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Why Flame-Grilled Chicken Franchise Galito’s Opened Up Shop Right Next To The Competition

How Louis Germishuys turned a simple idea into an international business with an annual turnover of R700 million by going head-to-head with the big boys. Here are five growth lessons from Galito’s.

GG van Rooyen

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Vital Stats

  • Player: Louis Germishuys
  • Position: Founder and CEO
  • Company: Galito’s
  • About: Galito’s is a South African flame-grilled chicken franchise that has opened more than 60 international stores over the last three years. Countries include the DRC, Mozambique, Malaysia, Pakistan, Mauritius, India, Sri Lanka, the UAE and Canada.
  • Turnover: R700 million
  • Visit: www.galitos.com

A few years after leaving school, Nelspruit native Louis Germishuys, founder and current CEO of Galito’s, was working as a load master for a South African airline (a load master oversees the loading and unloading of cargo, and is responsible for calculating the correct placement of a load on an airplane). He was living in Rosettenville and would often buy flame-grilled chicken from a local takeaway called Chickenland.

Related: With Only A $1 000 Loan Legendary Subway Founder Fred DeLuca Began A Business Empire

One day, Germishuys noticed that the chicken restaurant had changed its name — it was now called Nando’s Chickenland. And pretty soon, Nando’s outlets were popping up everywhere. 

1. Learn the ropes

“I immediately knew that I wanted to own a Nando’s franchise,” says Germishuys. “But I was encouraged to work at the company first. It meant that by the time I opened my own Nando’s in my home town of Nelspruit, I didn’t only understand the fast-food industry, but the business side of things as well.”

Things went well with Germishuys’s first store, and after a short while, he opened a second. Then the rug was pulled out from under him.

“Nando’s decided to go public, and therefore wanted to buy stores back from franchisees. I was offered the chance to work for Nando’s directly again, but it wasn’t for me. I wanted to own and operate my own thing.”

2. Embrace the competition

Germishuys’s association with Nando’s was coming to an end, but he had fallen in love with the flame-grilled chicken business, and he had some carefully developed ideas around what he’d do differently with his own brand. Freed from the limitations franchisees face, Germishuys opened his first Galito’s in Nelspruit — by design, right next to the Nando’s he had once owned.

“People said I was crazy,” recalls Germishuys. “They said I would be out of business in six months. How could I try to compete so directly with an established player?”

But there was method to Germishuys’s madness. He realised that hiding from the competition was not necessarily a good thing. Facing competitors head-on actually brought with it certain advantages.

“I knew that I didn’t have the marketing budget of many of the established fast food brands. But I could benefit from their marketing spend by positioning myself close to them. They would bring in the crowds – I just needed to be able to coax consumers my way once they got there.”

In 2008, OgilvyAction did a study on 14 000 consumers across 24 countries. They discovered what Germishuys already knew in his gut — that many buying decisions are made in the final moments before choosing a brand, product, or in this case, meal. It’s known as the last mile of marketing. The study found that 39% of shoppers decide brand choice instore, and that the decision is most frequently triggered by a product demo. Germishuys triggered this buyer psyche by targeting the senses of his potential customers.

“In the early days, I would actually put the grill outside and let the smell of the marinade lure people over,” says Germishuys. It was a smart, innovative way for an entrepreneur with a great product but smaller resources to compete with bigger players who had more extensive marketing budgets.

Related: Make Krispy Kreme Happen

galitos-chicken-franchise

3. Know your customer

The kind of bold approach that Germishuys employs with his competition requires something very specific: An excellent product.

“You need to know that your product is excellent — that it can compete with anything the competition has to offer. That’s why I never considered moving into a different industry. I knew that this was an area in which I could deliver an exceptional product. It’s important: You can’t compete effectively against strong and established competitors if you don’t have a good product. While you’re still building the strength of a brand and name recognition, you need to have that advantage.”

A lot of this comes down to knowing the customer and providing a predictable and satisfying experience.

“You need to know, and listen to your customer. You need to give them what they ask for. This can be tricky when it comes to fast food franchising, since you need to make sure that your offering remains consistent, regardless of the specific store. We manage this by making sure that our core offering — our chicken — is consistent, and then playing around with side dishes that a specific market might want,” says Germishuys.

4. Ensure consistency

How does one ensure consistency when operating in so many countries?

“You need to keep a close eye on the supply chain,” says Germishuys. “Our product is good because we use top-quality chicken, and because our marinade is made from all natural ingredients. This has to be the same everywhere in the world, so we approve all suppliers at a head office level. You can’t allow anyone to try and cut corners.

“At the same time, you need to be sensitive to the fact that franchisees can feel pressure, thanks to price hikes and inflation, so you need to help them buy better — to cut out the middleman, if possible — and to be aggressive with shrinkage. As an organisation, you also need to be willing to forfeit a bit of profit in order to ensure quality.”

5. Grow organically

Galito’s has expanded quickly over the last few years. In fact, the last three years have seen it expand into the DRC, Mozambique, Malaysia, Pakistan, Mauritius, India, Sri Lanka and the UAE. Importantly, though, it has not had a rigid expansion strategy as it has moved into foreign markets.

“What works in one scenario does not necessarily work in another. In Africa for instance, we have entered into a joint venture, while in others, we have granted master licences. It really depends on the specific situation.

“What is certain, however, is that you need local partners when going into foreign markets. You need someone who can help you understand local tastes and customs. Franchising requires a careful balancing act. You want to keep your product consistent, but still be mindful of local expectations,” says Germishuys.

Related: Starbucks Brings Baking To (Some Of) Its Stores

Key learnings

  • Embrace competition. You can benefit from strong opposition.
  • Know your customer and trust your product. Do you have a world-class experience?
  • It’s easy to sacrifice quality and consistency when scaling. How can you combat this?
  • Explore all growth options and opportunities. Don’t be too inflexible in your expansion planning. What avenues are available?

GG van Rooyen is the deputy editor for Entrepreneur Magazine South Africa. Follow him on Twitter.

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