The Picture of Health – Owning a Kauai Franchise

Kauai’s ‘eat better, live better’ philosophy is proving to have a vigorous impact on growth, with the company now represented in more than 140 outlets in operation across South Africa.


The Picture of Health – Owning a Kauai Franchise

Globally, people are more interested in how food is produced, sold and consumed than ever before. The increasing demand for healthier food choices has fuelled the growth of South Africa’s popular healthy fast food brand Kauai, which has seen major expansion over the last three years.

There are currently 56 retail stores nationwide, along with 82 Kauai In Motion outlets, and five Kauai@School stores – and the organisation is continuously growing. The outlets are a combination of company-owned, joint venture or franchised stores.

“To ensure that we can continue maximising the growth opportunities for Kauai, we see franchising as the most effective way of expanding,” says Hendrik Coetsee, CEO of Kauai. “We will continue to own some of our restaurants to ensure we keep a finger on the pulse of the key aspects of operations. Our training and field support infrastructure has been developed to enable this growth.”

Healthy options on the go

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After opening the first high street outlet in Cape Town in 1996, and growing steadily for a number of years, Kauai entered into an alliance with Virgin Active South Africa, opening Kauai In Motion stores in its health clubs to provide members with healthy food on the go. With the health club group continuing to expand, opportunities for the expansion of the Kauai brand just keep growing.

Although the alliance certainly helped fast-track Kauai’s growth, Coetsee stresses that it’s a symbiotic relationship.

“Virgin Active needed a food and beverage provider that could offer a reliable and quality product. The company is a global player that is driven by innovation in everything it does, so we are constantly learning through our partnership. We are being pushed to evolve, to challenge ourselves, driving us to push the business forward.”

He explains that Kauai has adapted its menu at the In Motion outlets to fit in with the health club environment. Kauai In Motion has been developed for Virgin Active members, with a menu designed to meet members’ nutritional needs and complement their workout.

“For both partners, the venture is in line with the commitment to a healthy lifestyle that combines exercise with the correct nutrition in the form of delicious, healthy products,” he adds.

The Kauai In Motion outlets are available as small or large operations, depending on the size and location of the gym and its membership numbers.

Coetsee says Kauai is seeking franchisees to open new stores in smaller cities like Kimberley and Bloemfontein, where Virgin Active has existing gyms. “We don’t want to operate these stores and would prefer to have them owned and run by franchisees.”

There are currently four different models available for In Motion stores. A lone owner-operator working from a smaller gym will sell a limited food offering that is pre-made and shipped to the outlet. Coffee and smoothies, however, are still made on the premises as freshness is key.

At the other end of the scale are Virgin Active Melrose Arch and Alice Lane in Sandton. At these exclusive clubs, Kauai launched the more luxurious Kohu, a gourmet café that serves premium health foods and caters for the high end of the market.

“The cost structures for these types of store set-ups are all quite different, and we encourage potential franchisees who are keen on the health club environment to approach us to find out more,” says Coetsee.

The right In Motion franchisee fit

But what is the right type of Kauai franchisee? Coetsee says, most importantly, you have to be passionate about health and what Kauai stands for. “Equally important is your ability to work hard in the service industry. This means working with people, from customers to employees, as well as motivating and getting the best out of your team.

“Most franchisees who are new to the business will comment that they have never worked as hard as in the first six to twelve months of starting their new business. If you find restaurant work rewarding, and enjoy working with people these are good signs. We do have a filtering process to assess this. Having the right amount of capital is vital and we cannot consider applicants without the necessary capital backing.”

Kauai@School – expelling junk food

One of the biggest unaddressed needs in schools is few, if any, options for healthy school meals. That’s what led Kauai to launch Kauai@School stores at Reddam House Constantia and Green Point in 2007. This was part of the campaign to expel junk food from South African schools. The menu was adapted for schools to make it more affordable to learners. Kauai@School now comprises five stores, with two at Reddam in Gauteng and one in KwaZulu Natal.

“This move is in line with our vision to be the leading healthy, convenience and fast food brand in the country,” says Coetsee. “We want to impact a broader audience and school is the best place to start making children aware of the benefits of healthy eating.”

