A Quick Guide & Market Survey of The Chips & Chicken Business
By Crack A Business Kenya
This quick guide refers to the business of Chips and Chicken café found in urban centers and urban estates. Though touching on a little of everything the quick guide will be biased towards chips (or fries) which is the main serving. Though not entirely focusing on Nairobi, in some sections it’s biased towards the city. Most of the information to do with licenses, equipment, Revenue and operations are applicable in any urban center.
In the last 10 or so years there have been a lot of public and private conversations about healthy eating which tended to discourage consumption of junk of which chips are considered to be. However with the increasing urban population, a young and more liberal population, expanding colleges and office spaces, the consumption of chips has not dramatically decreased as predicted, rather it has increase going by the resurgence of chips cafes and the revenues.
Consumption of chips and chicken is not necessarily driven by an increase in consumer’s income but a shift towards spending more on leisure and social activities. That’s why to some extent the business has been immune to the rising inflation, which has been on an upward trend since April and hitting 8.6% in August 2014. Despite the high inflation rate which has reduced the disposable income the target market of urban chips and chicken cafes, the middle class in all its definition, still flock the fast foods. The bigger the urban center the more resilient and profitable a fast food café will be, keeping everything constant.
The fact that ‘ junk food ‘ multinationals like KFC and Subway are making significant investments in the local market through franchises and even establishing in relatively mass market areas like Kenyatta Avenue is a positive indicator on the viability of business. The Kenchic fast food franchise has also been expanding in the last 2 years, again another positive indicator.
Between 2007 and 2010 quite a number of chips and chicken operating in Nairobi CBD were closed down the main reasons being change of user after the buildings from where they operated were purchased and converted to exhibition halls or 3 star hotels. For instance, along Luthuli Avenue there were about 5 cafes which were closed. But since 2011 or so the fast food cafes have managed to curve their space back in the city. To illustrate between May and August 2014
3 fast food cafes have been opened within a 20 meters radius from Tea Room, at the junction of Accra and Rive Road. The most recent being a Kenchic run by the proprietor of several other fast foods in the city.
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Even though at the bigger level the prospects of the business are rosy, the success of an individual fast food café will depend on local conditions, which include location, management, quality, service and marketing. This will become clear below.
- Looking at publicly available data about 76% of the chips cafes advertised for sale between March and July 2014 were located in Nairobi County estates and other counties. Relocation and other commitments are the classical reasons for selling. However due diligence revealed that mismanagement, lack of proper positioning in the market, poor location were the major reasons for closing. Mismanagement was especially a big problem where the owner was not present personally or with trusted employees or a manager.
Classification of Chips and Chicken
Chips cafeterias can be grouped into 5 broad categories:
- Purely Take Away Cafeterias – Here customers don’t eat on premises, which is usually a very small space. Rather they purchase for consumption elsewhere.
Purely take away fast foods thrive in estates, near bus stations, or office blocks located away from shopping centers. They also thrive in urban sections where there are student populations or office blocks with no alternatives for quick affordable food and snacks within a short radius.
- Standing – no seats – Cafeteria – Here customers can purchase chips and eat on premises, but there are no seats, not even stools, so customers eat standing, placing their chips on fixed benches. Usually this is to maximize space. Since customers are standing they can’t hang around more than necessary.
Some of these kinds of cafeteria charge lower prices as compared to those with seats. Others charge same or higher prices as other cafeterias with seats this depends on their location, competition in the area and if they have a superior offering. Some in this category will have a section with a few stools and another without.
- Bar Stools Fast Food Cafeterias – These have stools for seats but with no proper tables and in their stead they have benches fixed to the walls or in the middle of the room. These can be grouped into classy cafes like Kenchic with mirrors, fans, an extended
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menu, drinking water and the bare knuckles cafeterias with not much interior work simple chairs, basic menus and with only a standard level of cleanliness.
- Chairs and Tables Cafeteria – These have proper tables and chairs. Customers sit and have their chips. Such cafeterias often charge a premium for that.
- Hotels With Chips as part of an Extended Menu –These are not traditional chips and chicken cafeterias but they serve a whole range of foods and includes chips as part of the many accompaniments like ugali, rice and chapatti.
This guide is biased towards the first 3 types of cafes. The last kind has so many other attributes affecting that it requires a separate guide.
The kind of cafeteria you decide to start will depend on your capital, location and target market. Of course a take away and standing cafeteria will require less capital. On the other hand they may not work where consumers have relatively high income and looking for a richer eating experience.
Nairobi CBD has a big and diverse population to support all kinds of chips cafeterias. You should always look at your location, capital and tastes of most consumers around and use that to decide the best kind of cafeteria to maximize the returns. For instance if setting up at Mama Ngina Street a stool or take away cafeteria rather than a standing cafe would be more attractive. Also look at your competition. If everyone around is doing Standing cafeteria then there could be an opportunity for a stool cafeteria and vice versa.
In estates or where the population is not so diverse then it’s prudent to take your time and decide the best fit. There are cafeterias which have failed by being too classy in a neighborhood without enough population who appreciate ‘class’. Class does not necessarily mean expensive food but how comfortable a customer feels in that setting. When in doubt go for a basic, clean friendly fast food with a few bar stools.
County Business Permit – Ranges between Kshs.7000 and Kshs.40, 000 depending on county, size of premises and the location within the county. Licenses are more expensive in Nairobi. Have a budget of at least Kshs.15, 000 for a county license. The county license can take between 2 weeks and 2 months to acquire.
Health License – This is issued by public officers in the area to make sure the premises are okay for handling food. Among the check list is availability of water, a sink, and condition of floors, painted walls, chimney and generally a clean.
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In some areas the public health officials will insist on the basics and with some monetary conditions turn a blind eye on any thing that you have not fulfilled. The license averages Kshs.3000. Before you invite the health officials for inspection make sure the premises are well painted, the floors well covered, there is adequate water and the drainage is good.
