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In what is deemed the last continent for major growth in the fast food industry, several chains are finding that expansion into Africa is going to be tougher than what was once expected. Infrastructure costs, food imports, and meat shortages have led to high prices at many quick serve restaurants across Africa. This has lowered optimism among some fast food executives about the prospects of expansion into the vast African continent, though there are others who believe now is the time for growth, even with the early setbacks.
The biggest problem right now for several chains is the fact that beef prices in Africa are much higher than in other parts of the world. This has caused the price of hamburgers, a staple of many fast food menus, to be much higher than what most people can afford, causing a simple cheeseburger to become a luxury item for Africans. At a Johnny Rockets in Nigeria, single patty hamburgers start at $14, much too expensive for members of the growing African middle class. Even at Kentucky Fried Chicken (KFC), which does not have to deal with beef shortages, prices are 40% higher for a meal in African restaurants compared to what a consumer would pay in New York for the same meal. Coupled with the high cost of refrigerators and other appliances, some chains such as McDonalds, have decided that they do not want to invest in Africa at this time.
In the face of these challenges, there are some chains that are still bullish about the African market. KFC has overcome the high prices of food and expanded to over 1,000 stores on the continent, bringing renewed hope that growth is possible. Burger King recently opened its doors in South Africa, and Domino’s Pizza began its expansion into Africa by opening several stores in Nigeria. Helping drive this expansion is the fact that sub-Saharan Africa is expected to experience 6% economic growth in the next year, outpacing the rest of the world. As more people throughout Africa move out of poverty, markets will continue to open up for many businesses, and this could be the early beginnings of a fast food boom in the continent, in spite of the previously mentioned challenges.
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