Hot Dog Café franchisor, Derek Smith, realised that the easiest way to establish a national presence would be through a professionally designed and managed franchise programme.
Hot Dog Café participated in a ‘Franchisor Development Programme’ sponsored by the National Co-ordinating Office for Manufacturing Advisory Centres (Namac), now incorporated into the Small Enterprise Development Agency (Seda), and implemented by a firm of franchise consultants. Having improved the franchise model, Smith was ready to begin planning national expansion.
At that time, the company operated two business models: Carts (which were company-owned), and diners (which were largely franchised). Smith knew that while the cart model, if operated correctly, had virtually unlimited potential for expansion, growth through the diner model would be limited. This left a gap in the market which was traditionally filled by informal competitors.
To secure a slice of this potentially attractive market, Smith designed the e-diner – a semi-permanent self-contained structure that offers 12m2 of prime trading space. It turned out to be a stroke of genius because placing an e-diner in a parking lot or other suitable area was a relatively simple undertaking.
“If the turnover at a specific location is poor, you can simply move the e-diner elsewhere,” Smith says.
Hot Dog Café now operates through three types of outlets:
- Carts, designed to take up position near busy intersections.
- E-diners, which are located outside commercial high-traffic locations, such as branches of Makro or Builders’ Warehouse.
- Smaller trading areas are serviced through mini e-diners.
The franchise continues to help people from disadvantaged backgrounds through development and training, and also offers opportunities for corporates and other organisations seeking to meet BEE scorecard credentials to contribute to a job creation programme that has proved to be successful.
“We give our cadets generous and ongoing business training and financial support to ensure sustainable and genuine empowerment,” says Smith.
As a former chairman of the Franchise Association of South Africa (FASA), Smith has played a pioneering role in convincing government, funders and corporate businesses of the potential of franchising in skills transfer, entrepreneurship and job creation.
Franchising creates sustainable jobs
“There is no question that the inherent strength of the franchise format, with its built-in skills transfer mechanisms, support structures and benchmarking, and can contribute to creating entrepreneurs and sustainable jobs,” says Smith.
“By awarding Hot Dog Café funds from the Jobs Fund, and with other similar franchisor initiatives in the pipeline under the auspices of FASA, government is finally recognising the role that franchising can play in economic development.”
Since being awarded the Jobs Fund allocation in August 2013, Hot Dog Café has established a number of new operations throughout the country, training and mentoring qualifying candidates, and creating new sustainable jobs with candidate franchisees currently going through the funding process to own their own franchises.
The candidates, many of them disadvantaged when taken on as cadets, have benefited from seven months of intensive training and those who showed extraordinary potential have ended up owning their own stores.
Dual branding experiment shows much promise
In January 2014, as the first franchise recipient of government’s Jobs Fund, and with the roll-out of the R35 million – R17-million from the Jobs Fund matched by R18 million from the Masisizane Fund and the Public Investment Corporation – Hot Dog Café bought the London Pie franchise to broaden its franchise footprint and grow its entrepreneurial and job creation mandate.
“Merging the two offerings, Hot Dog Café and London Pie, as dual branded franchise opportunities, follows the growing overseas trend of dual branding products that are complementary, such as the combination of Pizza Hut and Taco Bell stores in the US, and in our case, hot dogs and pies. Complementary products do not compete, but actually attract more customers because of the bigger range.”
London Pie has a well-established franchise network, which gives franchisees access to a wider range of opportunities for setting up joint operations.
The dual branded offering will be targeted at shopping centres, food courts, shopping malls, and cinema complexes. With a range of versatile concepts available – from diners all the way to mobile carts, the franchisor will be able to cater for the needs of a wide range of customers.
The merging of London Pie into the Hot Dog Café stable totals a group of nearly 200 franchised and licensed outlets selling its various products, and offers a viable option to independent entrepreneurs wanting to enter the fast food market as franchisees.
“This dual branded offering is a great fit for the Jobs Fund initiative that will see opportunities given to more than 300 cadets of all races over a three-year period to be trained and mentored,” says Smith. “At the end of the programme, they will either enter gainful employment or, for around 60 of the top cadets, become business owners with their own franchises.”
Multiple brands for bigger impact
Producing a high-quality product in line with world standards in the fast food and vending environment is a challenge few would attempt, but which Hot Dog Café has succeeded at.
The franchise’s success in assisting corporations and organisations seeking to meet BEE scorecard credentials effectively and sustainably – as they have done with the Massmart Group in an empowerment deal for both The Coffee Stop and Hot Dog Cafe brands – will be boosted with the addition of London Pie to the mix.
“With financing in place through the Jobs Fund/Masisizane Fund, Hot Dog Café has implemented an aggressive roll-out strategy for the dual branded stores,” says Smith.
“We’re currently looking for viable sites and recruiting prospective franchisees, and appealing to corporate social responsibility companies and organisations to partner with us in entrepreneurship and job creation.”
Thus far, three dual branded stores have been rolled out in Gauteng, Brooklyn, Centurion and Rivonia, taking up much the same square meterage and employing the same number of staff as the single brand offerings, which means that the stores can expect a spike in turnover of between 40% and 60%.
“I have always been cynical about the shopping centre environment, because of the exorbitant rentals,” says Smith. “However, the new format will be profitable enough to enable us to go back into retail spaces. The first dual branded store was opened in Brooklyn Mall as an experiment, with excellent results.”
As part of the Job Fund’s initiative, Smith and his team have a grant of R17 million to roll out 62 new franchise units and create 383 new jobs in three years. They are 15 months into the programme, and are bang on target, much to Smith’s excitement.