Start-up success

With a slew of restaurants opening nearly every day, Caterer Middle East investigates the major challenges entrepreneurs face when setting up a F&B concept, and gets tips for new entrants

If there is one thing the UAE does not lack, it is restaurants. Diners will find high-end venues, casual eateries, international brands, home-grown outlets, cafés and bistros and so much more, all across the country.

The Pizza Guys co-founder Amber Haque says that the UAE and Dubai in particular, is fast becoming a “hotbed of entrepreneurship”.

She says: “In terms of F&B, Dubai has now attracted most of the major brands. The home-grown restaurant scene is still in its nascent stages. From the feedback we have received, people here appreciate what independent restaurants have to offer and are ready for more.”

Fraiche Café & Bistro founder Yousef Al-Barqawi agrees with Haque and says: “The F&B market in the UAE in general, and Dubai specifically, is an exploding one, with projected growth north of 10% per year over the next five years. That kind of growth is almost unparalleled in any other industry within the region.”

He adds: “More interesting than that though, is the huge interest in independent, locally based, home-grown mid-market brands; which has for so long been a criminally underserved sector of the market.”

However, Caterer Middle East has been told that established brands have a much easier task of starting up, and independent outlets often struggle to convince investors, developers and more of their viability.

Another concern is the legislation involved in setting up. Not only start-ups, but established restaurateurs have revealed that it is easy to take a false step on the licensing path since there is no clear checklist to follow. Does the UAE government need to find a way to encourage local F&B development and allow them to compete on a level playing field with the big global guns — perhaps by making the process easier?

So the question is, as also raised by our resident columnist Aidan Keane: do entrepreneurs need a guardian angel over their heads to survive in the F&B business, and is it harder to start up when you’re a new entrant?

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Finding a Gap
Everyone wants to start a restaurant these days — but what makes your idea stand out from the rest? There has to be some thought put into the food and location as well.

One of the reasons many entrepreneurs say they started shop was to provide personality and that personal touch. Tom&Serg co-founder and managing director Tom Arnel states: “The UAE food scene is way overpopulated with franchises and large multi nationals. Their businesses are robotic and lack personality, which is absolute key to a successful F&B business.

We wanted to start something that was people-driven, transparent and honest. There was a massive portion of the public who were tired of what was now becoming the norm, so we decided to get as far from the glitzy and glamorous side of Dubai as possible. So we chose the industrial area, Al Quoz, as our perfect location.”

Comptoir 102 co-founder Alexandra de Montaudouin was inspired through what she thought was a missing element. She says: “When we first moved to Dubai we found it quite difficult to eat out healthily. Coming from New York and Paris, we were struggling to find those organic, healthy little restaurants offering vegetarian, sugar-free, dairy-free and gluten-free options.”

When Haque and her husband Rami Badawi realised what was missing was authentic New York style pizza, they decided to jump into the fray. But food wasn’t all, says Haque.

She adds: “Another gap we identified was exceptional service. Rami has a background in F&B with the Ritz-Carlton Hotels in the United States, where the genuine care and comfort of guests was the highest mission. We really wanted to offer that same commitment to service in an accessible environment, changing what people expect from the pizzeria experience.”

Moti Roti founder Tahir Shah also found a gap, he says, as he was tired of the limited choices he had for lunch, and adds it was always a coffee shop or supermarket food that many offices had to deal with. “I thought it shouldn’t be hard to find good food which was affordable and quick for those working in a desk-lunch culture.”

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Money matters
Once a restaurateur has an idea in place, it’s time to find someone to back it — which isn’t always easy without a big brand name behind you, something stated by Gates Hospitality CEO Naim Maadad last month at the Caterer Middle East Food & Business Conference advisory panel. Our entrepreneurs largely agree with this.

Arnel says: “Based on the view that the franchises and multi nationals are the massive majority here, it’s hard to get investors, let alone landlords, to listen to the little guys without spending piles of money on conceptual design and pretty business plans. All start-ups need external investment, but if you don’t have the cash for the initial outlay, life is very tough.”

Al-Barqawi agrees and says emphatically: “Without a doubt, financial backing for new, home-grown brands is all but non-existent in this region. Most banks, if not all, will not even entertain the idea of supporting upcoming F&B concepts; not only in the start-up stage, but well into their challenge-filled first few years.

It is precisely for this obstacle that, probably above all others, many interesting concepts never see the light of day, and those that do, end up reaching far less than their potential promised.”

Shah states it is not easy in the UAE for small entrepreneurs. “I would say the region is not really geared for SME. People with the experience and the right money backing them will do well, but any developed support system for the modest start-up is still in its infancy here.

“You have to work hard, network hard, and demonstrate hard that your concept makes money. Investment should come from friends and family first, and if you can't get backing there, then your idea or belief is not strong enough.”

Haque agrees and says the best option is to have a solid business plan, and seek funding through personal networks. She explains: “As difficult as it is to obtain financing for a business, personal loans are extremely accessible. So if you have a lot of faith in your prospects, why not leverage that option? We like being under financial pressure; it keeps us disciplined.”