Different counties could have some ‘lesser’ licenses associated with the health license but which cost less than Kshs.1000.
Medical Certificate – Everyone handling food for public consumption is required to have a medical certificate to make sure they don’t have any communicable diseases which can be spread to customers. These are acquired at the individual level and cost an average of Kshs. 1500. The staff could get the medical certificates for themselves since they can use them even after leaving your premises. This can be acquired from a clinic or the local government hospital/ clinic after some tests or bribes.
Fire License – This shows that you are well prepared incase of a fire. You get this from the council’s fire department. In Nairobi this is at Fire Station. Make sure you have a certified fire extinguisher before you apply. The license averages Kshs. 1500 but varies from county to county.
From the above you note that you apply for the licenses after setting up everything or when you are almost done.
Other Regulatory Bodies
These are not licenses per se but regulatory bodies who you are likely to bump into in the cause of your operations.
- Kenya Revenue Authority (KRA) will come nosing around to make sure you are paying your taxes. There are quite aspects to this based on your turnover, kind of company etc Get the advice of a good book keeper. Know what to do, know what loopholes are there. KRA don’t make good enemies.
- National Environmental Management Authority (NEMA) officials could also be popping in once in a while to enquire how you dispose your waste. Have clear answers and a clear plan if they decide to harass you.
- County Officials and Police – And although your staff could be having all the licenses, the county officials might harass and arrest them for whatever petty reason especially when leaving for work late or reporting early. You should be prepared for that. County Health officials might also be popping in once in a while to ensure you are keeping to the health standards and all your employees have medical certificates. More often than not this is usually an avenue for them to squeeze money from you.
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Here we focus on the major items that you may need for a chips and chicken café. The exact items you need will depend on your operations.
This is used to deep fry the chips. You could start with one, but for greater efficiency and quality of the chips at least two are best. And then again if you are expecting relatively high traffic then you can not do with one. There are single and double fryers. Most of the small and medium chips café use a double fryer which goes for an average of Kshs.35, 000.
The market has fryers ranging from Kshs.15, 000 to Kshs.100, 000 depending on size, where you are buying, new or second hand and even if it’s a branded fryer. There are also deep fryers going for at about Kshs. 450,000. When planning a budget of at least Kshs.40, 000 for a fryer is good for a start.
You can either chose to buy jua kali fryers, ‘branded’ or imported fryers. In Nairobi the jua kali fryers can be bought in that metallic work area along Jogoo road near City Stadium. You can also get them at Gikomba near Machakos bus station.
The challenge with jua kali items is quality control. So make sure you have a good look at the items; joints, connections, materials used and also ask about the efficiency. There have been cases of poorly constructed fryers which end up consuming so much electricity or leaking. Still there are many jua kali fryers which have worked pretty well and tens of cafes are using them.
If you don’t want to go jua kali you can purchase from kitchen equipment suppliers. There are a couple of shops on the upper side of Tom Mboya and near Koja mosque. You can also check the area of River Road around the Latema junction on towards Tom Mboya there are a couple of shops there. You can also check Nairobi Kitchen Care along Luthuli Avenue, Hotpoint at Sarit Center, Housewives Paradise Kenyatta Avenue, occasionally you can also find deep fryers at Nakumatt supermarkets. Mombasa Road has a number of dealers too. (See appendix for a list and contacts of some suppliers)
Try negotiating. In most cases there will be room to lower the price. Also enquire about the features, efficiency and durability of the different fryers. Branded fryers are not necessarily the best. One brand, sold by kitchen equipment shops, is especially notorious for breaking down after 6 or so months. That does not mean that all branded fryers are bad but don’t have blind faith just because a fryer is imported and has a brand. Ask for some sort of assurance as hard as it may be to get it.
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Out of Nairobi check the jua kali areas which are common in almost all major towns. You can also check major supermarkets and household equipment suppliers.
The chips business is also reaching a point of maturity meaning there are many people opening and closing their chips outlets. This has created a noteworthy second hand market for fryers. Sellers at times advertise in newspaper classifieds and as is common these days on www.olxco.ke.
When purchasing second hand equipment make sure they are working properly. Test and test. A second hand fryer could go for as low as Kshs.10, 000 compared to the Kshs.30, 000 you may splash on a new one.
The potato cutter is used to slice the potatoes to chips. You can purchase from jua kali at between Kshs. 3000 and Kshs.5000 depending on features / size and your negotiating powers.
These are used to keep the chips and other items like smokies, samosas and sausages warm. They cost between Kshs. 5000 and Kshs. 30,000 depending on the size and where you purchase them. You can get these from Juakali vendors or the kitchen shops.
This is the rotating gadget used to ‘bake’ and display the chicken. The price averages between Kshs. 30,000 and Kshs. 70,000 depending on how many chickens it can hold. The price will also depend on whether you are purchasing from the kitchen shops or the jua kali artisans. (Kindly refer to the Deep Fryer above and the appendix for suppliers.)
‘Kitchen and Dinner’ Items
There are other equipment to think basic equipment like knives, plates, buckets, serving spoon, tongs, cups, forks, sufurias, jugs, sauce, vinegar, kachumbari containers, wrapping papers and the like. In any case budget at least Kshs.15, 000 for a small café. The items could cost as high as 40,000.
A cash register helps you monitor your sales, reduce cash leakages and manage and monitor taxes if need be. For instance with many cash registers by a click of button you can easily know what the total sales in a day were. A cash register in not a must. However if you are in a busy setting such as high traffic areas of Nairobi CBD, you will definitely need one not only because of the afro mentioned reasons but so as to be able to serve customers faster and efficiently.
