Commentary

Is the UAE restaurant industry in trouble?

The problem has more to do with the lack of integrity of some operators leading "bad brand" than industry saturation.

March 10, 2017

By Murad Alnasur
COO, FranchiseME

It seems like everyone is talking about the F&B industry slowing down due to saturation, and the Middle East is no exception.

The problem, however, has more to do with the lack of integrity of some operators leading "bad brand" than industry saturation. Leaders of these "bad brands" aren't industry professionals and are only interested in buying a couple of years' worth of employment. As long as there is no integrity and transparency when asked about the possibility of the success of a brand, we will continue to see many bad brands come and go.

Allow me to illustrate.

A company hires a leader (let's call him Joe) who it thinks he is a professional in the industry (based on his resume) and tasks him with finding a restaurant brand for him to open. Joe — for the sake of fulfilling the emotional wish of his boss — convinces the boss that a brand in another country, which has only one unit and a menu that caters to a special group of consumers, will do great in the UAE. After all, everyone knows the UAE is a hot bed for new brands.

The boss gives Joe a mandate to find a location for that brand, and luckily, Joe has a friend at ABCD Mall tasked with meeting leasing quotas.The leasing manager at the mall has a lousy spot that no one will take. He/she convinces Joe that since his brand is new and only has one location in the country of origin, the only spot available for it is on a corner at the end of the hall next to the cleaning closet. Joe is afraid of losing his job. He goes to his boss and tells him that the lousy brand will work at that lousy location.

After all, Joe just needs to buy a couple of years of employment. The boss, who knows little about the industry, agrees. It takes at least eight months to launch the lousy brand. The ABCD Mall does not mind since it benefits from imposing a penalty for late opening. Joe spends lots of money on marketing and opens with a huge bang but only because the invitees are eating for free at the grand opening.

Joe's boss feels good, however, since the opening gave him the chance to brag about his new restaurant. That excitement, however, lasts a few months and then sales start to drop. Joe asks for more marketing money. The boss pends it, yet it does not help. It is still a lousy brand at a lousy location.

The mall is happy since it has the post-dated checks, and two years later when the boss fires Joe due to the losses, a new leader (Joe No. 2) promises to save the brand. His attempts will buy him few a paychecks. What the boss should have done is close the lousy place, but no one likes to look like a loser. He keeps throwing good money at a bad brand.

That, my friends, is how the malls keep filling up with brands that should have never been opened.

Bad brands lead to a perception of saturation

The media counts that lousy restaurant and the hundreds like it and reports about the saturation of the market. This is tragic because these bad brands should never have been allowed to open. Their existence is harming the good brands and the industry overall.

Fixing the problem

I believe it's up to us to save our industry from a future collapse, which the good operators are not causing. We need a little help from the media, however. I would like to see the media conduct a round table discussion and invite honest Joes to tell the true story of what is going on with their brands. My bet is that if all those Joes were honest, most of them would recommend closing few of the brands under their leadership.

That would stop the perception of saturation and improve rental cost since the malls would lose at least 30 to 40 percent of the F&B locations. They would be forced to drop the prices, which would make them think twice before hiring Joe or agreeing to launch a lousy restaurant at a lousy location.

Are you and your Joes up for the challenge?