Entrepreneurship Zone: 30 May 2022 :: How a small South African bakery grew into a national restaurant franchise

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Entrepreneurship Zone: 30 May 2022 :: How a small South African bakery grew into a national restaurant franchise

 

	
 


 





How does a former South African volleyball player and a Serbian ex-policeman grow a novel Johannesburg-based bakery into one of the largest restaurant franchises in South Africa? Doppio Zero co-founder Paul Christie explains how a largely opportunistic – rather than strategic – approach to growth has yielded such success in the South African restaurant space.

Born to entrepreneurial Greek-South African parents in Johannesburg, Paul Christie grew up in a family that “always had some sort of store”, be it a coffee shop, convenience store or takeaway outlet. After studying business at the University of Cape Town, Christie embarked on a working tour of Europe, before returning to Johannesburg in 1992.

Leveraging his formal qualifications and family expertise, he spent the following few years establishing several new businesses across the city, including a convenience store and fast-food outlet, a mineral water bottling company, and three coffee shops.

On the hunt for their next venture, in 2002 Christie and his Serbian business partner and friend, Miki Milovanovic – a former policeman, serial entrepreneur and baker – identified a location in the trendy suburb of Greenside.

“We really liked the location in Greenside and wanted to open a restaurant, but it didn’t have the correct zoning, so we needed to either open a bakery, deli or butchery,” Christie tells How we made it in Africa.

“We decided to go with the bakery option because of Miki’s experience, as well as the fact that it had a day trading licence that would allow us to have a few tables and chairs, and sell coffee and light meals. So, establishing the bakery was really by default.”


Establishing the flagship


After securing 50% of the required funding from commercial banks, Milovanovic reached out to a private Kroonstad-based funder he had previously done business with who agreed to provide the balance of the capital needed.

While the private funding was subject to a higher interest rate than that of commercial bank loans, Christie says this allowed them quick access to operational capital.

“The big take-home here is that we were privileged enough to have an independent funder who could assist, which is very rare. He continued to back us for many years and we worked very hard to maintain his trust. He didn’t ask many questions and was able to wire us the money required almost immediately, which is in contrast to traditional bank funding, which often takes several weeks to be approved,” Christie explains.

The partners were able to purchase bakery equipment at around 10% of its real value from a recently failed bakery enterprise in a nearby suburb, reducing setup costs.

Scanning through an Italian cookbook, the duo decided on the name Doppio Zero, which denotes the grading of a very fine milled flour used in pasta, pizza and bread. Their vision was to establish a Mediterranean-inspired sit-down bakery with an innovative, down-to-earth and generous café culture.

“We opened the bakery with a few tables and we got a bit of resistance from local residents because they were aware that we didn’t have a zoning for a restaurant, but we managed to fly under the radar because we were a bakery, and we just expanded from there. We got to know the community, we stuck a few more tables in and eventually we grew into a big café bakery,” says Christie.

After several months of profitable trading, the duo successfully lobbied to have the zoning changed to a restaurant premises, which afforded a liquor licence and allowed the business to start trading in the evening.

Recognising the replicability of the Greenside Doppio Zero restaurant, the partners began investigating new premises at which to establish additional brand stores about a year after opening the Greenside branch.

“It was more of an opportunistic decision to expand than a strategic one. We found a location in nearby Bedfordview that we liked, so we acquired funding through commercial banks and our private funder and opened a new Doppio Zero outlet. This was soon followed by another outlet in Johannesburg’s northern suburb of Fourways.

“Within two-a-half-years of opening our first Doppio Zero, we had three successful self-owned restaurants, establishing the Doppio Group of restaurants,” he notes.

But the first years of multi-store ownership were not without their challenges. The duo had yet to develop a management and operational framework for each branch, leaving each restaurant heavily reliant on the efficacy and commitment of the individual branch managers.

This presented an opportunity to further clarify the brand vision and to introduce a growth-driven franchise model.


Creating a franchise model


The establishment of Doppio Zero’s franchise model was largely a trial-and-error process, explains Christie.

“We opened our fourth restaurant in Rosebank, Johannesburg, through a joint-venture (JV) partnership, which proved to be very successful. This gave us a lot of confidence in JV franchising, and we then sold our Bedfordview and Fourways stores using this JV structure,” he says.