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The price of a register varies depending on the dealer, brand, whether new or second hand and features. A basic register, like some of the Casio models cost as low as Kshs.10, 000, while others can be as high as Kshs.60, 000. Features include ability to generate different reports, level of programming, speed, ETR if necessary and so forth. Cash registers can be acquired from Electronics Shops. When going to purchase a register have a clear mind of what you want to achieve with the register. Depending on your budget you do not have to necessarily start with very advanced registers.
Renovations, Tables, Stools, Signage
The premises will need renovation to set it for the café. You need to set the cafe in a way that there is a smooth flow. From the point of payment to the point of serving and consumption. If you are personally manning the cash point you need to design it in a away that you are able to easily monitor operations from your position.
You could have an open counter with no grills, or one with grills. A big menu display which consumers can see immediately they enter the café is important. Other items like paintings, a television, music or mirrors on the walls are a matter of taste. Mirrors are increasingly becoming part of the fast food décor in urban settings so if you are competing with cafes with mirrors then you could do well to have them. Try creating a bright yummy environment.
There will also be the benches which serve as tables. There are many carpenters who can do this. Bar stool seats the kind that is used by many fast food cafes can be acquired from a number of black smiths. Basic stools cost an average of Kshs.800. Prices range between Kshs.800 and Kshs. 1500. An upholstered well painted simple stool will do. Some cafes go for stools with a back rest. If your space is limited this is not the best option. There are many blacksmiths making the stools. In Nairobi if you have no clue start with the jua kali area near city stadium, parts of Gikomba and even some supermarkets stock the stools. Remember you will need labor for all this ; a carpenter, electrician and perhaps some casual worker.
Depending on your setting and size the renovation could cost as low as Kshs. 20,000 to as high as Kshs. 80,000. At least plan Kshs. 40,000 for this. The more bells and whistles you have the more money you will need the figure could be lower if you are purchasing an already running café.
Also factor in signage to announce your business. A sign board will cost between Kshs.5000 and Kshs.20, 000 depending on the size and the sign maker. It’s a very open market with no standard fees. In addition you have to pay the county government to put a sign board outside your premises. The amount will depend on the size, county and location within the county. The price could range between Kshs.2000 and Kshs.20, 000.
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If you are in Nairobi there are many signage companies advertising in the newspapers and online classifieds. You can also take a walk along the upper part of Kirinyaga road towards globe cinema and the surrounding lanes and roads. There are many sign dealers located in the area.
A freezer is not a necessity but if you purchase items like chicken and other meat products like sausages and smokies in bulk then you will need to have it otherwise the items will go bad. Also if you peel more potatoes than are consumed within the day, you can store them in the freezer for next’s day’s consumption. (See more on frozen potatoes in Operations section). A standard freezer costs around Kshs.40, 000 depending on the size and make. You can purchase from supermarkets and kitchen equipment suppliers.
Coca-Cola supplies shops and restaurants making significant sales with fridges, but you will not get it immediately you open your business. Sometimes it can take up to six months. Meanwhile you need to satisfy customers requesting for cold sodas, water or other juices. And then even if you have a Coca-Cola fridge part of the agreement is that you should not use it to store products from rival companies. Though this rule is often flouted to avoid much collision and have the freedom to stock as many products as possible invests in your own fridge. Have a budget of at least Kshs.30, 000 for a fridge. Again the exact cost will depend on size, make and where you make your purchase.
The exact amount of rent that you pay will depend on the location, size of the premises and owner. More often than not, for commercial building you have to pay at least 3 months rent in advance. Normally In urban centers you have to pay goodwill too. Goodwill figures tend to be random and based on what the owner thinks the premises is worth in terms of future returns. As much as a premise has high potential negotiate to pay a reasonable amount of goodwill. You need to remain with as much cash as possible to run the business.
You need to purchase potatoes, sodas, chicken, smokies, salt, sauces, chilies, kachumbari ingredients juices all those items depending on what is on your menu. Have a budget of at least Kshs.10, 000 for the initial stock. The amount could be more or less again depending on your menu and location. But make sure you have some extra money for despite how keen you are initially you might miss or underestimate quantities of some items.
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Based on the above and data from a cafeteria in Huruma we can estimate the possible capital that you may need. Remember we are using average figures, exact figures like we have mentioned will depend on your supplier, type of fast food, size location and negotiating skills. Thus the figures could be slightly higher or lower. For planning purposes its better to over estimate rather than underestimate.
Deep Fryer – Kshs.40, 000
Potato Cutter – Kshs.4000
Warmer – Kshs. 15,000
Chicken Oven – Kshs.40, 000
Miscellaneous Items – Kshs.15, 000
Renovation – Kshs.50, 000
Licenses – Kshs.30, 000
Cash Machine – Kshs.30, 000
Rent + Goodwill – Kshs. 150,000
Stock – Kshs.10, 000
Fridge – Kshs.30, 000
Freezer – Kshs.40, 000
Total – Kshs. 474,000
Again the figures could be slightly lower or much higher depending on setting, location and the kind of chips café that you wish to set up. Again it’s very safe to say you need at least Kshs.300, 000 to set up a bare bones small size chips and chicken cafeteria.
For a basic chips outlets the amount could be slightly less, while for a large chips and chicken in Nairobi CBD the amount could be as high as 5 million. But with a budget of Kshs.300, 000 and above you are set to start a basic chips cafe.
Look at capital not just in terms of equipment and rent but also in meeting expenses before you break even. You should have a cash reserve to sustain you for at least 3 months after you start operations.
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The average break even period for cafeterias in Nairobi is 5 months but of course it will depend on your exact location and management. When planning and thinking of revenue don’t overestimate, work with moderate figures for that is the reality of business.
You may not turn much profit in the initial months and not because there are not enough customers. The reason is that you will be learning the ropes, you might be very inefficient, it make some time to correctly predict consumption patterns, where to source cheaply, how to avoid cash leakages, product wastages, how to improve quality and so forth . Initially these challenges will frustrate and slow your growth. Don’t give up yet. Don’t act in panic. Just keep your eyes and mind open. Learn and seek improvement.
