quick service restaurant (qsr) industry in select african

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Quick Service Restaurant (QSR) Industry in select African CountriesExecutive Summary

Table of Contents▪ Executive Summary

© RocSearch. All Rights Reserved. 3

Sample – Disguised and AbridgedQSR Industry in Select African Countries

Country A and B are most attractive markets in terms of opportunity size and market composition

BENCHMARKING PARAMETERS COUNTRY A COUNTRY B COUNTRY C COUNTRY D COUNTRY E COUNTRY F COUNTRY G

MA

RK

ETSI

ZEA

ND

POTE

NTI

AL1

Market size (USD mn, 2017) xx xx xx 222 862 xx xx

Historical growth (CAGR 2015-17) xx xx xx xx xx 10.8% 10.6%

Growth outlook (CAGR 2018-23) 8.0-10.3% xx xx xx xx xx 13.2%

Cumulative incremental market size (USD, mn 2018-23) xx xx 213 393 xx xx xx

Total number of QSR outlets 150 17,223 xx xx xx xx xx

QSR as a % of overall food services market: xx 29% xx xx xx 11% xx

QSR

PE

NET

RA

TIO

N1 Urban adult population per outlet 55,200 xx 27,620 xx xx xx xx

Annual QSR spend per urban adult (USD) xx xx xx 27.7 50.3 xx xx

% of total outlets in top city xx xx 81% xx 40% xx xx

CO

MPO

SITI

ON

1 International Brand’s Percentage (2018 –20 – 22) xx xx 35% – 37% – 40% xx xx 15% – 20% – 25% xx

% share of top 5 brands xx xx xx 22.0% 21.9% xx xx

Competition from unorganised QSR segment Medium Medium High High Medium High High

ROCSEARCH RECOMMENDATION IN TERMS OF RELEVANCE FOR THE CLIENT

Note: 1) Refer to appendix slides for key to assessment parameters2) Despite having highest number of outlets (xxx), Player X does not feature among top five QSRs in Country A because it reports revenue of self-owned outlets (xx) only

ATTRACTIVENESS TO INVEST

HIGH MEDIUM LOW NA

Country Benchmarking – Opportunity Size & Market Composition



Country X and Y are most attractive markets in terms of business model and financial KPIs of operating firm

BENCHMARKING PARAMETERS COUNTRY A COUNTRY B COUNTRY C COUNTRY D COUNTRY E COUNTRY F COUNTRY G

BU

SIN

ESS

MO

DEL

1

% split: franchisee – own stores (Top 10 franchises/ QSR Groups) xx 82% – 18% xx xx xx xx 7% – 93%

Store mix (mall vs. drive through vs. standalone vs. fuel stations)2 23% – 3% – 30% – 44% 19% – 2% – 78% – 1% xx xx xx xx xx

Median price point of menus -international brands (USD) xx xx xx xx xx 6.4 5.6

Median price point of menus - local brands (USD) xx xx 6.0 4.9 xx xx xx

Access of funds (lending rates) xx xx xx xx 5.5% 17.5% xx

Store size range - international brands (sq m) 90-360 xx xx 150–250 xx xx xx

Store size range - local brands (sq m) xx xx xx xx 60-300 70-275 xx

FIN

AN

CIA

LK

PIS1

Annual revenue of largest international QSR group (USD mn) 3 xx 341.8 21.0 xx xx xx xx

Annual revenue of largest local QSR group (USD mn)3 xx xx xx xx 9.5 xx 8.3

Average revenue per outlet of largest international brand (USD) 1.0 xx 1.5 xx xx xx xx

Average revenue per outlet of largest local brand (USD) 0.3 0.4 xx xx xx xx xx


Note: 1) Refer to appendix slides for key to assessment parameters2) Breakdown amongst drive through, standalone and fuel station stores in not available in Country A, Country B and Country C3) Indicated QSR-specific revenue

ATTRACTIVENESS TO INVEST

HIGH MEDIUM LOW NA

Country Benchmarking – Business Model and Financial KPIs



Country A, B and C are least attractive markets in terms of operational environment

COUNTRY A COUNTRY B COUNTRY C COUNTRY D COUNTRY E COUNTRY F COUNTRY G

◕ ◔

◑ ◔

◑ ◔

◕ ◕

◕ ◔ ○

◑ ◑

◑ ◔ ◑

◑ ◔

◕ ◑ ○

◕ ◔

◕ ◔

◑ ◑

◑ ○

BENCHMARKING PARAMETERS

Quality of infrastructure (access to reliable and affordable electricity, etc.)