The first school franchise was started in the Western Cape by converting a traditional school tuck-shop – where chips, chocolates, sweets, pies and fizzy drinks are the norm – into a Kauai store.

“It worked incredibly well because the franchisee was able to leverage what the brand is known for and quickly gain loyal, repeat customers. Tuck-shop conversion is a great way to introduce these stores into school, and it’s a solution that is obviously more cost-effective as the infrastructure cost is lower than it would be in a mall, for example.”

Aside from teachers at the five schools with Kauai on their premises now reporting a significant increase in classroom concentration as a result of improved nutrition, the school outlets have also delivered a phenomenal 20% year-on-year growth for their franchisees.

The right kauai@school franchise fit

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Coetsee notes that running a school outlet is not for everyone. Kauai seeks franchisees who are part of the school community, and who understand that trading hours are crammed into break times, and only from Monday to Friday during school terms.

“It’s not an opportunity that is suitable for a high-powered business owner, but offers a perfect lifestyle for an entrepreneur who wants to earn a good living that is financially rewarding, without requiring them to work all hours of the day.”

Kauai goes global

Kauai’s retail store footprint is on the increase both in South Africa and abroad. “We now have stores in most of the major shopping centres around the country and at three airports, and we have plans to open at least ten retail stores per year for the next three years,” says Coetsee.

“We have developed a smaller retail store concept which will enable us to operate successfully within many of the smaller shopping malls now too. There is a lot of opportunity available for the right person.”

In addition to this planned growth in South Africa, the company is expanding internationally and its first store outside of the country will open in Dubai this month with several more planned for the next three years. Following the same look and feel as the SA stores, the Dubai store is located in Park Island, Dubai Marina, and incorporates eco-friendly sustainable materials in keeping with the brand’s island heritage. The menu is 98% the same as the South African offering with a few tweaks having been made to suit the local palate, Coetsee explains.

After Dubai, Kauai will open in Namibia in May and thereafter is looking to take its healthy offering to India, the UK, Australia, New Zealand and Germany.

Becoming a Kauai Franchisee

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Franchise fees

Franchise fees for a Kauai@School store are less than those for a regular outlet.

KAUAI Mall/High Street store franchise costs

  • Set-up costs: up to R1,3 million excl. Vat
  • Franchise fee: R110 000 excl. Vat
  • Royalty fee: 6% of turnover
  • Marketing fee: 4% of turnover

The applicant will need 35% of the total upfront cost in unencumbered funds.

KAUAI@School franchise costs

  • Set-up costs: Between R350 000 and R750 000 excl. Vat (depending on what the school is able to contribute to the infrastructure)
  • Franchise fee: R55 000 excl. Vat
  • Royalty fee: 6% of turnover
  • Marketing fee: 2% of turnover

The applicant will need 35% of the total cost in unencumbered funds.

Ideal KAUAI@School locations

That healthy food costs more is conventional wisdom by now. To operate sustainable Kauai@School outlets, the franchisee has to identify a school where parents’ income level is in the LSM 7 and higher bracket. In addition, there have to be around 1 000 learners. In cases where the school might have fewer children, the parents’ disposable income may make up the shortfall.

Interested? Here’s how to apply for a franchise:

  • Fill in the application form and sign the confidentiality agreement. Make sure that the person who will run the store fills in a form as well as any other person who may be providing finance.
  • If your application form meets the criteria, you’ll have a face to face meeting with a Kauai representative in your area so that you can have any questions answered and find out more about the brand.
  • From time to time Kauai hosts franchise evenings which allow applicants and franchisees to get news about the brand, and is also an opportunity to get additional information about the franchising process.
  • You will then complete a working assessment.
  • You will be given access to the disclosure agreement to review.
  • You will be requested to complete a character profile test which is Internet-based and can be completed at Kauai’s offices or any other convenient location.
  • In a second and final interview, the franchise agreement is signed by both parties.
  • You will either start training immediately or when a site is found for you.
Monique Verduyn
About the Author
Monique Verdyun is a regular contributor to Franchise Zone. Franchise Zone is published by Entrepreneur Media SA. It offers advice and franchising opportunities in South Africa.

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