How local firm Express Kitchen bagged franchise deals with global fast food giants

 

Chicken Cottage products [File]

After four years of intense negotiations, two giant global restaurant chains, including the US’s fourth-largest pizza joint, are set to open their first African outlets in Kenya mid this year.

The UK-based Chicken Cottage Ltd recently signed a franchise agreement with Express Kitchen Ltd following a similar deal with international pizza brand Papa John’s.

Express Kitchen is a subsidiary of AAH Limited, the majority shareholder of Hass Petroleum Group, which is one of the top indigenous oil marketing firms.

Hass Petroleum currently operates more than 150 petrol stations across 10 countries in Africa and aims to leverage this retail footprint to grow its Express Kitchen brand.

AAH started as a logistics firm and has grown to a diversified business under the leadership of its chairman and founder Abdinasir Ali Hassan.

Enterprise spoke to the firm to understand what it takes to ink such huge franchising deals.

Market research

Express Kitchen Managing Director Ahmed Yunis notes that food is a multi-million shilling business and very diverse. He adds that based on market research they saw a gap and built a niche for themselves.

“We did research, engaged a consultant and the finding was that there’s a gap, there’s a niche we can come in and do good business based on the research,” he said.

Express Kitchen Head of Operations Olivia Oeri added that the service stations give them a competitive edge and the restaurant business will also boost the fuel business.

“We also wanted to grow the fuel business, the restaurants will bring the foot traffic and people can have a meal and also fuel,” she said.

Picking the right partners

When they thought of going into the restaurant business, they thought about it three-fold – pizza, chicken and coffee which are complementary.

They identified Papa John’s for pizza. It is the fourth largest pizza delivery chain in the US with 5,500 restaurants in 50 countries.

There’s no single restaurant in Africa and so the firm will be the first to bring them.

“They (franchisors) are looking for specific details and have high criteria. We showcased our efforts and other businesses. The vice president for Papa John’s came to Kenya and we had lengthy discussions. They were convinced that we can do this business,” said Yunis.

Chicken Cottage Ltd, based in Croydon near London, started operations in 1994 offering Halal grilled and fried chicken to the local community and currently operates more than 75 restaurants across the world, with customers craving its “authentic East meets West fusion of flavour.”

“Chicken cottage is 100 per cent halal, that’s one of the things that we were looking for so we engaged them. They came and we shared with them all our businesses including their performance then they agreed we work together,” added Yunis.

Ahmed Yunis, managing director Express Kitchen and Olivia Oeri, Head of Operations Express Kitchen [Courtesy]

How franchise deals work

Businesses have to pay some royalties to a franchisor and a certain portion of revenue annually.

“Someone has a proven business model so you’re saying I’d like to use that business model,” explained Ms Oeri.

Franchisees also have to pay an initial one-off fee. 

Yunis further explained that the franchisors also look at the bigger picture.

“People look at things from different perspectives. Sometimes, these multinational franchisors look at the long term, for example, by investing in Kenya with other people they’ll be making money for the long haul. The initial royalty might not be too much as they are looking at the next ten years,” he said.

Patience

The lengthy negotiations spanned 2019 and are still ongoing. The Covid-19 pandemic also delayed their talks with franchisors. This has seen Yunis and his team settle adjust their launch date from April to July.

“It’s a continuous process, not just one you wake up and happens overnight,” said Ms Oeri on the lengthy negotiations.

She notes they are eager for a slice of the market share on the back of good locations and a diverse and growing youthful population.

“There’s a lot of potential for growth in Kenya for these two brands. For us, it’s a continuous learning process, we are looking at creating something great for Kenya and replicating it with other countries,” she said.

Their business also targets the global traveller who wants what he gets in the top world cities here locally.

“A customer wants to get in Nairobi what he gets in New York, that’s the kind of need that we want to serve,” said Yunis.  

Ms Oeri adds that businesses must also always serve the customer with the right product.

“Have you given a customer reason to come and spend your money?” she posed.

Pricing and competition

Ms Oeri explained that getting pricing right also involves getting the supply chain right.

“Our key thing is can we partner with the right people to get to that price point? It’s all about the supply chain,” she said.

“We’ve looked at what the competitors have and a big chunk of this lies with the supply chain so getting the right partners will equate to better pricing.”

For the next five years, the plan for Express Kitchen is to expand its footprint and become the premier dining space.

“A key focus for that vision to be successful is to ensure that we are delivering that quality product, taking care of customers and at the same time marketing the brand,” she said.

“There’s a big enough market for everybody, we’re not trying to terrorise the next person or be great by copying,” she added.  

Suppliers

They’ve already engaged various local suppliers partners. Requirements to trade include halal certification.

Another challenge is that if there are additional costs to a partnership some suppliers might not have the resources to scale up.

Yunis underscores that they’ll give priority to local suppliers.

“Express kitchen is a Kenyan company with an international brand, our objective is to empower Kenyan suppliers,” he said.

Long term vision

Kenya is the launch pad before they expand to other regions. They are planning about 50 chicken cottage outlets across the region.

The creation of jobs is also high on their agenda. On average an outlet employs about 12 people.

“This will have a multiplier effect, suppliers using well employ people ripple effect to various industries,” said Yunis.

They also don’t want to harshly evict restaurant businesses in their outlets and will work with other oil marketers.

“Our intention is not to remove someone who’s there but we want to utilise unused spaces. Also, If we don’t have a station in some place can partner with another oil firm,” he said.

 Business lessons and values

Yunis underscores the importance of having values in business. He cites their core values like integrity, honesty, quality product and customer service.

This has enabled AAH to grow exponentially into one of Kenya’s most diversified firms with interest’s logistics, petroleum, real estate and now the restaurant business.

“Today the group has added food and beverages, tomorrow it might add another industry as long as there are opportunities and you have the right mind you can always invest and in the process create opportunities for employees, suppliers and tax for the government,” said Yunis.

He also insists on getting the marketing mix right which involves the four Ps – product, price, place and promotion.

Not all businesses are the same

Yunis said that one of the key business lessons he’s learnt over the years is that all businesses are different. His background is in the petroleum business and he had to deeply immerse himself to understand the restaurant business.

 “It’s not easy when you’re branching into a territory in which you are no expert,” he said.

“You must understand and experience to make an impact,” he said.  

Ms Oeri has been in the restaurant business for 20 years and notes the ever-changing space. The pandemic was one of the biggest shockers for the industry with fallen foot traffic.

“It’s an ever-changing business for you to stay relevant you constantly have to evolve and it takes time to break even. It requires a lot and you have to be engaged on the day to day operations.”.

“There are lots of sleepless nights in this business,” she added.