There is no exact way to predict or advise on such factors, a lot you will learn on the job depending on your location, employees, management skills and target customers. Still we will touch a little of this in subsequent sections.
A Note on Kenchic
If setting up in Nairobi or most of the county headquarters you will be most likely be competing with Kenchic which has over 40 outlets all over country. The fact that there is a Kenchic in a location should lift your spirits since it validates the viability of a chips business in the area. If next door to a Kenchic, position your café so that it’s an alternative; either by price, setting, quality and target customers.
Kenchic operates through franchises where they partner with business people to run fast food cafes. Kenchic sets the standards and the terms. Usually the company advertises for franchise opportunity in different areas, but if you see an opportunity it doesn’t hurt to approach to them. Some of the requirements for getting a Kenchic franchise include:
- Suitable strategic location attracting target group for fast food business with adequate space
- Ability to rise start up capital of between Kshs. 3 – 4 million, this will depend with the size of the Kenchic Inn and location.
- Commitment to dedicate themselves to the business on a day to day basis
- Dedication to high customer service and hygiene standards
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The main menu items in the kind of fast food covered in this guide are chips and chicken. Of these two chips is the main item, the highest selling in volume and turnover and the most labor intensive.
The main process of preparing chips is sourcing potatoes, peeling, cutting into chips, deep frying process and then selling.
First you need to know that not all potato varieties are ideal for chips. Factors that eventually affect the quality of chips and how much profits that you make are dry matter, eye depth, size and shape. . Potatoes with high dry matter are best because they are more edible, delicious and do not consume a lot of oil during frying.
Potatoes with high eye depth will lead to more wastage when peeling. You will have to remove the eye otherwise the chips will have black tough spots. Large and oval shape potatoes are easier to peel and more important produce long chips pieces which are aesthetically appealing to consumers. (Compare chips at Galitos, KFC, some Kenchics and those of some downtown fast foods).
There are over 20 varieties of potatoes and more keep coming up from research laboratories. Presently Zangi, Ndogo are the most preferred for chips. Others are Tigoni, Asante and Furaha. Nyayo is also used but it bruises easily and is a bit soft, so at times becomes soggy when deep fried.
Relatively high end fast foods like KFC, Subway and Galitos import processed frozen potato chips. KFC imports processed from Egypt. The major reason being that the potatoes available here do not meet quality standards in terms of taste, aesthetics and traceability. Others import from Europe and South Africa.
If possible have among your staff a person with experience in cooking chips, identifying various potatoes and purchasing from the market. If not careful at Wakulima or any other major market you can be sold a sack with half of it spoilt, or of mixed variety. Eventually though you build a relationship with one or a number of potato dealers or brokers who will be sourcing and selling to you.
Where and how you source your potatoes will have affect your mark up. The thing is to source as efficiently as possible keeping costs low and quality high. Quantities you purchase will depend on how busy your outlet is. About 70% of small and medium sized chips outlets in Nairobi source from Wakulima market, the rest source from other markets in the city and also from brokers, farmers and markets outside Nairobi.
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When you are starting you need to focus on the business and not be distracted by the hustle of sourcing very far from your business. The truth is that though you could make some savings if you went out to purchase from potato farming areas the truth is that at the start it’s not as easy as walking to a market; there are brokers, gatekeepers not to mention tricks and unforeseen circumstances. Before you learn the ropes the hustle and hassle can consume much of your time and even money without making any significant savings.
At the start you need to focus on your business, if possible be there to keep an eye on employees and customers, so source nearby but at profitable prices. You also need to monitor your demand to know the quantities you need. If you don’t have enough room for dry storage then purchase daily or two day’s quantities. Store potatoes in wet or dump conditions and you will be surprised at how fast they spoil.
Bulk purchases of course will lead to savings but consider in terms of your storage space and conditions, running capital and demand.
A Note on Frozen Chips
From our research about 90% of all fast food cafeterias in Nairobi purchase and process potatoes to chips on their own. However there are a few who purchase frozen potatoes. The frozen potatoes dealers purchase potatoes in bulk, peel, cut into chips and store in frozen conditions for sale. Their selling point is the savings in labor, quality of chips and at times cost. Storing chips under frozen conditions is a specialized skill, though with practice anyone can learn. You need to know the exact temperatures under which to store the uncooked chips otherwise they will turn black when you deep fry them. Sometimes you need to add some chemicals and so forth.
We are carrying out more research on these both for purposes of this guide and to gauge the feasibility of the business on its own. In Europe, Egypt and South Africa this is a big business. In Kenya a few companies are trying to get into the business in a significant way but there is nothing substantial yet. Part of the plan of some of the entrepreneurs seeking to get into the business is to sell frozen chips through supermarkets where consumers can purchase in packets of different sizes for preparation in their homes. Others want to supply to the major hotels who are presently importing while others are looking at the export market. There might be opportunity, or may be not. We will notify you of our research findings regarding this once we are done.
You can assign your employees to peel the potatoes or use a potato peeler. Most average size cafes use employees. Although a potato peeler could save time then type and quality of potatoes will determine how effective it is.
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The potato cutting machine slices the potatoes to chips in a semi manual process. You place a potato on the slicer and then press its bar down, and voila you have the chips. It’s faster than doing it wholly manually.
Despite the general method of preparing chips being standard you find that they taste different depending on where you have purchased them. The difference in taste is because of the skill (or lack of) in preparation.
Among the basics that influence the taste of the final product include
- Choice of potatoes – as noted above some kinds of potatoes absorb oil and become soggy
when they are deep fried. Some also taste odd when deep fried as opposed to when cooked in other ways.
- Choice of cooking oil – Some brand of cooking oils which when used to prepare chips leave an after taste in the mouth or make the chips taste ‘funny’. There are many cooking oils in the market some even without brand names. Rina, Mallo are some of the commonly used by fast foods.
