Chains vs independents

Thomas Klein International’s Daniel During explains why chain outlets that mindlessly tow the corporate line are doing so at the expense of the region’s restaurant reputation…

It’s my opinion that Dubai has yet to establish itself as a true food-destination city — and one major factor hampering its progress is the fact that independent restaurants have been run with too much emphasis on making a rapid return on investment, at the expense of that essential passion for food.

One business model that seems to thrive in Dubai is that of the chain or franchised restaurant.

Think of your favourite restaurant outside of a hotel; chances are it has several branches across town, quite possibly one in every shopping mall.

The franchise model does have several advantages for the investor and operator. It basically offers a ‘restaurant in a box’: everything from the interiors, menus and uniforms to operational guidelines has already been set out in a series of corporate manuals.

This model allows new outlets to be opened relatively quickly and with relatively low start-up costs — something that has been a prime consideration for many investors looking to cash in on the boom years.

From the consumer point of view, this model gives the comfort of knowing what to expect, in appearance and service as well as on the menu.

But the franchise model also has its drawbacks.

Precisely because everything has been predetermined and standardised, there is little scope for individuality. Chains and franchises have, by definition, something inherently systematic, distant and corporate, with a lack of creativity innovation and passion.

A chain or franchise’s key strength is that very ‘sameness’, with relatively reliable quality.

However it is flexibility and creativity, along with the ability to tailor to guest whims, is precisely what allows an outlet to evolve from just serving good food to surpassing customer expectations — and that applied passion and creativity is what makes consumers travel kilometers to try out an unfamiliar restaurant.

So it seems the strength of large chains and franchises is also their weakness.

Here are a few other points that need addressing at such outlets:

People

Chains target the largest market, so individuality or anything beyond the confines of the operational manual is discouraged.

Employees are trained to follow strict procedures, but in the process, they are discouraged from catering to individual customers’ needs, as it would disrupt the flow.

It can seem tiresome to cater to individuals, but it is actually hugely rewarding for the employee, the client and ultimately the business to provide a service and product that is truly appreciated.

Because everything is standardised, the staff and management employed are not allowed to contribute any form of personal input, and they cannot change anything or add the personal touch.

This can be frustrating for an employee with the motivation and the skill to excel, and it may increase employee dissent and turnover.

Word-of-mouth is the most important marketing component of an independent restaurant; happy customers talk.

Plus happy employees will hone their skills to learn and grow.

Product

Franchise and chain menus are usually defined by the company’s head office, which means they are distanced from the day-to-day operations.

Consequently, it is difficult for franchises to respond to dynamic conditions, these being seasonal or micro-demographic.

Individual outlet managers are often prevented from adjusting the menu to take advantage of seasonality or market specials, even though the end result would likely see increased sales.

In order to guarantee product standardisation, large chains supply semi-prepared products on a large scale, establishing central production areas that oppose the concept of freshness.

Additionally, to take advantage of economies of scale, many chains and franchises tend to use frozen produce purchased centrally and distributed globally.

Sacrificing quality is therefore inevitable, to some extent.

Not all chains use lower-grade products or sacrifice quality during mass production, however they all distribute globally or at least regionally.

Worldwide distribution has a direct negative impact on the local producers and increases shipping traffic, thus affecting the carbon footprint.

Even more directly, it affects the consumer, who does not get the advantage of tasting local seasonal produce at the peak of flavour and textures.

City chefs that are passionate about their food will go to the fish and vegetable market every morning and select what they esteem is best for their customers i.e. the most tender cuts, the ripest fruits, and the freshest fish.

Franchises on the other hand offer the consumer the same standard product the world over.

Passion

As briefly mentioned earlier, large franchises offer little or no incentive for staff to make suggestions on improvements, even though they are far more likely to spot issues than senior managers who aren’t out there facing the customers.

Franchisees and their employees are forced to implement corporate standards many times without even thinking whether these standards match with the local culture or not.

