Is Nightlife Losing Its Appeal?

With the variety and number of night clubs and bars around the country, all themed uniquely, anyone who wants to own such a franchise has to be tough enough to compete rigorously. This is an area where even franchises face a stiff fight with privately-owned night clubs and bars.

Innovation and reputation

Ryan Pellatt, operations executive at Fournews, which owns a variety of franchising brands, including popular night-clubbing destination News Café, says innovation is key to staying ahead in this business.

“When it comes to night clubs and bar franchises, there’s not a lot of us, but we are certainly holding our own. News Café is in a position to open more stores than it is closing, and we see a similar trend when we look at our direct competitors. I think maybe the frequency at which we open more stores may have slowed just a little bit.”

According to Pellat, attending night clubs and bars is a status-driven occasion for the consumer, “so you’ve got to make sure that you are talking to your customer and that you are relevant to your customer; and the way to do that is by being innovative and ahead of the curve”.

To illustrate his point, he explains how the News Café, originally a high street café, has evolved to become one of the most popular city night clubs. As an innovative step and to ensure it stays ahead of trends and the competition, the company is in the process of launching an entirely new cocktail menu, “something that isn’t a traditional News Café”, Pellat says.

He says that making money in either a franchise or a privately-owned establishment almost entirely depends on who owns it, although he admits that little to no room is given to franchise owners due to brand uniformity and reputation.

A worthwhile business venture?

With such intense competition, one may wonder if it’s even worth it to risk venturing into this business and, if so, whether to take the franchise route, or run it privately. Many franchise owners agree  that a franchise is much easier to establish than a start-up business because of all the support and the brand recognition.

Saul Mervis, co-owner of the popular Grillhouses and Katzy’s Kitchen Grill in Johannesburg, explains why franchising hasn’t worked for them. “Typically (but not always), the type of person looking to get involved in a franchise for the first time has slightly limited resources and often requires the plug-and play infrastructure where all the systems are already in place. We have never managed to find the correct person to partner with us in an out-of-town site. We are also proud of the uniqueness of our brand and would prefer to protect it by not rolling out the concept.”

Where is the money to be made?

From a business perspective, and in terms of which stands to make more money, Mervis believes that both a franchise and an owner-operated restaurant, night club or bar, have their pros and cons. “Franchise businesses generally have lower set-up costs and involve less risk. This is because all the hard work has already been done in terms of the correct construction team, research and development, the ability to investigate track records, and, over time, all the problems have been ironed out.”

Mervis says the most important decision is often purely location. “The downside, however, is that this experience and expertise comes at a cost. There is an upfront joining fee, and usually between five to eight per cent of turnover is paid over immediately to the franchise company — no matter how busy or quiet you may be.

”In the end, it boils down to personal choice, the concept and the individual’s personality. I have seen great owner-operated businesses thrive, as well as fail, and the same can be said about some of the most tried and tested franchises,” he concludes.