Access to skilled labour

Labour costs

Access to local raw materials

Import bans of raw materials

Rental cost

Regulatory environment (food related/ for franchising)

Laws (investment law to attract foreign direct investment (FDI))

Organised retail space for QSRs

Penetration of e-commerce platforms and home deliveries

Investment-friendly policies supporting food services and QSR sectors

Compliance process

Tax rates and tax process


DECREASING ATTRACTIVENESS TO INVEST

Country Benchmarking – Operational Environment



Market sentiments are in favour of Country A and B

COUNTRY A

VOICE OF INDUSTRY EXPERTS RELATIVE ATTRACTIVENESS SCORE

0

1

2 3

4

54.5

COUNTRY B

0

1

2 3

4

53.0

COUNTRY C

0

1

2 3

4

53.5

COUNTRY D

0

1

2 3

4

54.0

• “The QSR market in Country D is expected to grow at ~10% CAGR over the next 2–3 years.” – Ex. Chairman, Player X (April 2018)

• “There is a growing middle class, which is an opportunity for the QSR players. There are still less number of outlets compared to the demand. So, the number of outlets are likely to increase significantly in the next 3 years.” – MD and Founder, Player X (April 2018)

• “International QSR brands will grow much faster than domestic ones in Country D as their demand is very high among the locals. Considering the high demand and increasing disposable income, more international players will enter the market to tap the opportunity.” – Brand Operations Manager, Player X and Ex-Manager at Player Y Country D (April 2018)

• “Country A is a stable market, where international brand, retail and spending power is better than Country C. Country A is very potential market for QSR business. Inflation is very low 1.5-2% and bank interest is very low, so overall the conditions are very favourable to open a restaurant” - Former Business Head, Player X (May 2018)

• “Country A is a new market. There are infrastructure issues and restriction on imports but the market has lot of potential. KFC is the latest entrant and McDonald’s will definitely enter this market.” – Former Franchise Business Leader, Player X (April 2018)

• “Burger King has x outlets, and plans to open x more during 20xx. KFC just entered and has plans to expand.” – Former Manager, Player X (April 2018)

• “Country B is a matured market but it has potential. We (Cook Door) are growing fast. We opened 11 new branches in 2016. We are planning to increase our branch network to 120 (from 84) in the coming years” – Chief Financial Officer, Player X

• “Fast food market in Country B is very big. There are many international QSR brands. Most of the local chains are doing good too. Local chains are meeting high standards and there are no quality issues. We (McDonald’s) are bound by our franchise to open certain number of outlets every year.” –Supply Chain Manager, Player X

• “Country C is an attractive destination for international QSR brands considering QSR brands such as PinkBerry have entered Country C even before other market in Africa. This is due to various supportive macro economic factors and favourable regulatory landscape. Historically, the market grew moderately at about half as fast as Nigeria, however, its growth will accelerate in future.”- Chief Development Officer, Player X (May 2018)

• In value terms, the QSR market in Country C is expected to grow at ~7% CAGR over the next 2–3 years, largely due to reviving economic growth—following a slump due to drop in oil prices.” - CEO, Player X (May 2018)

Country Benchmarking – Industry Sentiment (1/2)



Industry sentiments towards Country Z are relatively negative

COUNTRY X

VOICE OF INDUSTRY EXPERTS RELATIVE ATTRACTIVENESS SCORE

0

1

2 3

4

52.5

COUNTRY Y

0

1

2 3

4

5

COUNTRY Z

0

1

2 3

4

51.0

• “There are no major international players in Country Z. Most organized domestic QSR outlets are located in XX. Outside of XX, there are hardly any organized players.” – Ex. Senior Director and General Manager, Player X (May 2018)

• “Market opportunity is still pretty small and operating an international franchise can be expensive.” – Founder, Player X (April 2018)• “There is very limited opportunity outside XX, as the people living there are comparatively poor and do not spend on eating out.” – Ex. Senior Director

and General Manager, Player X (May 2018)

• “Country X, currently is considered as an intense place for the international fast food chains to operate their franchise, which further eliminates the monopoly of any player in the market.” – Head of Operations, Player X (May 2018)

• “The International chains will continue strong performance and eventually dominate the Moroccan market beyond 2022…the local market is not showing any big development or expansion plans” – Director of Operations, Player X (May 2018)

• It really is impressive to go out and see places filled with everybody from all different walks of life. Country Y people are a very aspirational society also. So even somebody who might be really burdened financially, will still go out and eat to just have that experience, to get that American experience” –Managing Director, Johnny Rockets

• “As part of the growth strategy, we are focusing on online sales and home delivery. We are cognisant of the change and advancement in technology and aspire to stay on top of it” – Marketing Head, Player X (April 2018) 3.0

Country Benchmarking – Industry Sentiment (2/2)



Company A has strong financials, while Company G has the most robust business model

TARGET NAME COUNTRY

FINANCIAL STRENGTH EXPERIENCE AND PENETRATION PORTFOLIO STRENGTH ALIGNMENT OF BUSINESS MODEL TO COUNTRY SPECIFIC BEST PRACTICES

Annual revenue

(USD mn)

Avg. rev/ outlet

(USD mn)

Group profitability

Years of local exp.

