Chained up

[L-R] Mahmoud Harb, Rob de Villiers, Joe Van Jaarsveld and Simon Penhaligan

Undeterred by the economic downturn, chain outlets seem to be making steady progress in the Middle East. Some of the region’s top brand operators met at Frankie’s Bar and Grill this month to discuss pro-active plans for 2010, why the region is still a key growth area, and the real challenges facing their brands

Over the past 12 months, how have F&B operations been affected by the economic downturn?

Mahmoud Harb: We had some closures; it was the wisest move to close the few non-performing outlets, so we decided to bite the bullet and stop the bleeding.

We had two outlets that had been open for less than a year, so we had to basically write off the investment cost — and we’re talking about millions. But we knew in the long run it would be much better for business.

With the mall management, it was not easy to extricate ourselves; it took us six or seven months of negotiations, and we had to pay penalties.

Rob De Villiers: Things in malls are improving; I think Dubai Mall, for example, is certainly turning around, with regards to footfall. But the landlords aren’t negotiating. No matter what the situation, even if you are trading as well as you should be, they’re not prepared to change rates or negotiate.

Joe Van Jaarsveld: But looking at the impact of the downturn, we’ve had a down side and an up side: OK, the consistent growth we saw in our stores for many years has slowed down. But we’ve been fortunate in that we seem to be strong in the region — and now there are more purchasing opportunities, as we’re in a better position to negotiate with suppliers.

Penhaligan: Absolutely — before, suppliers wouldn’t give you the time of day. Now, they’re knocking on your door, looking out for good deals.

I think it’s also weeded out some of the more wishy-washy suppliers, who were trying to take advantage of the market, so we’re left with the established players with good quality products. And if you are a bit limited in other areas, this is exactly what you’re looking for: things that can make a difference to that bottom line.

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Looking forward, do you have an expansion strategy in place for 2010?

Harb: I think we’ll wait and see how the first-quarter figures come out. They will give us the indication for how we should continue for the rest of the year.

Penhaligan: For us, as a hospitality company we obviously have different sections: we have the restaurants; we also do consultancy work, for example on the Dubai Pearl and we’re looking at other consultancy contracts.

We’re also looking to franchise out Frankie’s and we already have some interest within the region, in Muscat and Doha; so those are the main areas we’re focusing on. We’re also looking at management contracts as well, for hotels, so RMAL has the advantage of being a bit more diverse than just restaurants.

Van Jaarsveld: The Middle East is definitely still a growth point for us; there are a lot of possibilities. Our aim is to be in every area of the region, but right now we’re really focusing on consolidating our products and looking after our staff.

Khalil Fakih: For BinHendi in 2010, we think it’s the right time to start focusing more on finding exactly the right developments. In previous years we were just rushing out, trying to be present everywhere within every single development. Nowadays, we have to really think how we’re doing it, whether it’s the right place; so we will continue to grow in 2010 and 2011, but only through the right projects.

Penhaligan: That’s not to say there isn’t still huge competition for sites; prime places are still being snapped up around the region. I just think you have to look at the strategy, at the feasibility study, and decide whether the area is going to give you a return on investment and whether your brands can work in the area.

Fakih: When we invest in a restaurant, it’s a huge amount, so if a restaurant is not performing, we have to really think and find a way to make it work, before we take the final decision to close it.

But of course some sites have been affected by the downturn and the changing consumer market; we have the Duck King restaurant which opened last year in Jumeirah, but it’s around five-star hotel prices, so the theme really requires it to be a licensed venue as well.

I think we have to reconsider the costs in that restaurant. The quality of the food is amazing, but right now it’s AED 180 per person, so we certainly have to reconsider the pricing.

Harb: We had a location in the same mall as Duck King, which we closed down because it was really suffering. I think since JBR opened and so many Dubai Marina developments came up, Jumeirah has slowed down. We didn’t see any hope there for our outlet, so it had to close.