Hot Dog Café is a remarkable franchise. Certainly not because of its product, which is exactly what the name says. Also not because it targets the unemployed and informal traders to become franchisees.
South Africa has witnessed countless attempts by municipalities, NGOs, government agencies and corporate foundations to turn the unemployed into entrepreneurs.
What makes Hot Dog Café extraordinary is that it is one of the few — if not the only — unemployed-to-entrepreneur projects that has succeeded in South Africa.
The private and profitable business, co-owned by managing director Derek Smith, has 50 hot dog cart franchises, 10 container-based takeaway franchises and six fully fledged coffee- shop franchises, all run and owned by young people who have not been in formal employment. The only work experience Ivy Madubanya (25) had before she came across Hot Dog Café was a few shifts as a temporary waitress.
Four years ago she joined Hot Dog Café’s six-month training scheme and today she runs a hot dog cart outside Builders Warehouse in Fourways with a turnover of about R50 000 and a profit of about R8 000 a month. Before the recession she took home about R10 000 a month.
Madubanya was one of 20 youngsters who started the training course and was one of only three who was offered the opportunity to buy her own cart with a loan secured by Hot Dog Café.
The stringent selection process is one of the ways in which Hot Dog Café differs from other unemployed-to-entrepreneur schemes and this is probably the key to its success.
Smith says its training courses start with an information session in which attendees are told how difficult it is to run one’s own business and how much hard work it is. ‘We actually try to scare them away,” he says. A Survivor-type training programme follows in which the winner is offered ownership of the franchise.
Smith uses his Coffee Stop franchise concept as an example: ‘We have 15 guys competing for that coffee shop. My guess is five of them are going to fall away. Eight of them are going to become employees and one or two will become eventual business owners.”
Because of its different concepts ranging from a simple hot dog stand to a sophisticated coffee shop, Hot Dog Café can place franchisees at a level at which they will thrive. ‘If you take a hot dog cart, put it on a site where there’s a lot of feet every day, visit it every day and have it quality assured every day, all the guy has to do is manage his cash flow. It becomes a simple requirement.
‘Out of those guys who manage their cash flow correctly, one or two will grow into a bigger operation and become more sophisticated. Within our systems there are levels of From unemployed to top dog entrepreneurship and [the trainees] have to slot into the right box. If we get that wrong, we will fail,” says Smith.
Madubanya says her next step is to upgrade to a mini-E-Diner, a container- based takeaway shop with a wider range of products than her hot dog cart. Probably the biggest reason for Hot Dog Café’s success is its vested interest in the success of its franchisees.
‘It’s hands-on mentorship. Anyone can walk in with business knowledge and say ‘Well, you have to do this’, and then walk away. But it’s another thing to make sure it happens,” says Smith.
Joseph Matsaneng, who used to run a fruit and vegetable stand before working himself into owning one of Hot Dog Café’s E-Diners outside Builders Warehouse in Rivonia, says he receives daily ‘follow-up” from Hot Dog Café’s field workers, constantly checking on ‘how we are using our income”. He has a turnover of R90 000 to R120 000 a month, depending on the season.
Smith says because he sells his franchises to trainees who don’t have cash or assets, his model depends on businesses such as Builders Warehouse to offer trading sites rent-free until the franchisee has paid off the loan, provided by the Umsobomvu Youth Fund.