Famous Brands will invest R1.2 million in the business to re-engineer and enhance the existing intellectual property and cover operational costs for the first two years. Of major importance is the product's flame grilled positioning - a category within the chicken market that is showing strong growth.
Famous Brands CEO Kevin Hedderwick said filling the gap in the group's brand portfolio with a mainstream chicken offering has been a major priority for many years, however, the barriers to entry in this category are high and the market is one dominated by three major existing players, two of which compete in the deep fried category, and the other flame grilled.
"The Giramundo transaction ticks all the boxes in terms of our acquisition criteria and Group strategy. Key to the acquisition is the low cost of entry and limited associated risks," he said.
"In addition, the product itself has performed brilliantly in our market research in terms of presentation and taste. Flame grilled product has gained wide acclaim as a healthy alternative to deep fried chicken."
The Giramundo business, which was started by husband and wife team, Buti and Maki Van der Merwe in Alexandra in 2007, currently comprises a retail outlet situated in Bramley, three container outlets in Alexandra, Thembisa and Soweto, and a production facility also situated in Bramley. The business currently employs around 40 people.
The operation produces a range of chicken on the bone and boneless options, including chicken burgers and chicken livers, prepared with Giramundo's unique peri peri sauce.
In terms of the agreement, Famous Brands will acquire a 51% controlling stake in the newly constituted business. Buti Van der Merwe will be retained as a consultant to collaborate on refining and improving the intellectual property that he has developed since launching the brand. The group will also take on the manufacturing and distribution operations currently conducted at Giramundo's Bramley facility.
From the outset, Giramundo will have full access to Famous Brands' comprehensive business model which includes franchising expertise, manufacturing, distribution and logistics infrastructure, new business development assistance and an immediate route to market.
Hedderwick noted that the group has already identified sites and franchisees for two new outlets in Kokstad and Nelspruit, which should commence trading by November 2010.
Significantly, in addition to the potential presented by a network of new Giramundo stores, is the opportunity to roll out this brand to the group's existing 1 500 South African franchisees as well as its petroleum partners.
The business model will be based on stand-alone restaurants, and where existing franchisees might have excess retail floor space, a "clip-on" trading format can be installed.
"Our vision is to make Giramundo's a serious contender in the mainstream chicken category. With this transaction we believe that we have the opportunity to take a very appealing product and develop it further to become a strong challenger brand within the flame grilled peri peri chicken market in South Africa," said Hedderwick.
Giramundo founder, Buti Van der Merwe says, "Giramundo means 'around the world' and that is my ambition for this business, my biggest dream is to achieve Giramundo's true growth potential.
"By partnering with Famous Brands I know that we can do that. Their expertise and achievements in the food services industry is incomparable."
Hedderwick noted: "A joint venture has a lot of advantage for us in that we retain the original skills set and gain valuable insight into this market. It is also Famous Brands' first real BEE project in terms of franchising and franchised brands."
Famous Brands' portfolio includes Steers, Wimpy, Debonairs Pizza, FishAways, Mugg & Bean, tashas, House of Coffees, Brazilian Cafe and Blacksteer.
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