It will be more economical to purchase the cooking oil in wholesale from wholesalers or supermarkets which stock. Established wholesalers are aware and many of them honest about which is the preferred cooking oil by chips cafes. Bad tasting oil will simply drive customers away; after all there is so much choice. You don’t want to be cafeteria known for zile chips za mafuta.
The oil that you use and how often you use it before changing to new oil will have an influence on quality. You may have heard the many stories regarding the oil used to cook chips in city cafeterias. Tales of transformer oil, some other recycled oil from industrial area and so forth. The oils are said to be economical shooting the margins to high levels. For the cost of oil eats a sizeable chunk of the revenue.
Some of the stories are true but again as you start you don’t want to risk with something you are not sure of, then you may not have the necessary connections to source from such black market suppliers. That means you start with the normal branded oil. When purchasing consider the evaporation rate and taste.
How long you use the oil before changing will also affect the taste and quality of your chips. Every time oil is used for deep frying it gets ‘infected’ with debris and carbon. So
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every time you reuse the oil the carbon levels increase, this eventually leads to ‘smoke’ or sour tasting food . As much as there is the temptation to keep reusing the oil over and over again be cautious not to over do it.
- Preparation process – Even with the right oil and potatoes, the exact preparation process will affect the quality of chips. There are several tricks used to make the chips tastier. The most common, which is also used by the high end hotels, is blanching. This involves put the chips in boiling water and then removing and deeping in cold water. The process removes the starchy taste of potatoes, improves the texture, appearance and overall taste. Before you start blanching make sure you try it on a small scale and acquire some expertise or have a skilled hand among your staff.
Many of the small and medium sized fast foods neither blanching or de-oil. They deep fry and ‘dry’. The results are not necessarily bad but then if you want to have tasty addictive chips then it pays to experiment with simple, cost effective preparation methods. In downtown cafeterias, other than Kenchic, consumers are not very particular about the quality of chips but still they appreciate by their spending if the chips are of relatively high quality
One Kenchic in Nairobi CBD is famous for the tasty unique tasting chips. They blanch.
There are several sources of chicken. First are the independent farmers and brokers who will approach you with their offers. There are also companies like Kenchic and Sigma Feeds. You can purchase from Kenchic in Tigoni or their trucks which visit various towns and parts of the city. One truck stops at Teleposta towers near Nyayo House. Sigma feeds are distributing in the city and soon opening a depot in Pangani. See appendix for the contacts of the two companies and they will advise where you can make purchases depending on their locations.
Many small fast foods in Nairobi also purchase from the City Stadium market. There is a flourishing market especially of low priced ex layers. These are chicken which are past their egg laying stage and owners through brokers want to dispose them. Remember when it comes to the actual sales it’s the volume rather than weight which matters.
There is no special skill required to prepare the chicken. For the chicken make sure it does not overcook in the oven and becomes tough or very dark, let it have the appeal and flavor of chicken meat.
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Coca-Cola has distributors in almost all parts of the city and the country. And so does major juice manufacturers. There are no formalities and it’s basically a walk in walk out affair. Apply for a refrigerator as soon.
For the other items the preparation method is quite clear, and does not involve a lengthy process. But again choose your cooking oil smartly even for items like Smokies, Sausages and Samosas, and be careful not to leave them dripping with oil as this is one of the biggest complaints by customers.
Have a clear work schedule where each and every of the workers knows their roles. This will avoid confusion and delays. Communicate clearly to the workers what they need to do and when.
|Average Mark Up ( Chips)||24 %|
|Mark Up Range||15 % to 60%. The mark up will depend on|
|supplier, price and location|
|Average Daily Sales in Nairobi CBD||270 plates|
|Highest Recorded in a day – 2419 plates|
|Lowest Recorded – 63 plates|
|Average Mark Up Chicken||40 %|
|Mark up Range – 35 to 70 % largely depending|
|on sources and the definition of ‘quarter’|
|Average Mark Up Sausages||60%|
|Average Mark Up Soda||75%. Will depend on price/|
|Average Spend Per Customer||Kshs. 90|
The above are gross mark ups, based on buying and selling prices. Please note that the mark up figures will reduce if factors such labor, electricity and rent are included. When planning work
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with lesser margin this is because it might take some time before you are able to achieve full efficiency and thus high margins.
- KFC sells an average of 6 tonnes of chips every week. In terms of sacks this would be around 60 sacks
- Jack Fries at Odeon sells an average of 9 sacks in a day, which adds up to about 2000 plates in a day.
- A particular chips cafeteria in Kayole sells an average of 40 plates in a day
A Casual Look at Revenue
The very crude way to look at Revenue is to calculate this way: Say you are selling a plate of chips at Kshs. 50. And you bought a sack at Kshs. 3500, and then you need at least to sell 70 plates and a few more to break even. 70 plates @ Kshs. 50 will give Kshs. 3500 but there are overheads in terms of oil, electricity and so forth. So 30 more plates to cover the overheads. This is a very hypothetical case which assumes you are only selling chips and have no other related costs. Nevertheless it should give you a clue about revenue projections and calculations.
Number of Plates from A Sack
In fast foods the standard unit of quantifying chips is the 20kg fat plastic tin / bucket, you know like the one for Mallo or Tily cooking fat. The plates of chips that can be gotten from the 20kg bucket varies between 18 and 30 depending on the quantity of chips that you serve in a plate, the quality of the potatoes and your efficiency. The average is about 24 plates.
The number of buckets that you can make from a sack of potatoes varies with how the potatoes are packaged. The standard weight of a sack of potatoes, as defined by the law, should be 110kg. However due to the influence of brokers potatoes are packaged in bags as low as 90kg to as high as 200kg. This means that the number of plates that can be gotten from a gunia can range from as low as 100 to as high as 200 with an average. Still the average is about 180 plates for a standard gunia and average serving. Between May and July 2014 a bag of Zangi potatoes has ranged between Kshs. 2800 and Kshs.3800.