In the 20 years since first opening, the expansion of the Doppio Zero brand has been achieved through a blend of corporate partnerships, franchises and JV partnerships.

“We weren’t sitting on a pedestal in head office, we were running our own stores, so we understood the pain points and challenges,” says Christie.

He explains that establishing good relationships with franchisees and ensuring consistent brand quality proved initially challenging, owing to the nuance of the brand.

“Our brand is quite complex – it’s not a simple brand. And with franchising, the simpler the concept the easier it is to franchise. You also have a restaurant that requires an experiential factor, so lots of personal interaction was needed.

“For this reason, most of our early-stage franchisees weren’t actually the right people for the job, as many were looking for a quick investment or an easy business. The pioneer franchisees are rarely the long-term franchisees and you’re forced to make compromises and concessions,” he notes, adding that he has since de-franchised restaurants that were not upholding the required standard.


Developing a firm brand vision


With the help of South African franchise consultancy Franchising Plus, Christie developed a franchise guide that outlined the requirements and features necessary for a successful Doppio Zero outlet, as well as an operational and management manual.

The franchise model centres on the provision of high-quality coffee, fresh Mediterranean-inspired breakfasts and light lunches, as well as freshly-baked artisanal bread, cakes, confectionary, pastries and pizza.

The ideal Doppio Zero location is in lifestyle centres in well-established areas with easy access to upmarket, high-density residential areas and/or high-density office environments.

With a minimum interior floorplan of between 350m2 to 500m2 and a minimum of 100 m2 in outdoor, or ‘al fresco’ garden-style seating, the sites should be suitable for a combination of convenient morning, day and evening trade and sufficient and easily-accessible parking.

“Each restaurant has its own unique personality, with a marketing strategy centred around strong community involvement and seasonal campaigns. Every season, we revisit the menu with fresh ideas and seasonal foods,” says Christie.

Doppio Zero stores without an in-house bakery are required to purchase finished bakery products from Doppio Foods – the group’s central bakery, located in Kya Sands, Johannesburg.

Doppio Foods also serves as a central kitchen and distribution centre from which franchisees are required to purchase mandatory products such as Italian cheeses, roasted coffee beans, Farina 00-graded flour, olive oil and tinned tomatoes. This distribution centre also services other independent restaurants and grocery stores.

“While our franchisees have certain products that they must buy from us, if it is not considered a mandatory item and they can find it for a better price elsewhere, we will test it and approve it, should it meet quality requirements,” he notes.



Doppio Zero co-founders, Miki Milovanovic (left) and Paul Christie.

 

After the establishment of their fourth Doppio Zero store, the Doppio Group decided to expand its presence and establish a pizzeria-based restaurant, Piza ē Vino. Again, this was a decision driven largely by opportunity rather than strategy, as Christie explains.

“We signed a lease for a site for a new Doppio Zero in Melrose Arch, in Johannesburg, but quickly realised that the location wasn’t right for a bakery-style restaurant. That’s when we decided to establish a pizzeria.

“A consultant assisted us with the concept and we brought on a local celebrity chef for the menu development and a Sardinian chef to perfect our pizza. We have since opened a total of 10 Piza ē Vino outlets nationwide, including in Pretoria and the Western Cape, using the JV and franchise model.”


The impact of Covid-19


With the onset of Covid-19-induced lockdowns and trading restrictions in South Africa, Christie says the group was forced to close its entire collection of restaurants for four weeks.

The Doppio Group lost upwards of half a million rand in stock and had to lay off over 970 of its employees – not counting the jobs lost in franchise stores. Since then, they have re-employed 80% of their original workforce.

“After about a month we were allowed to start limited takeaway trading. Our suppliers were amazing, and agreed to only charge us for the supplies we needed at the time and not hold us to hefty long-term purchase agreements,” he says.

On the whole, landlords were also largely supportive, with most providing some form of rent relief, while the group also received a partial insurance pay-out from insurer Santam.

“This saved us,” says Christie.