Market share # of cities # of

brands# of

outlets Outlook Type of brands

Product range

Target Customers1 Clustering Store mix Co-

location Sourcing Retail Delivery Production Marketing

Company A A xx 2.9 xx xx xx xx xx xx International Medium L, LM ✓ ✓ ✓ ✓

Company B A 9.5 xx xx xx xx xx xx 34 Local Medium L., LM, UM ✓ ✓ ✓ ✓

Company C B xx xx xx xx xx xx 3 60 International Low UM, U ✓ ✓ ✓ ✓

Company D B xx xx xx xx 3% 14 xx xx Local Medium L ✓ ✓ ✓ ✓

Company E C xx xx 16–20% 27 xx xx xx xx Local Medium L, LM ✓ ✓ ✓

Company F C xx xx xx xx 17% xx xx 14 International Medium L, M, UM ✓ ✓ ✓ ✓

Company G D xx xx xx xx xx xx 1 23 Local Medium LM, UM ✓ ✓ ✓ ✓

Company H E 36.7 xx xx 21 xx xx xx xx International High LM, UM. U ✓ ✓ ✓ ✓ ✓ ✓

Company I E xx 0.65 xx 7 xx xx xx xx International Medium UM, U ✓ ✓ ✓ ✓

Note: 1) L – Lower; M – Middle; UM – Upper Middle; LM – Lower Middle; U – Upper2) Companies with winning business model have been considered for analysis as the have high potential in respective geographies

OUTLOOK

PROMINENT EXPANSION NO OR MARGINAL EXPANSION

Target Benchmarking – Financial and Operational Assessment (1/2)



Company X leads the market in Country A, with high number of international brands in its portfolio

TARGET NAME COUNTRY

FINANCIAL STRENGTH EXPERIENCE AND PENETRATION PORTFOLIO STRENGTH ALIGNMENT OF BUSINESS MODEL TO COUNTRY SPECIFIC BEST PRACTICES

Annual revenue

(USD mn)

Avg. rev/ outlet

(USD mn)

Group profitability

Years of local exp.

Market share # of cities # of

brands# of

outlets Outlook Type of brands

Product range

Target Customers1 Clustering Store mix Co-

location Sourcing Retail Delivery Production Marketing

Company W F xx xx xx xx xx xx 3 273 International High LM, UM, U ✓ ✓ ✓ ✓

Company X F 33.0 0.4 xx xx xx xx xx xx Local Medium L. LM ✓ ✓ ✓ ✓

Company Y G xx xx xx xx 10% 1 xx xx International Medium UM, U ✓ ✓ ✓

Company Z G xx 0.3 xx xx xx xx xx 4 Local Medium H ✓ ✓

OUTLOOK

PROMINENT EXPANSION NO OR MARGINAL EXPANSIONNote: 1) L – Lower; M – Middle; UM – Upper Middle; LM – Lower Middle; U – Upper2) Companies with winning business model have been considered for analysis as the have high potential in respective geographies

Target Benchmarking – Financial and Operational Assessment (2/2)



Company A (Country A), Company B (Country C) and Company C (Country D) – emerge as high potential investment targets across the countries in scope

TARGET NAMECOUNTRY (BASED ON OPPORTUNITY SIZE + MARKETCOMPOSITION + BUSINESS MODEL + FINANCIAL KPIS

+ OPERATIONAL ENVIRONMENT)FINANCIAL STRENGTH BUSINESS MODEL OVERALL RECOMMENDATION

Company AA

● ◑ ★★★★★

Company B ◔ ◑ ★★★

Company CB

◑ ◑ ★★★

Company D ◔ ◑ ★★

Company EC

◑ ◔ ★★★

Company F ◑ ◑ ★★★

Company G D ◔ ◑ ★

Company HE

◕ ● ★★★★★

Company I ◔ ◑ ★★★

Company JF

● ◑ ★★★★★

Company K ◕ ◑ ★★★★

Company LG

◑ ◔ ★★

Company M ◔ ◔ ★

DECREASING ATTRACTIVENESS TO INVEST

Potential Recommendations

Sample – Disguised and Abridged

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quick service restaurant (qsr) industry in select african

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