A successful investment banker friend called me frantically last week. His supremely elegant three million dollar restaurant in one of Dubai’s trendiest dining hotspots was floundering, and he had just emerged from a meeting with his partners. I listened patiently, hoping not to hear the ‘d’ word – at least not from him. Four different times this month was already a bit much I thought. And then he said it. “We’re going for a distress sale and I need your help”. This translates to “we’re losing money in buckets and want to give away the restaurant for a pittance, but the sale needs to happen yesterday”. Sad.
Now I don’t intend to put a damper on Dubai’s generally flourishing food & beverage scene (the unmistakable growth stats would discredit me, even if I did), but my friend’s ordeal is far from isolated. Many have jumped on the Dubai restaurant bandwagon with enthusiasm in recent times, only to fall off unceremoniously and wonder what hit them. The good news for restaurateurs in waiting is that most of these misadventures were avoidable. Not so good, is the fact that people have repeatedly underestimated what it takes to run a restaurant business and in the process, have given the industry an unwarranted bad rap in some quarters.
So what could my friend and his ilk have done differently? I truly wish I could cite some mystical formula of restaurant wisdom known only to a select few (like myself for instance!). Reality, however, is far more mundane and unspectacular, and lies in adhering to the basics, old fashioned hard work and the application of common sense, which as the saying goes, is not so common.
Here are some of the important points to bear in mind from my perspective (in no particular order), quite a few of which I’ve learned the hard way:
1. Consistency is more important that quality
This claim may raise an eyebrow, but consider this – the absolute quality of your products is a result of conscious positioning, i.e. mid-market, up-market, gourmet and whatever else. None is wrong, just a choice, and there are buyers for each kind. Within each category however, predictability of the whole experience is an intrinsic human need and surprises are seldom welcome.
As a case in point, my favourite Dubai coffee shop chain, at the very best, serves mediocre coffee. Its a mid-priced brand with branches all over the city, where you’re more likely to be sipping sub-ten Dirham no frills Americanos, than twenty five Dirham Cappuccinos in fancy cups. Yet, its outlets are always buzzing with an interesting mix of people, many of whom I bet could afford to go anywhere. Oh yes, and the coffee is consistently mediocre in every branch, every time.
2. Pay attention to the clichés
Focus, focus, focus……retail is detail…..you eat with the eyes…..take care of your staff and they will take care of your customers….blah blah blah. Clichés are well intentioned pearls of wisdom that have lost meaning through over use. Follow what they were originally meant to teach though, and you could save yourself a lot of time, money and grief, and do your restaurant a huge favour.
3. First improvement, then expansion
The common Dubai wisdom seems to be more restaurants = more sales = more profit. Maybe, if you are a well tuned outfit that operates like clockwork (which is seldom the case at the outset). Expanding prematurely will serve only one purpose – to hasten your exit from the business.
In case of master franchises and area development agreements, be sure to have done your homework before signing an ambitious development schedule. Franchise or not, expansion should never take precedence over operational integrity.
4. Social media isn’t what you think it is
A dynamic social media presence has increasingly been touted as an ‘important part’ of any Dubai restaurant’s marketing strategy. Not any longer. Today, a well considered social media strategy has to be at the VERY CORE of your marketing, period…..and there is plenty of reliable data to prove it. Neglect this truth at your own peril.
5. While positioning your restaurant, the proposition of ‘different’ sells far more effectively than ‘better’.
As a place to dine, always highlight how you are different. If done effectively, it will translate to ‘better’ in your customers head. Try saying better directly and you bring a whole world of subjectivity into play, where perception is reality and opinion is everything. A BMW is better than a Toyota. No brainer? Think again. For the not so privileged rank and file employee, economy, not bells and whistles means better.
