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The Naked truth about the franchise

The first outlet is in Westlands and they plan to have three outlets in Nairobi before the end of the year.

Fast food franchises in Kenya
Ritesh Doshi, co-owner of the Nairobi franchise of Naked Pizza

KFC - America Galitos - South Africa Chicken Inn - South Africa Steers - South Africa

BY AAMERA JIWAJI

I

t isn’t a pizza base without toppings. Nor do you have to be naked to eat one. But Naked Pizza does require some introduction to the Kenyan market. Started as an international pizza franchise in New Orleans, Naked Pizza is developed on the idea that people want to eat healthy but are not willing to sacrifice affordability, convenience or taste to do so. So it is an all natural, reduced calorie, probiotic pizza that incorporates ten grains into its base and uses fewer processed ingredients and nothing artificial. But like an ordinary pizza, it is round, comes in a square box and the business model is fundamentally unchanged. What is different however is that the stereo| Nairobi Business Monthly February

type of a pizza as a high calorie product that promotes lifestyle diseases has been tweaked. And Naked Pizza isn’t the first company to embrace such a concept. It is one in a long line of international businesses responding to an increasing consumer consciousness that questions how and and under what conditions a product is made - whether it relates to child labour in an Asian country, the use of fair trade in procuring coffee beans, or as in the case of Naked Pizza, the health implications of a particular ingredient. The other thing that is different about Naked Pizza as an international brand is that while the fast food business model (carry out and delivery, or dining with no delivery) is unchanged, Naked Pizza was the first to receive international acclaim for its flexibility when entering new

markets. When it opened its first international location in Dubai, it was under the name N_K_D Pizza, out of respect for the culture, acknowledging that for a franchise to succeed in a local market it may need to change its products or services, adjust how it advertises, make adaptations to the equipment it uses or even change the name of its business. And so its arrival in a country where numerous international franchises have imposed a globally successful business model only to find that it does not work, sets it apart from other brands. Established burger franchise McDonalds embraced the same flexibility in naming practice last month when it rebranded its Australian outlets to Macca’s, the nickname that the locals

referred to it by. The journey of Naked Pizza’s arrival in Kenya did not require any adjustments to its brand name but local franchise owners Ritesh Doshi and his wife Sapna Shah have started tweaking the international product to better suit the needs of the local market, without compromising on the brand promise. “People here across racial, religious, income spectrum love chillies so we’re selling a lot of chillies whereas in the US and Dubai, chillies are charged as a separate topping,” said Ritesh. For the Nairobi couple, both of whom come from a strong financial background (Ritesh trained and worked with HSBC as an investment banker and Sapna is a portfolio manager for the private equity Ackerman fund), this is their first venture into business. “I have been looking for an opportunity to do something on my own,” said Ritesh. “Having been away from Kenya for the last 12 years, having seen the change in consumer trends and what is going on in the economy, my wife and I said: Do we want to watch this from the outside or do we want to be part of the development of the economy at home?” The answer was clear, and so while still working abroad, they started looking at opportunities

in the food space. Some international franchises were not interested in the African market; the economics of others didn’t make sense to Ritesh and Sapna but in May 2011, they came across the Naked Pizza brand. Some research and a phone call later, Ritesh spoke to one of the founders and outlined his idea. “I told him that I want to do this in Kenya. And I said in Africa most people want to start in Johannesburg or Cape Town or Lagos, but if we’re going to do this it’s got to be in Kenya because Kenya is at the cutting edge of the food scene and the technology scene.” His pitch was a success, and in August 2011, when he and his wife conducted a recce of the Nairobi food scene and found a gap that Naked Pizza could fill, the decision was made. “There are a lot of good brands here, but if I am sitting at home watching TV there is no offering in the market that would appeal to a consumer such as myself. And I am a typical Kenyan consumer. A middle class consumer that wants convenience, a cool brand, and who is health conscious. Not an old, tired brand that doesn’t change with consumer dynamics.” That September, they finalised discussions and two months later, Ritesh and Sapna secured the franchise rights for Naked Pizza in East and

central Africa with an informal understanding for the rest of Africa. In mid November 2012, they opened their first outlet in Nairobi in Westlands and plan to open two more by the end of 2013. The total expected investment for the three stores was over $1 million with the first Westlands outlet - serving as a central dough production area - requiring the highest share. While the strong emphasis on quality and all natural ingredients makes Naked Pizza marginally more expensive than other pizza in Kenya’s fast food space, Ritesh says price will not be a determining factor in securing a customer base - indicating a move towards a more discerning and socially mature Kenyan consumer who places service and quality above price. The pizza delivery business globally is built on residential business, and this is also true for Naked Pizza Kenya. For the outlet to work, it needs access to 55,000 residential households within a 50 minute delivery radius, hence the selection of Westlands - an area that has developed a reputation for being the food district of the capital. The growing commercial influence of Westlands also serves as a hub to various affluent residential neigbourhoods. With opening hours from 11 am to 11 pm, Naked Pizza targets the residential crowd, people who want a pizza dinner before a night of clubbing, and even busy professionals who return home late. In accordance with the international franchise model, the franchisee is 100% responsible for local investments and pays the franchisor between 4% to 12% of its annual revenue as a fee for using the brand and any inputs. “We’re paying for the know-how in terms of the pizza business, but we are also paying for the recipes and continued marketing, management and training support,” said Ritesh and with Naked Pizza having developed an all natural pizza base made of ten different oats and grains, which took six years to formulate, he and Sapna considered it a worthwhile business agreement. The Kenyan franchise is 100% local with him and his wife owning 85% of the business, and the remaining 15% being controlled by family members who are strategic investors from the Kenyan food industry. Two months down the line, the response from the market has been encouraging and through a marketing campaign based on social media and word of mouth, Naked Pizza Kenya has built a strong customer base among Nairobi’s young middle class consumers.
February Nairobi Business Monthly |

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