Taste Holdings, the Starbucks franchisee in South Africa, has sold its 13 Starbucks stores in the country for R7m ($475,000). It is also seeking to sell its Domino’s Pizza franchise and its The Fish & Chips Co and Maxi’s QSR brands and exit the food business.
The Starbucks franchise will now be run by Adrian Maizey, a director of Taste Holdings. He has registered a brand new company called K2019548958 as a vehicle for the purchase. The sale is a deep discount on what it has cost Taste Holdings to build the franchise: R5m ($339,000) per store, or R65m ($4.4m) in total since its launch in 2016.
As late as June this year, Taste Holdings, which reported an annual loss of R317.6m ($21.6m), had plans to expand. It talked of opening more Starbucks and Domino’s Pizza outlets. Its turnaround plan included opening six new Starbucks and 10 Domino’s Pizza outlets through to 2020, and eventually targeting 150-200 stores.
That plan was itself a volte face. In January 2019, the company revealed it was ready to abandon growth plans for Starbucks in South Africa given that its food division hadn’t generated a profit since 2015. Taste Holdings will now focus on its luxury goods division.
Taste Holdings is not the only South African franchise holder hit problems: in February 2019, Grand Parade Investments (GPI), the operator for the Burger King in South Africa, revealed plans to close its Dunkin’ Donuts and Baskin Robbins franchises in the country, citing poor performance. The move follows activist investor pressure. GPI had been the franchise holder for both brands since late 2016.
As with Starbucks, which faces stiff competition from local chains Mugg & Bean and The Seattle Coffee Company, GPI found that the higher costs and higher prices associated with premium international franchises left it unable to challenge well loved, embedded local rivals.
Taste Holdings has put out the following statement:
“After careful consideration, following months of operational reviews and canvassing potential partners and capital providers on this long-term objective, it has become evident that the capital investment required for this expansion strategy cannot be secured, given the current structure of the business and existing market conditions. Taste’s board of directors has therefore revisited the previous strategy and has decided that it is in the best interests of the Company and all stakeholders to exit the food business.”
For more information on the leading coffee shop chains in Africa, please read Trendtype’s Coffee Shop Chains in Africa report.
