CEO interview: Just Falafel's Fadi Malas

When Lebanese national Fadi Malas moved to Dubai in 2005 after a long stint as a banking professional in London, little did he know his next venture would be heading up the largest F&B franchise to come out of the Middle East.

Malas knew Mohamad Bitar, founder and managing director of Just Falafel, who told him about his new venture, which took the humble falafel and made it a commercial fast-food option in a variety of flavours. When Bitar revealed to him that he was ready to take his four-store business to the next level and begin franchising, Malas joined the team to head up operations full time in 2011 and set what seemed like ambitious goals at the time.

“We did a five-year business plan to sell maybe 20 or 25 stores and it took us only a couple of weeks to do that and we haven’t looked back since,” laughs Malas.

The team soon realised that in order to concentrate on their franchise model, they would have to sell their existing outlets to their franchisees. Retaining only one store — in Dubai’s Mall of the Emirates (MOE) — under its remit, Just Falafel sold its three additional stores in Dubai and Abu Dhabi.

“When we started franchising, we thought we needed two operating infrastructures to manage propriety stores or to manage franchises. And if we were able to franchise, we’d rather sell our stores, focus on growth and only sell franchises,” explains Malas.

The business has since grown rapidly. In three years’ time, there are now over 50 operational stores under the brand, with 20 additional outlets under development, and at least 200 more signed — a number that seems to grow each week.

Malas acknowledges that he’s aware of the brand’s perception in the industry of growing too fast too soon. Undeterred though, Malas explains his competition is not just local brands, but global fast food chains such as Subway and McDonald’s.

“We’ve signed hundreds [of stores] across 18 countries and we are continuously signing, continuously talking to people and it might sound like a lot of stores, but it’s not because you have operators like Subway, who operate 42,000 stores and we still have 50 stores so we need to grow fast because we have a long way to go. If we want to operate stores in MOE and places where the big guys operate, then this is the way we have to think,” he stresses.

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NEW HORIZONS
While Dubai will remain a key market for Just Falafel, and the brand is present in locations such as Jordan, Egypt, and Turkey, it is also one of the few local concepts to expand well past the Middle East.

“We are already in 14 countries. For a business that was only operating in one country until 2012 — we opened our first international store in 2012 in Jordan — and now, from being in only one country, we are in 14. So we are growing really fast,” states Malas.

It’s been a busy time at Just Falafel — in the past three months alone, the franchisor has announced a raft of new openings in key markets, and expansion plans that tap into new regions. First up was the announcement in May this year of the signing of 57 new restaurants in the Benelux region (Belgium, the Netherlands, and Luxembourg). And in June, the group marked its entry in North America with the opening of Just Falafel stores in Canada and the United States.

Just Falafel opened its first Canadian restaurant on Toronto’s Bay Street, a thriving commercial and residential centre that has up to 100,000 commuters passing through it every day, demonstrating the company’s strategy of picking the right location with a lot of footfall. As always, the menu features a local twist, with the restaurant serving poutine, a Canadian speciality, on its menu.

In the United States, Just Falafel signed 10 new restaurants in Texas alone in June. The expansion will see restaurants opening first in Houston, followed by more stores in Austin.

This follows the opening of the brand’s first US store in San Francisco earlier in the month, with a decidedly Californian twist in the menu, which offers gluten-free options, and The Californian wrap created by culinary chef Gerard Murphy. Another branch is also due to open this month, while Just Falafel has signed agreements with partners in locations such as New York, Kentucky, and Los Angeles.

“It’s like we’ve cornered the world. We are in Istanbul; hopefully we’ll be signing some contracts in North Africa again. We are also in Egypt. We are pretty much present in the Gulf, so we have grown,” adds Malas.

However, Malas is not happy to sit and watch his fast food empire grow in the Americas and Western Europe alone. Next up for the franchisor is the Indian Ocean region. A Just Falafel restaurant is due to open soon in Bangalore, India, while the group has also signed memorandums of understanding in Mauritius and Madagascar.

“I want to go everywhere. My wish is to honestly be in every single country because we are in an industry where everybody consumes food. If you can communicate to people what you are doing, surely you can find one or two people in the country who are willing to take up the challenge as much as you are. And it’s a food category that is new, so it’s exciting. There is a huge element of innovation. Most of the other food categories have been commoditised already and over-consumed and over-available,” he asserts.

