burger King’s partnership with Grand Parade Investments may allow the restaurant chain to expand through the leisure-focused investment company’s hotels and casinos, Sinclair said, yet it remains a long way behind its competitors. McDonald’s operates 170 restaurants in South Africa, while KFC has more than 600 stores in the country.

“In the first four weeks we sold 3,000 meals a week from our Cape Town outlet, using a ton of Whopper burgers,” Sinclair said.

While South Africa’s middle class has almost doubled in 8 years and is “attractive”, the company is already looking to expand in the rest of the continent, Sinclair said. Africa is home to the world’s youngest and fastest-growing population, McKinsey & Co. said in a 2010 report. Household expenditure in the continent is forecast to expand 63 percent to $1.4 trillion by 2020, the report said.

Open Outlets

Sub-Saharan Africa’s economy will expand 4.9 percent this year compared with global growth of 2.2 percent, the World Bank said in June. South Africa’s GDP is forecast to grow by 2.5 percent. Burger King will initially look to open outlets in Botswana, Mauritius, Mozambique, Namibia, Zimbabwe and Zambia.

“South Africa is to be a springboard into Africa,” Sinclair said. “There is double-digit growth in many of these economies, so you want to be there.”

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