DREAMERS AND DOERS: The F&B start-ups making a name for themselves
Being an entrepreneur can be a lonely business, or so some of the F&B-preneurs have told Caterer Middle East over the years. A tough one too, they said. But despite that, these dreamers keep doing what they know best: creating F&B concepts and keeping them going.
While the UAE has seen a slow but steady growth of F&B start-ups, there has definitely been a rise in the local, home-grown start-up without a sizeable financial backing.
Some of the set-up challenges that almost all the entrepreneurs we spoke to pointed out were issues related to recruitment, dealing with some landlords, rental costs, visa costs, along with overheads.
But one of the most common concerns cited by many entrepreneurs Caterer Middle East spoke to was related to landlords and developers not keen to take a risk on them.
Spill The Bean founder Hannad Abi Haydar recounts an experience where a developer showed him a project in a location that could not, under any circumstances, get decent footfall. He says: “This tells you as an SME how I am treated. Once the big guys take their pick, then I am shown a space.”
BookMunch Café founder Dareen Charafeddine interjects: “…And this is when you have established a name for yourself. Before that you’re not even…[considered].”
Cookies & More founder & head chef Jassim Farukhi agrees with this and notes: “You get a lot of resistance with new concepts no matter what — and I understand why. Primarily when you look at brands from the US coming over here, they are tried and tested. They’ve got financial backing behind it.”
So rampant is the issue that even now-established start-ups believe that there isn’t always buy-in for the ‘local‘ concept in the face of an international or well-known franchise. Aegis Hospitality founder Samer Hamadeh adds: “I like that there are more and more home-grown brands coming up. It’s a shame we have so many franchises here. Some are incredible, don’t get me wrong but there’s a lot of talent here. Landlords should have vision and long-term thinking to take a risk.”
Food Fund International CEO Johnny Tomazos comments: “Landlords should identify who the right operators are, not who is going to pay the highest rental. Because when we take a location is, who are our neighbours? If we know those around us are good operators we know the development will become good for destination dining, so the tenant mix is important. At the same time, we would ask for a market related rental in line with what’s happening today.”
However, some restaurateurs have shared that some landlords do not always reveal the tenant mix willingly.
However, Tomazos does believe that it is still a good place for independent restaurateurs, and hopes there will be an adjustment in terms of rents coming down.
Rents and contracts are a whole other ball game, however. High rents aside, exit clauses can also be a problem in some cases, especially if a new restaurateur is not vigilant. Some contracts may have no exit clause for the entrepreneur — or a fairly tricky one — but landlords are allowed to give notice more easily. Bigger corporations can tend to get an exit clause in their contract. Smaller developers, however, can sometimes be more flexible with their contracts. Tahir Shah, founder of the now defunct concept Moti Roti, says: “Landlords are good businessmen, they rely on dreamers.”
One Life Kitchen & Café founder Necip Camcigil asks the tough question: “Isn’t it partly our fault because we’re choosing to do business with entities that are much larger than us?” He says that with a smaller-sized landlord, it’s more viable to sit down and negotiate terms, and it is essential to be aware of all the clauses in the contract. Rental costs, of course, vary from place to place, and can range from AED 300 ($82) per square foot through to AED 600 (US$164). Camcigil, however, points out that it might potentially be more beneficial to be located in the AED 600 rental, and adds: “Isn’t it better where it’s higher because there’s more footfall there? You’re better off paying AED 600 in a big mall than in an unknown place.”
But many a start-up has said over the last few years to Caterer Middle East that larger corporations or franchises get the best locations, and can have a completely different contract to the smaller entities. Fresh Fruits Company’s Mohammad Mansouri comments: “Money talks and this is a struggle that we have.”
Farukhi adds to this: “In the beginning it’s always tough, unless you have a big financial reserve and a very strong marketing team. So what does an entrepreneur do? You think of alternatives.”
Affordable alternatives aside, cash flow is definitely something that new start-ups need to bear in mind, as many pointed out. Camcigil says: “You need to have a business plan first. Not just concept and who you’re targeting but a financial model — because once you plug numbers into a financial model and you see what you need to be making per day to not lose money then some of your choices change. Honestly, what I would love is doing a café with 8-10 seats, no pressure. But plug that into a financial model and you need to turn that every 10 minutes all day. The romantic idea of having a café doesn’t make sense on an Excel sheet. It’s not romantic when you’re haemorrhaging money.”
Tomazos taps in to that sentiment of where people, who don’t necessarily have the experience or know-how, think it’s ‘romantic’ to own a restaurant and adds: “I think there were too many people entering the restaurant industry and it wasn’t their core business and too many people starting food groups with unrealistic expectations. That is changing because they have seen the realities of it. So people entering the restaurant industry are going away and there’s a clean-up going on.”
Shah points out that when a business plan is made, there needs to be “enough of a cushion”. The crowded marketplace, clean-up or not, means that it takes time, he notes, for diners to learn about you, then visit, and finally, visit some more.
Abi Haydar circles back to the point about business plans and says: “This is a very valid point. If you have a good business model and then didn’t succeed, that’s something. If I’m renting something at AED 300,000 ($81,700) I need to make 220 transactions a day. That’s not realistic.”
And yet the number of new restaurants or concepts created by local talent continues, despite potential challenges. Shah comments: “You learn that when you go through it but the fallibility is this… this is what happens. When you’re a dreamer you see that one guy who does well. ‘He did it, I’m going to do it’, is what you think.You don’t realise that for that one winner, 999 people fell behind him.”
Camcigil adds: “What I think is the most important is to encourage SMEs to see those thousands to get one success. You need all of them to give it a go, and let the Darwinian Theory work. The losers shouldn’t get punished though. If the entry was easier, there would be a lot more independent entrants.”
Shah, while sharing the caveat that this might not be the best example, says that Singapore’s authorities “half funds or partially funds the hawker centres”, and continues: “The idea is that the entrepreneur is the driver of the economy. It would be great to have an initiative for a lower barrier to entry.”
This circles back to the point made earlier about taking risks on home-grown talent. In an interview with Baker & Spice director of operations Andre Gerschel a few months ago, he championed the cause of home-grown, saying: “Hotels should immediately sub-lease, do joint ventures with, and partner up with local young F&B operators. Let’s get rid of franchises, the royalties are a total waste of money, it doesn’t make any sense anymore. Let’s do something that shows agility, that shows an avant garde look towards the future of F&B and let’s partner up with some of the local guys who are going to showcase excellent local talent.”
And this agility, Gerschel says, is what will lead to success. All the entrepreneurs Caterer Middle East has spoken to over the years speak of passion for the business and the willingness to be flexible in the face of all odds. Shah adds: “All the ups and downs we go through, we can’t teach that or describe that to anyone. These are the things we go through that build us.”
And Hamadeh notes: “I’m not a huge fan of the word ‘entrepreneur’, I prefer ‘opportunist’ because ultimately the term ‘entrepreneur’ romanticises something which is just humans seeking opportunities and fighting against crazy odds.” And may the odds be ever in their favour.