Knutsford Boulevard LOCAL FAST food outfits such as Island Grill, Tastee and Mother's appear to be holding their own during the current economic malaise, although several of their more illustrious international competitors are finding the going tough.
Despite the backing of sophisticated corporations and internationally recognised branding, McDonald's, Wendy's, Taco Bell and Kenny Rodgers are all thought to be re-evaluating their strategies for Jamaica.
One of the main reasons franchise operators with big international names are finding the going tough locally is the terms they agree to with the parent operations. Most franchisees have to pay royalties based on monthly sales and must pay added royalties for every new store opened based on the size of the new outlet. There are also strict quality standards and supplier terms which limit the flexibility in competing with rivals.
Exporter Beverley Lopez, who controls the smallest of the major franchise operations Taco Bell, said she thought future growth in the fast food sector would be more hard to come by. "I think elasticity in the market has finished. I don't see how it can expand further".
She said: "Its all about cost containment now". She said areas such as food wastage and the hours worked by staff were coming under increasing scrutiny as the market remained tight.
Mrs Lopez said she had spoken to more experienced Taco Bell franchise operators, who said it had taken as long as seven years to get the right balance and profitable mix. Mrs Lopez said she did not have seven years and was still working for the right mix. "We are still educating consumers about our product. Introducing jerk chicken had helped", she said.
The fight for scare consumer dollars has led even the biggest to look again at operations.
Last week it was revealed that McDonald's has pulled in its aggressive expansion plans. Already the home of the Big Mac and the world's leading hamburger seller has decided to put in place a "value strategy" plan that sees cost reductions on its menu with the hope of enticing customers in droves.
McDonald's has introduced daily special offers at its Knutsford Boulevard location, cutting the price of a burger to as little as $25.
The move has clearly raised eyebrows in the fast food world. One competitor on Knutsford Boulevard complained: "McDonald's is seeking a short term solution in an effort to continue with its expansion plan, which for now is futile in Jamaica, particularly with the stores in relatively close proximity to each other - in the business we call that cannibalisation."
"If you offer hamburgers at $25 and chicken in a box for $30 a piece, then sure the customers will come but when you return to your original prices they all desert you because they begin to get comfortable with that price and are unwilling to pay more. You see, the consumer gets used to the discount particularly if it endures for some time.
While many of the foreign fast food operators appear to be searching for the right mix, more established Jamaican players are moving from strength to strength.. Island Grill is all set to expand its operations both in the United States and in Britain in what its boss Thalia Lyn is calling "reverse colonisation."
Its first US restaurant will be located in Lauderdale Lakes, Florida with a further seven slated to come on stream by 2004/2005. Each store is projected to cost around US$400,000. Island Grill hopes to generate sales in the first year of operations of more than US$1 million, with sales of approximately US$15 million by 2005.
Back in August Island Grill opened a store in Montego Bay with a further five local stores expected to be launched over the next five years. Island Grill's financial controller Albert Bailey observed: "Many of the international fast food chains have added costs such as franchise fees and they all have to make contributions to co-operative advertising which when factored into the present equation makes things difficult. Also many take instructions from abroad so they give up a certain degree of flexibility."
One local food player was forthright, declaring "Burger King was the first international burger franchise in Jamaica and it is doing well with a low key approach, so to is KFC. Beyond those two, who enjoy a certain comfort level in Jamaica, we are not that interested. We are not like Europeans, who will try most things, we know what we like .
By Al Edwards
Staff reporter
