Belayab Foods and Franchises gets into a franchise agreement with Yum! Restaurants International Inc. to bring Pizza Huts to Addis Abeba. The agreement makes Pizza Huts the third internationally franchised restaurant in the country.
The contract between the two parties was signed last Monday, but it was announced on the next day on April 25, 2017, at Golden Tulip hotel, in the presence of representatives from Yum! International and Belayab. Fortune got the chance to review the franchise agreement that the two companies had signed.
To start with, the American food chain, Pizza Huts will be opened at three locations in the city, at Old Air Port, Bole and CMC areas. Belayab will invest 5.5 million dollars to open the restaurants. The Pizza Huts, which will be located in Old Airport, will be designated to the Muslim community and named Halal Pizza Huts.
“All of these three pizzerias will be operational by November 2017 as we are currently negotiating with building owners to rent outlets and we expect to finalise it in three weeks time,” said Michael Ghebru, shareholder and senior advisor of BelayAb.
It is expected to open job opportunities for 105 individuals. But when it expands its chain outlets to 10 in the coming three years, it will create job opportunities for 285 permanent and 125 non-permanent people.
Ewan Davenport, general manager of Pizza Huts Africa, relates the opening of the chain in Addis Abeba, with the expansion of the brand in Africa. The franchise came to Africa for the first time in September 2014, even though it was established 59 years ago.
The negotiation took a year, and the company has been communicating with the company on its own, according to Aschalew Belay, a businessman who is based in Beijing and the operates business in Ethiopia namely Golden Tulip Hotel, Belayab Motors, Belayab Cables and KIA Motors.
“We were not the only company which was negotiating with the Yum! Brand, other companies has been dealing with them, and luckily we were selected to work with them,” Aschalew told Fortune.
From the total investment, half of it was spent on the construction of the storage facility, which is located in Lebu on 2,400sqm of land out of the total area of 3,400sqm, according to Michael.
According to the deal between the two parties, Belayab will pay an annual royalty, training and inspections fees for the brand from the total revenue it earns. In addition to that, the company will source the ingredients from Yum! Brands.
“After reaching to 10 outlets we have an agreement with Pizza Huts to re-franchise the name for another company,” Michael told Fortune.
The two companies signed the franchise agreement for 20 years, which will be renewed by the end of the first 10 years.
“We choose to partner with Pizza Huts due to its high annual turnover,” said Michael.
Last year, Pizza Huts collected annual turnover of eight billion dollars from its 18,000 operational outlets operating in 115 countries.
The entrance of this restaurant in the country has three advantages, including bringing trust from the international community in the country, introducing a new trend to the local market and the know-how transfer brought to the country, according to a hospitality consultant with over a decade of experience.
But he believes that bringing such kinds of restaurants to the country might be luxurious as an enormous amount of foreign currency will be spent to import the food stuff.
“This means, even if the customers are paying in local currency the cost of the meal will be calculated equivalent with foreign currency,” said this expert.
But the company claims that they will source 20pc of the ingredients locally and will work on increasing the share of locally sourced ingredients in the meantime, according to Michael.
Even though the company already signed the deal with Pizza Huts, it did not get approval from the national bank to open an account to pay royalty and other fees to the foreign company.
“Once we signed the franchise agreement, our next step will be approaching the central bank to open an account for the foreigner company to transfer the payments in foreign currency,” Aschalew told Fortune.
“For now a chef will come from New Zealand, but gradually we will train the local chefs,” said Michael.
In addition to Pizza Huts, the company owns well-recognized brands including KFC and Taco Bell.
Recently, Spur Steak Ranches, a franchise restaurant originating from South Africa, opened in Addis Abeba after a franchise agreement between Spur Corporations and Cucina Trading Plc. Besides Spur, there is also another a South African brand named Debonairs Pizza which is another South African franchise restaurant in Addis.
Currently, there is a local brand operating under the name of Pizza Huts around the Hayahulet area. But the owners of the new Pizza Huts claims that they will not do anything with this business unless the international brand company makes claims for its brand.
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