Abdul Kader Saadi, managing director of Glee Hospitality Solutions explores what works best in the Middle East
One of the most common questions we are asked by people looking to invest in food and beverage businesses is whether it is better to start a new concept or expand on an already established brand. In general, due to the brand recognition, expansion is the preferred option in the Middle East for investors who are new to the business.
However, homegrown brands launched in recent years in the UAE are now seeing a significant rise in franchise opportunities, specifically within other GCC countries like Bahrain, Saudi Arabia, Egypt, Qatar and Kuwait. Local investors have recognised this trend and are keen on reaping profits, while raising the brand value and improving brand recognition in the wider region.
The truth is there is no right or wrong answer on whether to expand a brand or invent something fresh, but there are advantages and disadvantages to both which should be identified and understood. Most importantly, the decision should be based on the investor’s strategy, objectives and aspirations.
One of the biggest advantages of taking on an existing name is the brand recognition amongst consumers in the market; but there are other important benefits such as the systems already being in place and the previous success offering reassurance that it will be accepted when entering a new market.
When setting up a new venture, there is an initial investment that goes into creating the brand for concept and design development. The process of establishing a new concept takes longer as there is always a learning curve, and it takes time for the market to accept and follow the new brand.
To grow a successful new concept requires informed decisions and a well-thought-out plan of action backed by expert knowledge and robust research. And, once launched, the new concept requires time to seep into the target market and to build a loyal client base.
Whether it is a new or existing brand, the location needs to be researched correctly. The site and position of a restaurant is something that could make or break a venue, regardless of the quality of food, the operational team’s skillset or how successful this concept may have been elsewhere.
Not all restaurants are designed or destined for rollout. Several factors affect the launch of a new venue – from its size, initial budget, the kind of product on offer, service style and menu. Also, brand expansion is an option only worth considering once the initial outlet has proven to be successful.
In recent years, people have been more willing to invest in new concepts, especially homegrown brands. They wonder why they should pay for a brand name based in the USA, which may not be able to adapt to the local market. A common question that potential investors ask the consultants at Glee Hospitality Solutions is: How can a business in the USA or the UK, which is thousands of miles away and on a different time zone, support my business in the UAE?
The truth is that most international companies are not ready to franchise out and certainly not as far as the Middle East. Yet, they continue to do so just to make short-term monetary benefits.
For many investors, all these benefits are outweighed by the potential profits and the freedom that a new concept can offer. The cost for franchised concepts can be high and difficult to manage as it involves paying royalty and franchise fees, while some investors may feel trapped by the brand requirements and regulations involved with a franchise.
Those with a deeper passion for good food and hospitality, will be keen to introduce something fresh to the market that they will hope to grow into a successful business that others may want to expand in the future. Owning an original concept gives the investor the freedom to make changes. This flexibility helps the business adapt quickly and more efficiently to the ever-changing market trends.
It should also be remembered that more niche concepts are less suitable for expansion, especially in the fine dining sector.
To choose between investing in a new concept or a new branch of an established venue, you first need to see which strategy best suits your long-term business model and budget. Identify the key risks, various expenses, and potential time frame in both situations before taking a cautious decision.
The secret to success in the current difficult market is robust research that leads to a creative concept, which will in-turn ensure consumer demand.
About the author: Abdul Kader Saadi is the managing director and owner of Dubai-based Glee Hospitality Solutions, which has researched, designed and launched more than 20 restaurant concepts, and operates 40 outlets across the GCC.