Being better means sticking to the corporate manuals. Individuality is discouraged and in general, passion is driven away from the individual.

Mediocrity attracts mediocrity, and even if certain staff have the potential to shine it is often fruitless, as they are all paid the same wage and are not encouraged to break away from the standards.

The processes are so well established that everything is distant and impersonal, and staff cannot change or add their own flair, which ultimately ensures they lose interest in what they are doing.

I firmly believe that without passion, anything in life, including restaurants, can never rise above mediocrity.

Dubai does have some very successful restaurants that are built on passion. They have owners who care about food, and can often be seen waiting on tables and greeting customers. Inevitably that well-deserved success has led to expansion, and they are now on the verge of becoming too big for the owners to micromanage in the same way that they did before.

The danger here is that they fall into the standardisation trap.

I was recently at one of these restaurants, which I love, and asked to have mashed potato with my main course instead of the fries, as was listed with on the menu.

My server told me that I couldn’t have it as “it wasn’t in the computer”.

I can’t imagine that happening a year or two ago, when that company had fewer outlets and the owner made sure every customer was given an experience rather than a meal.

Once standardisation starts to take over, some of that magic begins to be lost.

The way forward

There are several solutions to creating a reputable chain of restaurants with excellent food and service.

When faced with expansion, it would be better to open unique restaurants, each of them with a personality of its own. Give each one a different menu, even a different name; set it up and give guidance to the local team, but let the individual location chef run the show with passion.

That’s a model that worked well for renowned chef-restaurateur Jean Georges Vongerichten.

Vongerichten hires head chefs whom he trusts, and gives them relative freedom to improve or twist his own dishes, within guidelines set by him.

Each of his restaurants has a different menu, a different theme, a different feel — but the excellence of the food is consistent.

In larger corporations, where the investment comes from group level, there is the option to involve key managers and chefs onto a joint venture. Giving them a personal stake in the business translates into a strong will for the individual outlet to succeed.

It is also important to get line personnel involved, not just through incentive schemes, but by allowing them to make suggestions on how their jobs could be made easier.

Incorporating the team’s ideas into the system makes employees feel important, by making them a part of the restaurant and of its success.

There is a lot to be said for franchises. Customers know that when they enter a branch, they will get consistency. The challenge is to make sure that it’s consistently excellent, not consistently mediocre.

Franchises in the Gulf are usually part of large conglomerates and therefore managed in an impersonal corporate manner.

At corporate level, the first step is to negotiate a certain degree of flexibility to adapt corporate standards to local requirements, taste and customs.

In order to add passion and personality to your outlet, you also need to pre-establish systems that allow the right manager flexibility within the system — the ability to bend the rules within set limits and to go out of the way to meet customers’ needs and wants.

Finally, setting up a corporate culture that is equal parts individuality, passion and profitability will manifest in an improved bottom-line and market longevity.

Some people may argue that in hotels you find many high quality restaurants that are not franchises or chains. While these restaurants are much better than chains, many are restricted by corporate constraints and overzealous executive chefs, who often limit the personality, flexibility and creativity of the restaurant chefs.

What Dubai really needs is more stand-alone restaurants with liquor licenses, such as those at Century Village, which are not as highly-regulated by the landlord. This allows the restaurants to be free to be as creative as they like.

More Dubai hotels should also be looking at leasing their premises to individual restaurateurs and chefs at reasonable prices.

This will not only create more interesting and unique restaurants, but it will also position the hotel as a food and beverage destination. Okku at The Monarch Dubai or Zuma in DIFC are good examples of this practice.

I believe that when a customer goes to a chain or franchise, especially a foreign franchise, he is giving a slap in the face to individual chefs and restaurateurs that promote creativity.

Personally, I would rather take the risk and patronise new restaurants where creativity, passion and individuality are the core focus.

I truly hope Dubai will be there soon.

Daniel During is the managing partner at professional turnkey consultancy Thomas Klein Group; for more information, visit: www.thomaskleingroup.com