Comptoir 102 co-founder Emma Sawko adds: “We were lucky enough to be able to self-finance our start-up, but we started small, with 80 seats. Of course, as it is doing well, we now have new development projects, and would imagine finding financial support will be easier now that our company is up and running.”

However, Montaudouin adds: “Since Comptoir 102 was neither a brand nor an existing concept, it took us a while to find a good location and a landlord who would trust us.”

But how much does it cost to set something up? Al-Barqawi says: “It's very difficult to specify a certain amount. In the last year, I've come across new concepts that have been launched on as little as a few hundred thousand dirhams, to some that have gone as high as tens of millions.” Arnel agrees and says all scenarios and businesses are different, but a small café would cost a minimum of AED 1.5 million.

Shah wryly says: “Starting a business here will easily cost AED 500,000 — which will be gone by the time you’re dusting off your shiny new licence.”

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Clear rules
Licence brings us to the next, most oft-repeated, gripe among entrepreneurs: the ease of getting registered and legally being allowed to operate as a business.

Badawi says: “I would say this is a favourite gripe amongst entrepreneurs in the region. However, we don’t think this is entirely fair. The one valid criticism is that since you have to deal with multiple government entities, it is hard to know upfront what the sequence of approvals is. However, once you figure that out, the process is really smooth.”

Shah adds: “In fairness, the DED and some of the free zones have clear descriptions of the process on their sites. But the devil is in the details — it took me one month to start an application in the free zone because they would not accept ‘Moti Roti’ as a business name, due to a company in England called ‘motiroti’, which is an arts and theatre company.”

Al-Barqawi also says the rules are clear and are there for all to see. However, he adds: “This is not to say that they are easy or straight forward. There are so many interpretations to every situation; that makes both enforcing and adhering to those rules and regulations that much harder for all sides.”

Tom&Serg co-founder and managing director Sergio Lopez also nods to the issue of interpretation and clear information distribution: “The problem we faced was people not being able to solve all the questions or doubts at once, and having to keep going back.

In our case I would say we got lucky because we managed to find someone very helpful and knowledgeable. But to make sure everything is done on time and done properly, it is always better to do it yourself and make sure it is followed up at all times.”

He adds that the problem is not how the rules and regulations are set out; rather it is the people involved as they are not knowledgeable enough or very informative.

If the concept is something not seen before by the authorities, it can take more time. Caterer Middle East has heard of certain ideas resulting in new categories being created just for them.

Sawko says: “We had a hard time getting our F&B licence as we needed both a retail and an F&B licence under the same company, which seems to be quite unusual in Dubai. It was also extremely difficult to get a clear understanding of the steps we would have to go through to get all the needed authorisations.”

Lopez adds that another concern is the amount of paper work, not having the right documents ready or law changes.

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Encourage the new
The UAE is a business hub, but if entrepreneurs are not likely to open up, there is a danger of becoming stagnant in what’s on offer.

Haque says unfortunately, there are not many institutional options available to budding entrepreneurs in the UAE yet.

She adds: “We understand there is an initiative at the federal level to support entrepreneurs of all nationalities in the UAE. Encouraging signs of support from the highest levels is an acknowledgement of the value entrepreneurs add to the local economy. For a long time it was all about the big brands imported from abroad. To a certain extent that is still the case, but we now see rising support for home-grown ventures.”

Lopez says it would be interesting to set up a department specifically for start-ups divided by type of business as each industry is totally different in terms of legislation.

Badawi adds: “If I had one piece of advice for the Department of Economic Development it would be to come up with a licensing checklist that entrepreneurs can get off the website.”

Shah agrees and says: “I also would have liked a ‘cheat sheet’ which lists every charge you will have to pay when you set up. For example, I found out after I had paid up for my licence that I then had to pay an advance to auditors for the company, and that I had a limit on the number of staff I can hire.”

But an interesting point is raised by Shah and Al-Barqawi — it’s not just about home-grown versus international on a conceptual level, but on a financial one. International brands have larger pockets to dip their hands into unlike the independent ventures.

Shah says: “I wish there were layered fees for start-ups compared to other companies. For example, the cost of the licence is same whether I’m applying or Tim Horton’s is; I feel it, Tim Horton’s doesn’t.”

Al-Barqawi notes: “What would help a great deal is consistency with the application and enforcement of those laws. In other words, there should be a level playing field on which all concepts can fairly compete, rather than bigger, more financially backed ones taking advantage of their size and support in a way that no other small, independently launched concept can compete with.”

Montaudouin is positive as she says: “Each day, we were facing new challenges and had no idea of the timeframe when we would be able to operate. But with a bit of patience and a good business model, you get pretty much where you want.”

Is the UAE entrepreneur-friendly? It would seem things are picking up — it takes investors to look beyond the name, and for authorities to further streamline the process to make it easier for exciting new ventures to storm the country.