Key participants were Doug Smart, introduced in Gloabl Postcards, and Burt Gunning.

Burt Gunning, founder and MD of Gunret Foods (Pty) Ltd. Burt is a KFC multi-unit franchisee. He has won several awards, the most recent one being KFC Franchisee of the Year 2012. His personal background is covered in a separate article headed How to become a positive and compliant franchisee where details about Burt’s company, Gunret Foods (Pty) Ltd., are also given.

The franchisee’s viewpoint
Burt Gunning – KFC Franchisee of the year 2012

To facilitate this, Burt does not employ good managers; he only employs great managers, then incentivises them with career development opportunities and financial rewards to match. For example, branch managers and area managers come from the existing pool of Gunret employees. Burt also derives great pride from the fact that four of his former staff members have become KFC franchisees in their own right.

Although being a multi-unit operator does not result in fee discounts or similar financial benefits offered by the franchisor, it has distinct advantages. For example, Head Office overheads are allocated over a larger number of stores and the development of marginal sites becomes possible. In this context, Burt cautions that if an individual with limited resources would be permitted to open a KFC restaurant that initially performs below par, the financial consequences could be disastrous.

Like all things in life, being a franchisee has some disadvantages and KFC is no exception. Burt lists the following:

  • Franchisees who fail to adhere to approved standards could damage the brand. It is the franchisor’s responsibility to step in and set matters right. KFC South Africa do this rather well.
  • No territorial rights are granted;
  • Access to funding is limited because KFC franchisees are not permitted to list on the JSE;
  • Given that KFC is a very large company, the decision-making process tends to be a bit slow at times.

Having said that, Burt stresses that he sees KFC as the best franchise opportunity in South Africa, and that the many advantages the franchise offers outweigh its few disadvantages by far.
Wrapping up, Burt stated that the most important ingredient for making the relationship work is trust. “Without trust, the relationship between franchisor and franchisee cannot work” he asserted.

The franchisor’s viewpoint

Doug Smart stresses that, “franchising is what we do,” highlighting once more KFC’s commitment to the franchise model. Implementation varies among countries but in South Africa, KFC have very few small operators (defined as those operating between 1 and 5 stores). Larger multi-unit franchisees, those operating 35 to 45 stores each, are the norm.

It is the franchisor’s responsibility to control who comes into the network and who stays in the network. KFC take this responsibility seriously. In Doug’s view, franchisees should be entrepreneurial but not too creative.

Having operational control over a growing number of stores while strictly following KFC’s blueprint must satisfy them.

KFC enters into franchise partnerships for the long haul and their franchise agreement reflects that. Franchises are granted for an initial period of 10 years linked to a conditional renewal clause that extends the partnership for a further 10 years. Doug subscribes to the thought that a franchise is similar to a marriage and readily admits that it is often more difficult to extract oneself from a franchise than it is to get a divorce. He also acknowledges that there is healthy tension in the relationship between franchisor and franchisees but that’s OK as long as the parties work together in the interest of the brand.

ãKurt Illetschko 2013. Published with permission.

Franchising Plus