Franchise chain not so tasty
INVESTMENT: CHALLENGES, LOSSES ➽ High supply prices, portion miscalculations, leave franchisees out of pocket.
Chicken fast-food chain Tasty Gallos has left many of its franchisees with a bitter aftertaste while others are apparently still struggling to survive.
Several entrepreneurs, some who have invested their life savings into a store, had to shut shop after only a few weeks of trading.
Former franchisee Thandiwe Gamedze told The Citizen she lost all her savings in a failed Bloemfontein franchise, while another said his store struggles to break even.
In a Carte Blanche expose a fortnight ago, two other two cases of former franchisees, now empty-handed, shared their horror stories after dealing with Tasty Gallos franchisor Muhammed Gutta.
Neither 22-year-old Gutta, nor Tasty Gallos, responded to questions from The Citizen.
There were challenges from the get-go, said Gamedze, who is planning legal action against Gutta and Tasty Gallos.
Gamedze said problems included portion miscalculations that resulted in substantial financial losses. “Chip portions were sold at prescribed weight, but Tasty Gallos set down these sizes at uncooked weights and, given that food loses weight during preparation, the difference between the two eroded our margin.”
While it was only about a 2% difference, it became significant on volume and she consequently incurred losses.
The Bloemfontein outlet lasted five months. “It was impossible to make money when we were being charged a small fortune for critical stock items, like sauces and high prices for chicken, our staple menu item along with chips, from approved suppliers,” said Gamedze.
Ironically, said a current franchisee, Tasty Gallos on occasion takes over failed stores as many franchisees have been unable to sustain their businesses. “Right now, the many stores are head office-owned, mainly for that reason.”
The franchisee also said it was difficult to make money, let alone achieve profitability. There were significant supply chain challenges and input costs were at times exorbitant and well beyond market-related.
Tasty Gallos sold what some former franchisees believed to be caterer grade, or lower grade, sauces at about R550 per bottle to stores, with a R200 delivery charge. The franchisee confirmed that the price was reduced recently after store owners rebelled.
“It may have been reduced to R365 a bottle, but is still priced at a premium, compared to what you can buy over the counter at a grocery store.”
Tasty Gallos operating manuals were also allegedly, in the words of the franchisee, “cut and paste jobs” of competing brand Mochachos. Gamedze confirmed that she also received Mochachos branded manuals. In the Carte Blanche insert, former franchisees said the same. Gutta denied the manual was plagiarised.