ALL IN THE DETAILS
Before signing a new store, potential franchisees have to meet Just Falafel’s minimum financial requirement of US $75,000 of “non-borrowed personal resources”.

As with all franchises, the onus of turning a profit and marketing the store successfully falls on individual franchisees. Just Falafel charges a marketing fee and a royalty fee to all its franchisees to promote the brand globally. The fee is determined based on markets — franchisees in the Australia, Canada, and USA for instance, pay up to 4% in marketing fees and 7% in royalties, while those in other regions usually pay a 3% marketing fee and 6% in royalties.

The franchise fee for each outlet also varies between $16,350 and $25,000 depending on the country. The fee covers the cost of the Just Falafel licence, training, operations manual, menu development, support, and guidance.
In order to maintain consistency in the product, especially in new markets, Just Falafel has established a central kitchen in every new location it has opened a store in.

“Every time we go anywhere, we try to have our own central kitchen and in some areas now we are moving into outsourcing because that is an option as well. We have a very simple menu, and we try to get all our supplies locally wherever we go. Either we own the kitchen ourselves as Just Falafel, or we do a transfer of technology to our master franchise partner,” he explains.

Malas is optimistic that the recent signings mark a new era of growth for the company. He says: “Because we have such a huge interest, and because we are confident in terms of the industry we are in, which is food, we feel that we will strengthen our foothold in certain markets that we do well in — we don’t know which ones yet because we are still in early stages.

“When I tell you we have 50 stores and 20 under construction, you will see that the growth has really started now. It took me three years to get to these stores and now I can double them in the next 12 months. So we are starting to learn what it takes to operate a company with 150 stores. We are not there yet, we are still learning, and we can only do it by trial and error.”

The franchise model also benefits Just Falafel because all stores are managed as individual businesses by owners with a vested interest in running a profitable restaurant.

“Maybe only one or two of the stores are into their third year — so we don’t have many performance details [to set KPIs], but I think great franchisees will come in and put high benchmarks for themselves because these are businesses that they own and however well they perform is for their benefit and the more you shine as a franchisee, the better you are as a businessman.”

There have been times, however, when the team has had to step in and help some outlets improve service or sometimes take over management. Case in point is the Deira City Centre outlet, which Just Falafel took over from a franchisee when it wasn’t performing as expected.

“We’ve taken one of the stores from our franchisees in Dubai, and we have been able to double the sales overnight.
We didn’t do anything else differently; we were only serving the client better. So the performance of any particular store is an element of management — the same store can be managed by different people and deliver different numbers,” explains Malas.

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SECRET TO SUCCESS
The company’s three-pronged strategy has also helped Just Falafel achieve success. Malas explains: “I think the first thing that worked was the food category itself — today, no matter how wide our competition is, we are the number one in the world in our category because no one took the falafel and adapted it and franchised it and innovated it. We chose the right food category, and it put us at the forefront of the game in that particular food category globally.

“The second thing is I think our communication was extremely efficient and effective. As early adopters of digital media, we were able to benefit and take advantage to impose our brand across the digital world in a very effective way.”

The fact that Just Falafel is one of the savviest brands on social media is no secret. The company has used Facebook extensively — from marketing its new outlets and locations, to attracting franchisees through a dedicated tab on its Facebook page. The brand’s smart use of the social networking platform also led to Facebook conducting a case study on how businesses can use the website to attract investors.

“The third thing that went right for us was we launched our concept at a time when there was a global credit crunch so people were not interested to talk about stocks and bonds, and nobody was talking about investing in a new concept... and it’s not common for a franchise to come out of the region as well.

“So too many things went right, and I think we had the right team in place to take it to the next level. We invested in people and continuously try to invest in those who will take this brand and really elevate it and take it to the next level,” adds Malas.

Location was also a key factor that helped establish the brand in the market early on. While Just Falafel originally started in mall food courts, it eventually ventured out to commercial and residential areas such as Dubai’s Business Bay and Jumeirah Lakes Towers.

“We have stores in residential areas, in business districts; we are all over the place, but we still have very few stores compared to our competitors. In the UAE we operate 18 stores, and our competitors operate more than 100 stores... that’s why we see growth for ourselves in the UAE market as well because we are under-represented,” he asserts.

