Business

Franchising a food joint? Don’t get too ‘greedy’

Alvin R. Cabral


Last updated on May 7, 2021 at 07.14 pm
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Imagine taking a McDonald’s franchise and just relying on its global popularity and recognisability to earn. That’s a recipe for disaster.

And while indeed having a famous brand carrying your business is a huge advantage onto itself, doing the opposite — towing that brand with lots of hard work and creativity — would be the way to navigate through the challenging world of this business model.

The biggest mistake those involved in franchising make is the misconception that the model is an easy way to make money — and both franchisor and franchisee are prone to it, Ian Hyndman, managing partner at Dagaz Management Consultancy, told Khaleej Times.

For franchisors, it’s focusing on the upfront franchise fee without planning to support their franchisees; they don’t realise that the more successful their franchisees are — mainly, by helping them grow — the more royalty they can make out of it.

On the other hand, franchisees tend to get too excited about carrying a brand and assuming it’ll drag their outlet to growth; paying for the brand and betting on that without fiddling and being creative can also doom your venture. “It’s not a magic wand that allows everybody to succeed — you still need to work hard on it,” Hyndman stresses.

Another mistake made by franchisees is trying to implement a too-personal touch. For example, taking a franchise and then changing the name or adding on to it; that would lead to the perception that the brand isn’t the real thing.

“It just doesn’t work,” Hyndman added. “When you buy a brand name, you’re also buying a business system.”

Restaurants remain the most dominant sector when it comes to sales value of chain franchises in the UAE. According to Statista data, restaurants are pegged to grow to $3.014 billion (Dh11.07 billion) by 2022, compared to $2.43 billion in 2018, a leap of almost a quarter. Accommodation is a distant second with $824.6 million, followed by on-trade retail and leisure, all of which are also expected to expand.

Also, be mindful of which market you’re in: Menus should be tinkered with to satisfy local tastes.

“When franchising works well, there’s a commitment to the local community,” Rolly Brucales, managing director of Off The Hook restaurant, told Khaleej Times.

And not only should ingredients be fresh; the menu itself should be evolving, making it exactly that — fresh. This accomplishes two things: It keeps customers interested and gives the staff something new to perfect.

“It’s not just customers who’ll get bored; the team will get bored, especially the kitchen team,” Hyndman said. “You got to make things new so they have something to experiment on and to share to clients.”

Another way to motivate employees: Take the financial benefits a step further. Brucales says that they’ve developed a system that, essentially, makes their employees “shareholders” of the company. “We set a quota at every branch… and make sure they get something [accordingly],” he says, implying that providing the best experience to customers will make them more loyal, which in turn will hike revenue.

For good measure: Even amidst Covid-19, management was still able to invite motivational speakers from abroad not just to boost morale, but to also guide staff on how to become financially literate and responsible — an skill badly needed during times.

The unprecedented situation didn’t mean they had to scale down operations and fire people. Instead, they did the opposite: Thanks mainly to rents and costs that went down — they focused on a careful development and expansion strategy, and were able to open a new Dubai outlet late last year.

Those lower rents certainly help, and it is still an opportunity if you look in the right spots.

Hyndman says during the pandemic, businesses that weren’t run well and were surviving on cash flows struggled; the moment that flow stopped, “they had nothing to stand on”.

“Despite being conservative, it takes guts to invest in new sites when there’s uncertainty,” he said, adding that a pool of qualified talent searching for work and suppliers looking for new customers can all be leveraged.

“I think we have the right components that make up our strategy; it has helped us not just to survive, but to thrive,” Brucales said.

“To have a firm that continues to enjoy higher sales, bucking the trend and outperforming bigger, international brands… you got that sense of security.”

— alvin@khaleejtimes.com