Dubai: The sub-franchising menu is getting bigger. Whether it is Charley's Grilled Subs, the US chain which has just extended its interests to Oman through its regional partner, or the homegrown Just Falafel, now looking to grow a regional footprint, a prospective sub-franchisee has a few options to choose from.
And the options now extend to the scale of the investments required to set up the business as well.
If it were an international food and beverages (F&B) brand that is sought, the upfront investment would be in the region of Dh1.5 to Dh2 million, while for a local or regional concept it would be Dh450,000 to Dh1 million.
But why is it that sub-franchising prospects in F&B seem to be burning brighter? Could it be that it affords an easier entry for a prospective candidate than is the case in other categories?
Yes, but at the same time there is more to it. "Banks are willing to consider providing credit for a sub-franchisee — even a start-up — which has managed to tie up with a reputed F&B brand," a Dubai-based master-franchisee for a South Asian casual dining brand said.
Less risk involved
"Their thinking is that there is less risk involved in going with a tried and tested concept and the turnaround times in the F&B space — once the initial phase is crossed — has historically been quicker than is the case in other service categories."
This sentiment would find merit with Bob Wright, president and chief operating officer at Charley's. "After all, the sub-franchisee would have access to the systems and tools on which the brand has been built and developed," he said.
"It truly is about having the right partnerships that will execute to those standards and all of that can be replicated from one location to the other. Also, the core qualities that go into the food with which a F&B brand is associated can be replicated. Like a lot of relationships built on trust, the one with a sub-franchisee can be nurtured and developed for long-term success.
"And that's why I would never accept the premise that a brand cannot replicate what it stands for through franchising. That it is possible is the beauty of franchising."
Study the market
But, before a potential sub-franchisee rushes out to sign on the dotted line, he should still take a pause and get a reading on the market environment. Industry sources talk about a spate of closures of F&B outlets, some of them in choice neighbourhoods in Dubai, over the last six months. The common thread running through this was that most were barely a year or two into the business.
"It is a direct consequence of the prevailing market sentiments and a shaken consumer confidence," a consultant, who is currently advising an F&B operator on an exit strategy for two of his three locations, said. "If by the fourth or the fifth month, your cashflow is still in the negative, it will have a snowballing effect on future operations.
"This is true for those F&B operators who do not have locations in high-traffic locations such as malls, the high-street or prime residential or commercial neighbourhoods. Even otherwise, for many operators, it's still high-wire stuff."
So, here's the fine print for potential F&B sub-franchisees: While the menu of opportunities may look appetising, make sure that the portions are consumed in doses that can match your wallet. Anything more could cause heartburn.
Charley’s franchise all set to take off in Oman
After building a presence in the UAE and gradually getting there in Saudi Arabia, Charley's Grilled Subs is now turning its attention to Oman. As with the other two markets, it has got Dubai-based Al Madani Group as the key partner.
"Growth is about having the right brand and the right mix of operations, execution and infrastructure," Bob Wright, president and chef operating officer of Charley's, said. "And the right partner to support that growth."
It was in September 2005 that the two businesses came together for the UAE. The development agreement was later upgraded to a master-franchisee relationship.
"Things initially moved a little more slowly," Wright added. "The initial stores are where the foundations are built. Once that is overcome, growth will tend to accelerate."
Currently, Charley's is represented in 452 locations across 16 countries. But the dominant presence is in its home market of the United States, which accounts for 85 per cent of the revenues.
Recently, the brand has been looking to develop a presence as a standalone F&B concept. "We are expanding the model to include freestanding locations, including dining rooms and drive-through, that are proving to be successful for us in the US, going by early indicators," Wright said.
"As we expand on those core strengths and broaden the appeal of the brand itself, you will see it expand internationally. We believe franchising the expanded version in the US should happen later this year and two to three years would be reasonable for it to go international."
