Losing local identity

In a region where so many western restaurant franchises have been imported so quickly, could the lack of local identity and owner passion among F&B chain operators harm the industry?

The Middle East is often hailed as a hot-bed of innovation — a breeding ground for unique buildings, hotels and restaurants.

So why is it that so many outlet operators in the region have chosen to import existing western F&B concepts, rather than develop their own; and what effect has this had on the local chain outlet market?

Thomas Klein International managing partner Daniel During said there were multiple reasons for choosing to import brands.

“The Middle East doesn’t have a culinary tradition such as Italy or France, or an immigrant population as in Australia or the Americas, which might see people promoting their own national cuisine by investing in their own businesses,” he noted.

“What we do have in the area are investors with little or no culinary background, who have to purchase the know-how to set up an F&B business — and the best way to buy know-how is through franchises.”

For an operator, purchasing an existing franchise is an attractive option: they are buying into a ready-made, proven and therefore comparitively safe brand; plus there is no lengthy or costly development process, so it can open quickly.

“As local landlords are unwilling to take risks with new, unproven concepts, a franchise makes it easier to obtain prime locations in malls and other areas,” added During.

“Add to that customer brand recognition and it’s pretty much a no-brainer for someone who wants to start up an F&B business, has little or no experience and absolutely no time to invest to develop his own.”

Gautam Moudgill, general manager of Mumtaz Mahal Restaurant — an established Indian concept in Oman which has run for more than 25 years and is now in the process of franchising the brand further afield — noted there was “an element of uncertainty” in expanding an unknown brand.

“If the franchise is not developed with total diligence and adequate resources, the chance of failure is very high,” he conceded.

So expanding is not easy for small, home-grown brands; but is the fact that the Middle East market consists of predominantly foreign franchises a problem?

According to Abdul Rahman Falaknaz, president of International Expo Consults — organiser of Franchise Middle East (FME) — the presence of successful chain outlets ensures the consumer more choice.

“Further advantages come from their expertise and established franchise systems, which help this region to learn,” he noted.

Similarly Sami Daud, chief executive of Gourmet Gulf — the lcoal franchisee for YO! Sushi, Gourmet Burger Kitchen (GBK), California Pizza Kitchen (CPK) and Morelli’s Gelato — noted that the introduction of established players increased competition and standards across the market.

“Choosing to import an existing western franchise is similar to buying a successful business model with an efficient learning curve,” he added.

Daud said the company took “meticulous measures” to ensure the international brands would fit into the regional market.

“This is reflected in every aspect of our restaurants, from the seating area to the greetings and service to our menus. Plus we adapt our menu offerings to local and regional preferences without jeopardising the essence of the brand,” he asserted.

However Thomas Klein’s During said certain limitations necessarily applied to most international franchises.

“As foreign franchises are all managed under a set of corporate guidelines, all identical within each chain, there are unable to adapt fully to the local market, often remaining foreign to the culture and colour of the people,” he claimed.

More Café and Intelligent Foods managing partner Marijke Lap agreed that the influx of global chains had resulted in “a uniformity of brands offering very similar fare, most of whom have not adapted their menu to suit the local palate”.

However there are exceptions: established chain operator BinHendi Enterprises’ not only franchises western brands, but also develops its own unique F&B offerings.

The group’s president Mohi-Din BinHendi commented: “Although the western franchise system is a way ahead of us, we can be equally as good with time.

“For us, working with western brands is an effort to take market share in the F&B business. But on the other side, we are focusing on and developing our own brands as well, making our own ventures and our original concepts really successful in the area,” he explained.

“We are in the process of franchising our home-grown Japengo concept and we will be launching three new original concepts later this year,” he added.

BinHendi’s effort may tell a success story, but other local brands — particularly single-outlet operators looking to expand — do face challenges; primarily convincing landlords to accept them in prime locations, according to During.

“Big groups are able to negotiate better leasing rates with landlords than newcomers, making it increasingly difficult for new concepts to be profitable,” he noted.

International Expo Consults’ Falaknaz added that such brands also faced a fight to be accepted by the region’s population of diverse nationalities.

“Everyone is familiar with brands like McDonald’s and Starbucks, and we know what to expect from them, whereas local brands need some time to establish themselves,” he pointed out.

So what does the future hold for the regional franchise scene: more of the same, or new concepts taking off as the market matures?

BinHendi Enterprises’ BinHendi said he hoped for more original concepts, but was unsure how straightforward progress would be.

“It’s not easy to strike a winner here. It takes a lot of effort to make a successful brand and keep it successful, while competing with high international brands,” he warned.

With consumer demand for variety increasing, there is room for both types of franchise, according to Mumtaz Mahal’s Moudgill.

“The top-performing successful franchises, in both categories, continue to see growth ahead. I guess the ones performing well will grow and a few new entrants will also move in,” he predicted.

But More’s Lap called for “more originality”.

“Operators should not be lazy and copy good ideas from someone else; they should start being creative,” she insisted.

“But companies are starting to realise that ‘copy-and-pasting’ an imported brand is not a guaranteed formula for success.”

Thomas Klein’s During predicted that as the market grew, so would the range of offerings.

“This growth will be proportionate to the climate and offer mix, so we should see more of both,” he said.

“So there’s potential for the proportion of locally-developed concepts to grow — however I suspect it will take at least 20 years to balance things out.”