And the gross profits from a gunia can range from Kshs. 3000 to as high as Kshs.8000. Looks attractive? Yes. But this is the gross profits; also depending on your location you may not necessarily sell a whole gunia in a day.
Abnormal sales figures are recorded in Nairobi CBD. Outside Nairobi CBD, in the estates some cafeterias struggle to even sell 100 plates. When planning work with lower figures. The average sales in Nairobi estates are 120 plates.
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The cafeterias which sell over 500 plates in a day are in the very busy streets between Moi Avenue and Tom Mboya. Locating in Nairobi CBD will also not necessarily transform to higher sales; it depends on what exact section of the city you are located. For instance in the section of Kirinyaga Road towards Racecourse a number two fast food cafeterias have closed in the last two years . This is because of the labor intensive work of most consumers around who will not be ‘satisfied’ by chips ‘. Also there are many ugali matumbo, ugali karanga, ugali sukuma cafes prices their items almost the same as the chips.
In estates with many alternatives for quality ‘non junk ‘food, sales will be lower. There is perception among some consumers that chips is a meal you consume when in ‘town ‘. Once you are back to the estate you either cook or look for ‘real’ food. In low income estates the biggest competition comes from the roadside chips traders.
If you are located in the estates you have to do more to raise the profile of your café especially in terms of quality. Let the café be known for superior chips, great and large chicken or even you can chose an unrelated item like meat roll or chapati roll.
Invest in cleanliness, good service, an attractive exterior and more important something to differentiate and brand you. ile hoteli ya samosa kubwa.. Or something like that. It doesn’t matter whether you are enjoying a monopoly at the moment. The barriers to entry in the business are low, and as happens if you are doing well, you attract more people to the business. But do this with a very clear understanding of who your target market is, and the kind of alternatives they have presently.
As the supermarkets located in middle income areas venture into food preparation the competition in the fast food business will become intense. Some of the supermarkets are investing in superior preparation methods both in terms of equipment and skill resulting in relatively higher quality chips and chicken. A big portion of consumers tend to trust the supermarkets in terms of hygiene and quality than they do the neighborhood cafes. What with the supermarkets open kitchens and cooks dressed like professional chefs.
Profits from Chicken
Though chips are the main items, the profits and consumption of chicken are significant and can’t be downplayed. A number of cafes in Nairobi CBD have noted an increasing trend where some consumers just purchase and consume chicken alone without accompanying with chips as is the norm.
Again as observed the definition of quarter in the fast food business is based not on weight and more on volume. Thus a 1 kilogram chicken could give even 5 (or even 3) ‘quarters’. Consumers have in their minds an idea of what a quarter should be. If you try to squeeze so
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many quarters from a standard chicken then it will negatively affect the perception of your café. A coupon weighing between 1.4 and 1. 6 kilograms can give 5 to 6 quarters. Thus a margin of between 40 and 60 %
Revenue is influenced by:
The relatively high gross margin in chips means that there is much room to play around with price. In Nairobi CBD for instance prices ranges from as low as Kshs. 30 for a plate of chips to Kshs. 100 for standard fast food cafes. Common price points are Kshs.50, Kshs. 60 and Kshs. 70. Others are Kshs. 55 and Kshs. 65. Kenchic (in August 2014) sells a plate for Kshs. 70. An interesting case is the John and Jos café which is located along Harambee Avenue and associated with the Michuki Family. It’s a purely standing café which sells a plate of chips at Kshs.100. The chips are of relatively high quality and also there is no fast food competition in the section of the street. This is one of the oldest cafes in Nairobi CBD and has worked to maintain the same look over the years.
Other interesting cases are Jack City Fries and Q-Fries near Odeon Cinema along Latema Road. Both sell a plate of chips at Kshs. 30 per plate, a price they have maintained for almost 2 years despite the fluctuations in the prices of potatoes and an increase in costs such as those of electricity and cooking oil.
Jack City about 15 feet by 10 feet is has a downstairs without seats and an upstairs with not more than 10 bar stools. It competes on price selling chips at Kshs.30 a as compared to the average of Kshs.60 in most cafeterias. All day long the cafeteria is filled to the brim and it’s not unusual during the peak hours to see almost 15 meters queues of waiting customers. Most customers consume chips though they also serve chicken bhanjia, sausages and samosas.
Q fries is in a much bigger space though with the same downstairs upstairs setting. Around June 2013 Q fries displaced a cyber café so as to acquire more space to host its customers. Here it’s not unusual to see over 10 meters queues. Our research didn’t identify any exceptional trick used by the businesses. Jack City for instance sources potatoes from Wakulima Market on a daily basis, averaging 10 sacks everyday. They use normal cooking oil which they purchase and bulk. There are 6 employees at any one time and the owner manages the business full time. Theirs is a formula of keeping costs at the minimal, low margins and high volumes.
Price based competition is common in the chips business. Lower prices are used as a way of penetrating the market or winning customers. For instance in Nairobi within a radius of about 30 meters from the same Odeon there are price ranges of between Kshs. 30 and Kshs. 80. Between Q Fries and Jack City is another clean; bar stool fast food selling a plate of chips at Kshs. 60 and
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it too has its considerable number of customers. Of note is that this particular café started as a Kshs.30 per plate, then upgraded to the Kshs.60 cafeteria.
In estates and smaller towns the price ranges is not as big. This is because incomes and tastes in estates tend not to be so different.
The effectiveness of price based competition will depend on the location. In places with above average incomes experience and quality are the major considerations when purchasing rather than price. That explains the price diversity around Odeon cinema. Also it explains the relatively high prices at Kenchic.
