Mailbox: How I bought a BK ‘franchise’ in SA. Investing more than a piece of paper.

Biznews community member Ross Malt is on an educational drive. His idea is to encourage people to look at investing as more than just a piece of paper. This time he bought a stake in Grand Parade Investments, which owns the majority stake of the Burger King franchise in South Africa, and the group has just signed the Dunkin’ Donuts and Baskin-Robbins brands. Malt’s passion is to make people think like business owners, as a good business is worth keeping for the long term, irrespective of short term price movements. – Stuart Lowman

By Ross Malt*

If you could buy any franchise in South Africa, which one would it be? Listening to people one often hears that “KFC is a goldmine”, but you cant buy them anymore in SA. They also say McDonald’s would be good, but they do not have the R5m plus to buy a franchise, if you can. Well in my view a Burger King franchise will in time be just as good as these. The only problem is that they are not for sale in SA, not yet anyway, and when they are you are probably looking at not less than R5m.

Burger_King_Leicester_Square

The solution, a share of Grand Parade Investments (GPI). GPI owns 91.1% of Burger King in SA, so as a shareholder you effectively are the master franchisor, you get a bit of the profit from each and every store (close to 60 at last count). GPI expects Burger King to be profitable by the 2016 year-end after making initial losses in the start up phase. Being a part owner of all the stores also diversifies your risk from owning one store.

Buying a share of GPI also gives you a share of GrandWest casino and its LPM slots business. GrandWest casino will be the subject of another article, but lets just say for now the cash flows from these assets are busy expanding your Burger King empire as we speak, or about to come your way as a dividend.

Of course in the last few weeks it has been announced that GPI has the rights to Dunkin Donuts and Baskin-Robbins in SA, so as a GPI shareholder your empire is growing. GPI also has a 10% stake in restaurant group Spur, so whenever you tuck into a Spur burger or a Panarottis pizza, you are adding to GPI’s profit.

To me, investing in shares should not be complicated, i do not want to study actuarial tables to try and understand the balance sheet of an insurance company, or guess how much platinum the Chinese will want in 2020 before investing in a mining share. It amazes me though that so many people will see the queues at Burger King, the popularity of Spur since 1967, and never think how they could get a piece of the action. You should do your own homework, but i believe that in GPI you are buying quality assets, in a business that is easy to understand, at a price that currently looks attractive. My passion is to make people understand that as a shareholder, you are the owner of these businesses.

So maybe this should be the year you finally start your own business, perhaps a few food franchises would not be a bad place to start?

  • Ross Malt has a Bcomm from the University of Cape Town and has been a full time investor for two years. He won the JSE Investment challenge in 2014 where he turned R1 million into R2.2 million in three months.
  • Not a recommendation to buy, small caps are risky. More a way to think about shares. I currently own shares in Grand Parade Investments.
Visited 203 times, 1 visit(s) today