Furthermore, Just Falafel is also now looking at running more propriety stores in the city while it continues increasing its presence in the United Arab Emirates.

“We own two stores today and now we want to go back to owning stores because we feel there is great value in store ownership and we’d like to have some ourselves as much as our franchisees. So that’s why I see high growth in the UAE because we will be developing as well. We are excited, we love the market, we know it quite well, and we are looking to continuously innovate.”

The number of stores under development has meant that Just Falafel has to grow its workforce. “In terms of recruitment, we are probably doubling the number of people that work under the brand. Today, Just Falafel has around 700 people working under the brand, and that will potentially double over the next six to 12 months,” reveals Malas.

The company recently launched a new recruitment campaign called “Would you like to work with me?” which uses social media to attract potential employees. The campaign attracted over 200,000 views within a few days of its launch, and according to a recent statement by the company, Just Falafel receives close to 100 applications per day.

While the franchisor is helping to attract staff to the company, the responsibility, as always, is on the owner to recruit the right talent for each store, with Just Falafel contributing to the training element.

TEETHING PROBLEMS
For a business this successful, it’s easy to forget that Just Falafel has been on the market for just over five years now, and with so many new openings and almost 200 outlets in the pipeline around the world — all in a relatively short span of three years — it can’t be an easy task dealing with so many different owners and adapting to different regions.

“We have so many challenges everyday; there are never enough hours in the day to deal with what we have on our plate. We expect every day to have things and every day something comes up because we are opening a store with a different partner, in a different country, in a different currency, in a different language, in a different supply chain, with a different method of communication, in a different culture... and multiply this by 20 for a company our size, and you will understand that we are still building this; we are trying to streamline everything, so it’s never-ending,” Malas laughs.

Working with different owners and suppliers hasn’t been easy for the company either, he admits, claiming that the company’s rapid expansion is sometimes difficult to keep up with.

“We are still learning how to manage a business. At this stage of the game, our business remains quite fragmented because we are growing globally in a very thin way. I’ve learned a lot of lessons along the way but despite that, there is nothing that I would do differently today.

“Knowing all the mistakes we’ve made over the past couple of years, whether it’s the choice of a location, or a particular market, choosing a point of sales system, supplier, franchisees, employees — we’ve made mistakes across everything that we have done and that’s why we are more confident now about the future and we think we will make fewer errors than we have over the last few years when the brand was still young and extremely thin,” he says candidly.

MENTORING ENTREPRENEURS
When Malas is not busy running a global F&B franchise, he spends his time as a mentor and speaker at various industry conferences, championing entrepreneurship in the region.

“For us to prevail as a brand, we have to change the acceptance of entrepreneurs in the region. I am a big supporter of people who are doing start-ups,” says Malas, who recently helped crowd-fund an Arabic content website Ekeif.com through crowdsourcing website Eureka.

“I think going forward I would like to invest more and more in start-ups; young entrepreneurs who are not scared to go out and try to excel and do new things. And I think now is the time... in two or three years when all the scepticism is gone and everyone wants to do the same, it will be too late for people to make money. So now is the best time for people to invest in start-ups in the region,” he urges.

“I’d be less excited to consider brands that have been here for 20 years and have only grown to 50-100 stores. I’m more excited by younger brands that are single-store who are very entrepreneurial, very dynamic, because there are a lot of people who have done very well for themselves at a regional level and are within their comfort zone and are not willing to take up that risk. Anybody can go anywhere, so it depends on how entrepreneurial you are. There is no excuse not to grow your company,” he concludes.

Local brands to watch
- Taqado — The home-grown Mexican brand is looking to open several more outlets across the UAE over the next year.
- Moti Roti — This pop-up Indian takeaway serves healthy, fresh, and traditional wraps and recently set up its third food station in Dubai.
- Man’oushe Street — Another Arabic street food concept that’s eyeing at least 200% sales growth by next year.
- Chez Sushi — The home-grown sushi bar has already opened its first international franchise outlet in Oman.
- Bateel — The brand has grown from a dates and chocolate retailer to incorporate a café menu, and recently began stocking its products at Harrod’s in London.