Price is based on source of supplies, competition, location, target market and of course your costs. If you are paying more in rent, more in salaries, incurring extra costs say in the process of preparing your chips then of course you will charge more. Same if your products are of higher quality, you operate from a point where there is not much competition, or if your target market has relatively high income.
Chips and Chicken is a high traffic business. You can survive without high numbers but to grow and remain in the business in the long term you need the foot traffic.
If you are in a strategic high traffic location, and the traffic is also the right kind – seeking chips and at the price you have set – then you will eventually earn more revenue that is keeping everything constant.
High traffic locations increase the chances of getting a big threshold of the right kind of customers. That’s why cafeterias in urban centers say like Nairobi CBD have higher chances of success more than those located in a high traffic location within an estate. As noted consumption patters in estates tend to be more conservative as compared to urban areas where people are out of their own spaces.
Nairobi CBD is the most attractive location for the chips business. The numbers and diversity of consumers is a half way road to success. But although Nairobi CBD is an attractive location, it’s not the only great location. Some high populated or not so highly populated areas but with the right mix of the population provide quite good opportunity.
There are estates and towns with significant student and relatively young working population that could do with a quick chips café. Towns coming to mind immediately are Kiambu, Machakos and Embu. Though a little peri urban and with one or so Kenchic outlets, and other traditional hotels serving chips there is opportunity for the classical independent chicken and chips café. A real clean specialized chips and chicken fast food serving the urban population in such areas.
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Best locations for a chips and chicken are urban, with middle income populations, single households and student populations. The more urbanized and bigger a town is the better. Bigger towns have diversity in terms of population and income that provide enough foot traffic and ability to operate profitably at different levels of price and facilities.
If you wish to set up in Nairobi CBD, the biggest challenge will be getting a great location. Space could be available especially in new or renovated buildings coming up downtown; however goodwill figures for cafeteria at times tend to be exaggerated. Though we have noted goodwill of Kshs. 200,000 there are locations where reportedly owners paid 5 million.
Despite that you can look for locations with affordable rent and reasonable goodwill. Rent for chips outlets in the CBD ranges from shillings 20,000 to as high as Kshs. 300,000. That should not discourage you but it is something to think about when weighing your capital, and where to locate your business. In Nairobi estates rent for chips outlet range from as low as Kshs. 5000 to Kshs.40, 000.
One of the biggest advantages of a visible location is that it reduces the cost of acquiring customers; it also provides you with a flow of customers to help the business survive and break even. A good location however doesn’t guarantee you repeat customers; the people who make the business grow. These are a function of service, quality and right pricing.
Get the best location but also be real to the fact that a good location is not the only recipe for success in the business. Quality, service, costs and management will determine the eventual success of the business.
The costs incur will determine your profits.
Major Variable Costs
- Cooking Oil
- Sauces/ Chilies
- Wrapping Papers
Major Fixed Costs
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There is also stock, is a variable cost. The cost of potatoes and chicken as noted will depend on where you source from, prevailing seasonal market price, quantities and qualities that you purchase and how far you are from the source of supplies.
Like we mentioned in the ‘Operations’ section you should aim to source as intelligently as possible without straining yourself and the business. There will always be the temptation to purchase potatoes in bulk for future use when prices are low but then consider that in terms of storage and your cash flow.
When you can, purchase items like cooking oil, sauces in reasonable bulk to enjoy discounts. Lower quality potatoes will be cheaper at point of purchase but might turn out to be expensive if you consider how much you will waste, or the quality of chips that you serve your customers.
On average 10 to 15 kilograms of oil are needed to prepare chips worth 1 sack. This is the average the exact amount will depend on how often you change the oil, quality of the oil, skills of the cook and the quality of chips that you want to attain.
Instill in your workers a responsible culture of saving without necessarily affecting their morale or the business. This is especially so for items like electricity and water. Electricity if uncontrolled will eat quite a big chunk of your profits. For fast food in Nairobi CBD electricity takes an average of 11% of the total gross revenue.
Even for items like salt, wrapping papers and sauces whose cost might seem a small negligible proportion when compared to the rest of items, try to minimize, not by curtailing them from customers but by sourcing in bulk and cheaply. For example the price of wrapping papers between the different suppliers is significant, and taking a short time to shop around for the cheapest will lead to significant savings in the long run.
Also have a clear contract with your landlord to avoid arbitrary increases in rent. Seek to have a very clear system and goals as far as costs are concerned.
Variety of Related Items
If you are able to offer more of related items then you will not necessarily reduce the consumption of chips rather you will encourage consumers to spend more. Sodas are a must. Fresh juice, such as passion juice, moves fast. Bhajias, sausages, samosas, kebabs, smokies, are a good addition. Keep to the fast food menu. You can introduce products gradually as your business grows. Variety will make customers spend more thus increasing your revenue.
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One of the biggest complaints among fast food owners is revenue leakages by crooked employees. It happens all the time. For instance there is a cafeteria along Ronald Ngara Street which is notorious for side deals; with Kshs.30 or even less you can get a plate of chips, or have an extra amount added to what you have paid for legally. Officially a plate of chips costs Kshs. 60 at the cafeteria.
Workers at another cafeteria along Moi Avenue will give you a quarter of chicken at between Kshs. 70 and Ksjs.100 instead of Kshs. 120 that you would have paid at the counter. They pocket the money. Some of these thefts are not entirely possible to erase if you are not managing the business personally or if you don’t have a trusted manager or employees. Still depending on your setting you can find ways to seal the loopholes.
Management is also about organizing your workforce and other resources so that they are efficiently employed in a way that cuts costs and boosts profits. This includes sourcing efficiently, managing cash, motivating employees, service and all else you do as the owner of the business.
