A local franchisee has leveraged the clout of one of the world’s most loved brands many times over and is now the owner of eight McDonald’s restaurants in Gauteng. He shares his recipe for success with Entrepreneur.
Entrepreneur | November 25, 2011
McDonald’s is probably the world’s most popular fast food brand. It all started when Ray Kroc, a milkshake mixer salesman, ventured to California in 1954 to visit McDonald’s hamburger stand, where he heard they were running eight mixers at once. Kroc was impressed by how rapidly customers were served and, seeing an opportunity to sell many more milkshake machines, encouraged brothers Dick and Mac McDonald to open a chain of their restaurants. Kroc became their business partner and opened the first McDonald’s in Des Plaines, Illinois in 1955. McDonald’s has since become an internationally-recognised symbol of quick-service hamburgers, fries, chicken, breakfast items, salads and milkshakes, serving 47 million customers a day. That’s what drew local entrepreneur and successful franchisee Ishmael Moloko (52) to the iconic golden arches.
“I wanted to own my own business, but I also wanted a partner because I did not have a lot of money,” he recalls. “McDonald’s is a tried and tested franchising company that’s been around since 1955 and is hugely successful in the more than 113 countries in which it operates. To minimise failure in the very competitive quick service restaurant industry you need a partner like that to succeed.”
But he was not always a business owner. Armed with a Bachelor of Commerce Honours degree from the University of South Africa (Unisa), he started his career as a human resources manager and then group industrial relations manager for Suncrush, a Durban-based Coca Cola bottling company later bought by ABI. He then went on to become general manager of National Sorghum Breweries in Springs.
Buying the first outlet
Moloko opened his first outlet in Springs, in December 1996. “I decided that I wanted to become an entrepreneur, even though it was such a daunting challenge, because I had developed a strong desire to have my little bit of money work for me rather than me continuing to work for my little bit of money,” Moloko recalls. “The more I thought about it, the more it seemed to me that doing it with a strong partner in the form of a franchise was the reasonable choice to make.”
Moloko financed his first McDonald’s outlet through the Industrial Development Corporation (IDC). “McDonald’s was in fact the first fast food franchise to be financed by the IDC as part of the organisation’s drive to promote SME development that also focuses on the black economic empowerment component.”
For the purchase of his first store, Moloko had the advantage of being able to participate in a joint venture partnership with McDonald’s. “I held a 30% stake until a later date when I was able to buy McDonald’s own stake and I become a full licensee some years later. At that time interest rates in South Africa were quite high and conventional banks were reluctant to give finance. Despite my work experience, a business plan backed by a successful franchisor and my educational background, I was still regarded as high risk. I could not have made the move to franchising without the JV.”
The Springs outlet started on a slow note. It took a long time to reach the projected sales figures; in the meantime high overheads were threatening the survival of the business. “As a franchisor and a reliable business partner, McDonald’s intervened. The Bruma Lake restaurant was franchised to me and this resulted in increased sales volumes which enabled me to cope with my overall business overheads.”
From those early days, Moloko has had a relationship with McDonald’s that is highly professional and mutually beneficial. It’s important to note that he himself is an active and vocal franchisee. “I currently serve as the chairman of the National Leadership Council, a consultative body of owner/operators that has a mandate to engage with McDonald’s on a range of issues affecting our businesses and the brand,” he says.
As a franchisor, McDonald’s seeks out people-oriented individuals who can get on well with others and are team players. Franchisees also need to be supportive of the global company’s broader national and worldwide initiatives. Naturally, good business acumen is a must. “You need to have the right work ethic and be able to embrace the same values and practices that have made McDonald’s the leading brand it is,” says Moloko. “That’s why you have to ensure, as a franchisee, that you truly believe in the system you buy into.
“In addition, you must have financial discipline, a belief in yourself and in the people surrounding you, an appetite for risk and the guts to do it. But at the same time, you also need to have the humility to acknowledge your shortcomings. Unlike other business owners, you have the support of a franchisor to help you overcome those.”
McDonald’s has systems in place that cover procurement and ordering, marketing, human resources and training, production and IT, all of which enable and assist the franchisee to run the business efficiently.
“Over the years, staff at all levels as well as fellow owner/operators and other stakeholders have come to embrace the same values espoused by the brand and this has created a great working environment where individual talent is allowed to thrive.”
Owning multiple franchise outlets
Subsequent outlets were opened across Johannesburg – Bruma in 1997, Highlands North in 1998, Eastgate in 1999, Louis Botha Avenue in 2001, Turffontein in 2004, Alberton in 2005 and Alexandra in 2009.
It’s one thing to successfully operate a single outlet to which you can devote all your time, skills and energy. But what are the challenges of owning and operating as many as eight restaurants? “This necessitates relying on others to achieve results. The need to recruit, develop and retain effective, talented and loyal people becomes critical. You also have to learn to delegate and hold people accountable. It’s at this level that your own time management skills make all the difference.”
How does Moloko spend an average day? “On a good working day, I start with some physical exercise early in the morning. During the day, I am required to do a multitude of tasks. I interact with employees; communicate with head office support staff, suppliers, and fellow owner/operators; and I talk to customers and community members in my trading areas and beyond. It’s important to know the community you serve.”
The question of staff training is key to the successful operation of any business, but even more so in the franchised environment where adherence to the tried and tested formula is crucial. McDonald’s is renowned for its training throughout the world. South African crew members receive comprehensive training in restaurants across the country. The company has trained and employed over 6 000 South Africans at various levels, including franchisees, restaurant managers and crew.
“McDonald’s is a people’s company serving hamburgers more than it is a hamburger company hiring people,” says Moloko. “Training and development is an ongoing activity. It is because of these trained and motivated people that so many of our customers keep coming back and the brand gets stronger by the day.”
He says staff management is a breeze when the right people are hired and trained. “Once you have employed the right person for the business, the effort that goes into training that person, combined with the working environment we have created for our employees, results in the best outcome.
An individual with the correct work ethics and some ambition soon realises that working for McDonald’s is fun. But more than that, their individual talent is recognised within a reasonable timeframe, so career development is always possible and encouraged.”
Key success factors
Moloko attributes his achievements to a burning desire to succeed, solid support from his wife and family, and a certain level of serendipity. “I found myself in the right environment surrounded by the right people at the right time,” he says.
Like most successful business owners, he advises aspiring and new franchisees to save money, no matter how little at a time. “Whatever the amount, you are going to need it to get your business going,” he says.
Moloko also makes an important point about learning, and one which may often be overlooked in the relentless pursuit of business opportunities. “Learn as much as you can when you are given the chance. You will need that knowledge to run a successful business.”
For his own part, he plans to keep on pursuing his dream and to create more and more opportunities for himself and others by continuing to leverage the McDonald’s brand. “It’s a matter of planning and guts,” he says.
A snapshot of McDonald’s in South Africa
- McDonald’s opened its first restaurant in South Africa in November 1995. Today, it operates 132 restaurants in Gauteng, Western Cape, Eastern Cape, KwaZulu-Natal, Mpumalanga, Free State, Limpopo, North West and Northern Cape.
- More than 97% of all food served in McDonald’s restaurants is produced by local South African suppliers to the brand’s highest quality standards.
- South Africa is one of the most successful markets in McDonald’s international history. A record was set when 30 restaurants were opened in just 23 months; at one stage, 10 restaurants were launched in 78 days.
- The company has trained and employed more than 6 000 South Africans, including franchisees, restaurant managers and crew.