6. Location, location, location……..yes, but there’s more
Going back to my friends restaurant, I happen to know the owners of two neighbouring outlets. By general logic, it would be reasonable to assume that they might be suffering a similar fate despite the high profile location. Maybe its just a bad section of an otherwise flourishing area. Yet, they are doing roaring business and stand in stark contrast to their under performing neighbour. So, whereas location is surely vital, it will certainly not compensate for flawed execution – not even in Dubai’s best dining spot.
7. Invest in a good accountant
Its a myth that you need to have an in-depth knowledge of accounting systems to be successful in the restaurant business. This is particularly true in Dubai, where one doesn’t have to grapple with the complexities of a tax regime.
What you do need is a fundamental comprehension of business transactions and a competent and trustworthy accountant, who can interpret numbers effectively and translate them into necessary action or recommendations. Notice I didn’t say Finance Manager or CFO, as this is a luxury afforded only when economies of scale have been achieved. Moreover, in my experience, the Finance Manager will often tell you exactly the same thing as the accountant, but wearing a fancier suit.
8. Dare to challenge the so called experts
There is simply far too much happening in the F&B sector, in Dubai and in the world, and keeping abreast of rapidly changing trends isn’t easy even for the experts. Moreover, with everyone on a quest to be different, a lot of traditional beliefs about what works and what doesn’t are being challenged.
Knowledge, on its own, is over rated and available in copious amounts at the click of a button. So, as a prospective investor, ask the experts for bespoke solutions through specific application of this knowledge. Unless its a reason of safety or hygiene, don’t let them dictate what can or can’t be done. If you can visualize it, they should help you materialize it. I hate to admit it, but of late, my own job has been getting a whole lot harder.
9. Avoid the ‘me too’ trap
There are several business groups in Dubai who personify restaurant success, with their high profile multi-brand, multi-unit presence. However, that doesn’t make them better or smarter than you, just maybe better positioned than you – for now. Tip: many of the outlets in the most expensive malls are ‘loss leaders’ – they showcase the brand, help build its equity, market other branches in the city, but are not necessarily profitable as individual units. This is a strategy that might serve large groups, but could spell disaster for smaller operations.
10. No more lip service to staffing…….hire the best teams possible!!
Dubai is the home of opulence, with the spectacular interiors of each new restaurant outdoing the last. Ironically, a lot of the same restaurants are plagued by average service. By the time investors are done spending their millions, the staff is often relegated to the position of an afterthought. Pennies are pinched and a big fuss is often made over a couple of hundred Dirhams extra in salary for deserving candidates. After all, the extraordinary ambience should be good enough to attract big sales. Wrong. Its time to stop paying lip service to this key aspect of the business and to bring the staff centre stage – where they belong. Don’t do it because you’re nice, just do it because you’re smart. I personally promise that you won’t regret it.
11. Make sure your decision to open a restaurant is not an emotional one
My friend, in his own words, felt that owning a fancy restaurant would be ‘really cool’. It would raise his stature and announce to the world that he had truly arrived. His partners anticipated the same sense of fulfillment through the venture. Small problem though – in spite of the hefty individual financial contributions, there was no clear vision for the venture, insufficient time spent on planning with the consultants and a business plan that was ambiguous at best. How ridiculous you say. Well, prepare to be surprised at how often this actually happens. And the result – please refer to point 1.
12. Strong conviction backed by sufficient start-up capital
Dubai isn’t exactly cheap. Besides preparation, being successful with restaurants needs conviction and perseverance, backed by enough capital. Even for the best planned outlets, things may not go according to plan from the word go, especially with cash flow projections. Rather than having to fold at the first major financial challenge, be prepared for contingencies in the first 12 months. Sometimes, there is little more wrong with the business than inadequate funds to weather a storm…. that would have eventually passed.
Conclusion: Owning a restaurant has become a bona fide part of the ‘Dubai dream’, and why not. It remains a financially lucrative and personally fulfilling business in an industry with a consistent record of growth in the Emirate. Just be wise enough to understand that the last thing a restaurant can ever be is a passive investment – which means it seldom works till you do. Good luck.