Industry group The Restaurant Collective, of which the Doppio Group is a member, lobbied government in August 2020 to shield South Africa’s  <https://www.howwemadeitinafrica.com/category/sectors/agriculture-sectors-2/> food and drink industry by easing restrictions and allowing alcohol sales. At the time, a 9pm curfew was in place across the country and no alcohol sales were allowed.

“At least 70% [of South African restaurants] have had to retrench employees to save costs, and 40% have not received any form of government loan or support. Sit-down restaurants are limping since opening on June 29 [2020]. Most are trading below 50% of usual turnover. This loss of cash flow has depleted businesses and individuals of any reserves, and timing is now critical,” the grouping said in its appeal.

For the Doppio Group, only one of the group’s restaurants – its Piza ē Vino store, in Stellenbosch – was forced to close over lockdown due to “landlord issues”.

“Otherwise, we were okay. It was tough and we gave our franchisees a lot of breaks in terms of royalties and fees when we reopened,” notes Christie.

“Some of our restaurants are trading at higher volumes than in 2019, while some have just caught up and a few are still lagging. The stores based in malls took the biggest hit.”

In the 12 months ending February 2022, the Doppio Group employed 1,365 employees (including franchises) and served 2.55 million customers.


Rebuilding and innovating


Christie says the group is now focusing on rebuilding its operational team post-Covid-19, growing its new brand acquisitions, and introducing new, innovative and experiential concepts to its older restaurants.

The group is also looking to create a separate marketing and operational function for each brand (Doppio Zero and Piza ē Vino) to prevent unintended brand overlap.

“The one mistake that we can make is to try and run all the brands with the same marketing and brand operations teams, which makes all the restaurants very homogenous.

“We also lost a lot of our operational team after Covid-19, so we’re looking to build the group’s support structures up to back where was – and better,” he notes.

Currently, 15 of the 30 nationwide Doppio Zero outlets are group-owned (including JVs), while 15 are franchise-owned. In terms of innovation, Christie says his greatest challenge is in keeping the brand fresh and relevant.

“I’m debating whether we should have so many company stores, as it [distracts] our focus from running our own business at a group level.

“When you first open, you are super trendy, but once you start growing and expanding you lose a bit of that ‘wow’ factor. We are working hard at innovating and keeping our menu relevant and investigating what the next great front-of-house customer experience will be.”

One such intervention can be seen at Doppio Zero’s Rosebank restaurant, where the smoking area has been transformed into the Jazz Room, which plays host to jazz musicians and offers a diverse drink and cocktail menu.

The group further plans to reduce the overall size of its Doppio Zero venues, refurbishing them into smaller venues that are easier to franchise.


Brand acquisition and diversification


Additional growth plans for the Doppio Group include acquiring aligned independent brands and testing new franchise models.

Doppio recently acquired a majority stake in sustainability-focused health foods retail brands Fresh Earth Food Store and Fresh Earth Bake House. The business currently has two food stores and eateries in Blairgowrie and Emmarentia, in Johannesburg, with plans to expand the brand into other retailers and online.

“I really like the health category, and I think there are some great growth opportunities in this segment, so we’re in the process of strategising,” says Christie.

In addition, earlier in 2022, the group opened a standalone Indian restaurant and gin bar in Rosebank called Modern Tailors, which Christie says will be used as a model for possible expansion into other regional food offerings.

“We’re looking for the right people to bring on board and then replicate this model across three of four different food offerings, such as Asian and Latin American,” he notes.

While the number of independent restaurants in South Africa have increased post-Covid-19, Christie believes there still remains good demand for franchise outlets, driven by a large emerging middle class.

Hoping to take advantage of the growing market for fast food, in May 2022 the Doppio Group opened its first fast-food offering in Rosebank. Inspired by Dutch and Belgian street food, Doodles offers a to-go ‘loaded fries’ menu.

In addition, Doodles – at under R1 million (about $64,000) a store – is far cheaper to franchise than Doppio Zero (R7 million or about $447,000) and Piza ē Vino (R5 million or about $319,025).

“Our aim now is to refine the Doodles working model and make it simple and easy to franchise, and I’m quite excited about it,” enthuses Christie.

“It’s chips, and let’s be honest – we all like chips.”



A Doppio Zero restaurant in Sandton, Johannesburg.

 

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