Grand Parade Investments (GPI), the operator for the Burger King in South Africa, is set to close its Dunkin’ Donuts and Baskin Robbins franchises in the country, citing poor performance. The move follows activist investor pressure and now means it will focus its resources on growing the Burger King franchise.
GPI has been the franchise holder for Dunkin’ Donuts and Baskin Robbins (both owned by Dunkin’ Brands) since late 2016. Dunkin’ Donuts is the challenger brand to the more established Krispy Kreme franchise while Baskin Robbins competes with a range of small franchises including Marcel’s, Wakaberry and Häagen-Dazs (which although large globally, has only 9 outlets in South Africa).
GPI’s food division incurred a R107.7m ($7.64m) loss for the financial year to end June 2018. It has faced problems growing both chains in the competitive and congested South African fast food market. Its eleven Dunkin’ Donuts and five Baskin Robbins stores were limited to the Cape Town area only. Neither chain had grown since the initial launch phase. When it took on the franchise, GPI had said that it aimed to launch 290 Dunkin’ Donuts stores in South Africa within 10 years. GPI also acquired the franchise rights to six further countries in South Africa at the same time. Before closing the brands, GPI had sought to sell on the franchises.
Krispy Kreme, operated by South African foodservice company Fournews, has also struggled to grow – just 16 standalone stores in South Africa, although the brand is available in selected Engen service stations. Last month we noted that Taste Holdings, the Starbucks franchise holder in South Africa, had abandoned growth plans for the brand.
The main issue for GPI is that it needs the funding and focus to deliver growth for its headline franchise, Burger King. GPI has held the franchise since launching Burger King in South Africa in 2012, when it announced plans for hundreds of new outlets. To date, GPI has launched just 82 Burger King outlets, making it the fourth largest burger chain in South Africa behind Wimpy (458 outlets), Steers (429), McDonald’s (240) and ahead of Rocomamas (74 outlets – the brand is owned by Spur Corporation, in which GPI holds a 17.5% stake).
Trendtype tracks 17 fast food chains in South Africa that primarily market themselves on burgers (this doesn’t include the long list of chains that also sell burgers as part of their offering, or which sell products such as chicken burgers that compete directly against beef burgers).
The closure of the Dunkin’ Donuts and Baskin Robbins stores will please investors. GPI, which is primarily a gaming and leisure company, is on its fourth CEO in three years needs a simpler platform for growth. Its fast food outlets have struggled in a recessionary economy that has seen the introduction of the sugar tax and and increase in the VAT rate.
