Pizza Hut enters Ethiopia in latest expansion into Africa

[ADDIS ABABA, Ethiopia] Pizza Hut is set to open three outlets in Ethiopia this year, becoming one of the first international restaurant chains to enter Africa's second-most populous country.

The restaurants are scheduled to begin serving in the capital, Addis Ababa, by November, franchisee Aschalew Belay said in an interview Monday. Aschalew's company, Belayab Foods and Franchise, will run the local outlets of the Yum! Brands Inc pizzeria and will have invested US$5.5 million in the operations by next year, according to his partner, Michael Ghebru. The agreement allows for as many as 10 outlets, he said.

Ethiopia is an attractive destination because of its cheap labour and electricity, said Michael, who will run the franchise and initially hold a 15 per cent stake. There are "no major" food franchises in Addis Ababa, making competition "non-existent," he said.

Ethiopian openings are part of a wider expansion under which Pizza Hut plans to boost its number of sub-Saharan Africa outlets to 100 by end-2017 from about 70, according to the company's incoming general manager for Africa, Ewan Davenport. About half of Pizza Hut's business on the continent is in South Africa, where it opened in 2015, with outlets in Angola and at Camp Lemonnier, a US military base in Djibouti, the top performers elsewhere, he said in an interview. He didn't give figures.

Ghana, which has three Pizza Huts, is "absolutely firing," with the partner looking to expand to neighbouring countries such as Togo, Mr Davenport said.

Ethiopia's economy is forecast to grow 7.5 per cent this year, the second-fastest pace in sub-Saharan Africa after Ivory Coast, according to the International Monetary Fund. The government's growth plan seeks to turn Ethiopia into a lower-middle income country by 2025. The World Bank says per capita income of US$590 is substantially lower than the regional average.

A well-performing Pizza Hut restaurant will have "well in excess" of 1,000 weekly transactions, according to Mr Davenport. Michael said he's targeting 2,200 per week, equivalent to about US$1.1 million a year, from each outlet.

BLOOMBERG