There are Chips and Chicken Cafes in Nairobi which operate for 24 hours. Others are open as early as 6 AM and close at 11 PM. The extended hours of operation lead to increased revenue. However before you decide to operate for extra hours look consider your location in terms of the possibilities of getting late night customers and also security. You might also need to pay workers who work at night extra if not have more of them so that they can work in shifts. If you are in a location without much nocturnal activity then it will be of no value to open for 24 hours. Still whatever your opening hours be consistent . Let consumers know that if they walk to your cafeteria today at 11 PM they will find you open, and tomorrow the same thing.
Critical Success Factors
For you to succeed in the business you need to get this right:
A good location, as mentioned, is one with enough foot traffic and the right mix of consumers. A good location is visible secure and easy to access both by suppliers and consumers. A poor location will make you take longer to break even or even suffer losses. You must get the location right and if you can’t get an ideal location then compensate with quality, marketing, service or even price.
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In most locations there are alternatives to chips. The alternatives are other chips and chicken cafes and hotels serving other kinds of food. This means that if consumers don’t like the quality of your chips more often than not they will get a substitute.
Quality is about how the chips taste, the oil you use, how crispy they are, whether they are well cooked, how dry they are and other such factors. Consistencies in quality generate word of mouth, repeat customers and help you loosely build a brand.
Again with choice consumers will always walk away if the service they receive is not to their expectation. This includes common courtesy, efficiency and responsiveness of staff, packaging, availability of things like water, sink, clean drinking water, glasses and depending on the setting the cleanliness. Service is also about not creating an unnecessary fuss when given a customer gives a big value note.
Service is about giving consumers a superior experience, the kind that they expect in a cafeteria of your status.
Basically management is about making sure all is running well towards the profitability of the business. Good management involves sourcing efficiently, managing costs, and preventing revenue leakages, marketing for growth, managing and motivating staff.
Poor management has led to the collapse of many chips and chicken cafes. Revenue leakages by conniving staff and a careless revenue and cost management system have led to the collapse of many chips and chicken.
A Note on Competition
Competition in the fast food business in Nairobi has been increasing in the last 3 years. This is driven by the increased demand for fast foods as noted in the introductory section. Also the attractive margins are pulling more into the business. The barriers to entry are relatively low, at least outside Nairobi CBD. Within the CBD the biggest barrier is finding a good location, and the high rent and goodwill associated with it. Competition in the business will continue to
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increase, however the urban market is yet to be saturated and there are opportunities in the business
On What Is Competition Based On?
We have covered in detail above most of the below factors on which competition is based on. So here we note them and make some few additions as need be:
If an entrepreneur has higher capital or access to short or medium term capital then he is able to have more leeway in what he can do. For instance he can have bigger billboards, he can purchase in bulk and thus end up with higher margins, he can offer more variety, he can absorb losses till break even point, he can purchase better equipment, he can hire more skilled employees, and he can hire more employees to make the service efficient. Capital will also enable the entrepreneur to set his fast food cafeteria to target the most profitable of consumers. For instance by having stools if need be, expanding the menu, having music and so forth.
Though a large amount of capital will not necessarily lead to success of the business, it helps cushion the business and make it more resilient.
This as noted in the preceding sections. Investors in the business try to get an edge by positioning themselves in the most strategic of locations. In Nairobi a few of the established owners try to fence competition by using money, connections and their experience in the business to snatch any strategic location that is available. A strategic location gives a fast food edge over the others in terms of traffic and diversity of customers. Visibility is key choice of location
Others attributes on which competition is based and which we have covered above are:
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Sample Daily Revenue From A Small Cafeteria in Nairobi CBD (June 2014 Data)
1 Sack Potatoes – Kshs. 3300
Cooking Oil for 1 Sack – Kshs. 1500
No of chips plates – 160
Price of a plate – Kshs. 60
Plates sold in a day – 417
Total Expenses – Kshs. 12000
Total Revenue (Chips) – Kshs. 25020
Gross Revenue – Kshs. 25020 – Kshs 12,000 = Kshs. 13020
- Coupon– Kshs. 420 Quarter – Kshs. 120
Total sales 1 Coupon – Kshs.600 Chicken sold – 27
Gross Revenue Chicken –
Kshs.16200 – Kshs.11340 = Kshs. 4860
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Sausages – 33 (x Kshs.40)
Gross = Kshs. 495
Samosas – 63 x (Kshs.30) –
Gross – Kshs. 1197
Sodas – 186 x Kshs.35
Gross – Kshs. 2046
Staff – 5 – Kshs. 42,000
Electricity – Kshs. 67,000
Rent – Kshs. 55,000
Miscellaneous – Kshs. 140,000
Total – Kshs. 304,000
Some Equipment Suppliers
|Nairobi Kitchen Care||Main Branch||P.O.BOX 49938, 00100 NRB|
|Main Mombasa Road, Allbid||Kenya|
|House. Opp ASL||Ph. (+254) (0) 706 991 469|
|Mob. 254(0)727 246 209|
|Kitchen Professionals||Airport South Rd, Near TNT,||P.O.Box: 66609-00800|
|Kenbelt Industrial Park, off||P.O.Box: 29-00606 Sarit|
|Sheffield Steel Systems Ltd||Mombasa Rd, Nairobi||Centre|
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|Meaf Consultants||Sameer Business Park, Block||254 20 357 9028, 254 737 117|
|D1, 2nd Floor||257, +254 734 688 983|
|Off Mombasa Road, Along||www.meafconsultants.co.ke|
|Cute Kitchen||Tom Mboya Street , opp fire||0711 850 850|
|station , next to Family bank|
|Kitchen Appliances Ltd||Commonwealth house,||0726 949449|
|Ground Floor, Moi Avenue|
|Kitchen Pride||Bombay House, Tom Mboya|
|Wlibhai Karim and co||Kathlawa Hse, Ground Floor –||020||2222808|
Tel: 020 2301518 / 020 2013313 / 0722 202 373
Sigma Supplies Contacts
0723 004 289
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