McDonald’s entry signal caps big year for fast food chains

News that global fast food giant McDonald’s could be eyeing entry into Kenya capped a year when nearly half a dozen internationally renowned convenient food stores opened shop in Nairobi.

Attracted by the rising number of cash-rich consumers, the fast-food chains set up shop in a year when the rebasing of Kenya’s GDP confirmed its status as a middle-income economy.

In the past six months, US-based Cold Stone Creamery and Domino’s Pizza, as well South Africa’s Ocean Basket — a sea food diner — debuted in the Kenyan market.

KFC and Subway have been on an expansion mode with the former opening Kenya’s first drive-in outlet.

Local outfits including Java House and Artcaffe have been stepping hard on the expansion pedal as well.

Java House is looking to invest between Sh344 million ($4 million) and Sh430 million ($5 million) in new outlets, said managing director Kevin Ashley in an earlier interview with the Business Daily.

In 2014, the coffee house opened new branches Nairobi and Kisumu bringing the total number of Java restaurants across the country to 23.

The company saw its footprint in East Africa expand with a new outlet in Kampala. About two years ago, American private equity firm Emerging Capital Partners (ECP) bought a majority stake in Java, injecting fresh capital to drive expansion. In January Artcaffe acquired Dormans Coffee shop, a move that saw it increase its outlets across Nairobi

It opened a new branch in Westlands at The Oval. The Dormans deal came after US-based private equity firm ECP bought a 90 per cent stake in Nairobi Java House, illustrating investors’ appetite for coffee shops.

READ: KFC opens Nairobi's first drive-through food outlet

Artcaffe opened the re-branded Dormans outlets at Wilson Airport, Junction Mall and the Village Market. “There are immense opportunities. We want to be as competitive as possible,” said Artcaffe marketing and communications manager Njeri Kariuki in an interview with the Business Daily.

Other eateries, including Avanti Group of Restaurants, are also fighting for a share of the pie. Avanti, which took over the Books First restaurants, has eight branches across the country and is set to open two more.

American fast food chain Domino’s Pizza and ice cream seller Cold Stone Creamery will open 16 franchised outlets in Kenya in the next two years.

Local franchise holder for the two brands, Om Nom Nom, says the outlets will be located in areas mainly frequented by middle-class shoppers. They will be launched at an estimated cost of Sh445 million.

“We are planning to open at least eight Domino’s Pizza and 10 Cold Stone outlets in the next 24 months in Nairobi where our focus will remain over that period,” Mr Andre told the Business Daily in a telephone interview.

Kuku Foods- franchise holder for KFC in Kenya- plans to open an additional 10 KFC stores in the next two years. The demand for fast food, according to KFC Kenya managing director Justin Melvin is driven by the Kenyan consumers’ tastes catching up with the rest of the world.

This follows the opening of the first drive through in the country by the chain. In a week, the outlet was grossed more than its Galleria and Junction branches, said Mr Melvin.

Coffee shops, restaurants and fastfood outlets have been on an expansion and capital raising plans in the race to tap Kenya’s emerging eating out culture mainly fuelled by an expanding middle class with higher disposable incomes to spend.

Increased activity in this segment of the market has also coincided with the rise in construction of new malls in Nairobi offering retailers a concentration of well-heeled shoppers.

Other brands like McDonald’s and Burger King are on an expansion plan in the continent, eying the different markets for growth. The former is open for applications for a franchise in the country.