Having R1.35m in unencumbered cash may get a prospective franchisee through the first stage of a Tasty Gallos application, but it does not guarantee a restaurant.
Tasty Gallos founder and CEO Muhammed Gutta. Image supplied
For founder and CEO Muhammed Gutta, the more important question is whether an applicant has what it takes to still be operating the business five years after opening.
The chicken franchise, founded in 2020, has made franchisee selection a key part of its expansion strategy, with Gutta assessing applicants on more than their ability to fund the investment.
He considers factors including business experience, additional income streams and whether an applicant intends to be actively involved in the restaurant.
“Anyone can sell you a restaurant, especially an established franchised business. I want to know whether you'll still be running it in five years, because that’s what makes the franchise sustainable, and that’s the only version of this model that will work for both of us,” he says.
Capital is only the starting point
The approach reflects a broader challenge in South Africa’s entrepreneurial environment.
According to the Global Entrepreneurship Monitor (GEM), early-stage entrepreneurial activity in South Africa increased from 11% of adults in 2023 to 15% in 2025. At the same time, established business ownership declined from 6% to 4%.
For franchisors, the gap between starting a business and sustaining one has direct implications for the health of a franchise network.
A failed outlet can affect more than the individual franchisee, potentially placing additional pressure on the franchisor, management resources and brand reputation while making future expansion more difficult.
With Tasty Gallos operating across multiple locations and continuing to expand, Gutta says the focus is therefore on building a durable network rather than simply increasing the number of stores.
“Selling another restaurant may grow the network on paper but placing it with the wrong operator can create problems for years. That puts more responsibility on us to make the right call at the beginning. We learnt that the hard way.”
Learning from franchisee experience
Gutta says the franchise's selection criteria have evolved since the business began.
Initially, the ability to fund the investment carried greater weight. Experience showed, however, that capital was not necessarily an indicator of whether an operator would successfully manage the business over the long term.
Some franchisees, he says, placed too much pressure on the business by expecting it to provide an income too soon, while others were not sufficiently involved in day-to-day operations.
“That changed the way we looked at franchise applications. Having the money tells me you can open the restaurant. But what matters is whether you can make the most of the opportunity once the doors are open.”
A particular consideration is whether an applicant needs the restaurant to generate an immediate personal income. Gutta says withdrawing too much money before the business is properly established can put pressure on working capital and limit its ability to absorb operational challenges.
An option for passive ownership
Active involvement is not the only route available.
For selected applicants who want to own a restaurant without managing it themselves, Tasty Gallos may, at its discretion, offer a separate management arrangement.
Under this model, Head Office manages the restaurant for a fixed monthly fee while the franchisee retains ownership.
The arrangement provides an option for passive ownership in certain circumstances while keeping operational oversight within the franchise structure.
Building the network beyond store numbers
For Gutta, the emphasis on franchisee selection ultimately comes down to aligning the interests of the operator and franchisor.
An additional franchise generates an upfront commercial return, but an unsuccessful outlet can create longer-term costs for both parties.
“Our business interests have to be aligned. I don't want someone to open a Tasty Gallos for six months or a year. I want them to build a business that is still successful years from now, because if they succeed, we succeed.”
