When it comes to the crunch

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Mokhles Bustami, Simon Penhaligan, Walid Hajj, Rob de Villiers and Sami Daud address industry issues during Caterer’s roundtable at The Meat Co, Souk Al Bahar.

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Rob de Villiers, regional operations manager, The Meat Co and Ribs and Rumps.

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Walid Hajj, chief executive, Cravia.

The men behind some of the region's biggest F&B brands met at The Meat Co in Dubai's Souk Al Bahar to discuss the impending credit crunch, the importance of brand standards and their issues with landlords.

Tell us about the brands you represent in the Middle East.

Mokhles Bustami: We have many brands; a lot of them are local Dubai brands, such as Japengo, Café Havana and Bella Donna. We also have franchises from Europe and North America.

Simon Pehaligan: RMAL Hospitality is part of the Al Fahim Group, a family-owned Abu Dhabi-based company.

We have Trader Vic's restaurants, Mai Tai by Trader Vic's, Frankie's Italian Lounge and Grill and also the Wagamama brand.

We're also currently looking at opening a new hotel in Abu Dhabi, with 369 rooms and several restaurants, which will be managed by Fairmont.

Walid Hajj: Cravia was previously named the United Restaurant Development Company; we are the franchise developers for Cinnabon, Seattle's Best Coffee, Zaatar w Zeit and recently the Roadster Diner concept from Lebanon.

Rob de Villiers: Our company is called Food Fund International and we have two brands up-and-running in Dubai, The Meat Company and Ribs and Rumps.

Sami Daud: At Gourmet Gulf Company we currently have Gourmet Burger Kitchen, Yo! Sushi, California Pizza Kitchen, which is a new addition, and Morelli's Gelato.

What are the current major challenges that operators in the region are facing?

Bustami: For outlets such as ours, a big challenge is the malls - delays with construction and so on. We often talk about how tough it can be to finalise all the details of a project and simultaneously coordinate with the landlord to fit with their time plan.

Pehaligan: One of the main concerns for us is the actual fit-out time for projects.

Depending on the style of your restaurant it can be shorter or longer, but some of the malls will give you just 90 days to do a full fit-out, which for certain concepts is just not long enough.

Hajj: I find the biggest challenge is that we are operating in a seller's market, so the landlord has a big take - up to now, that is. I don't know how the current global situation is going to affect this but until recently, the landlord could dictate whatever price they wanted.

So you get outlets, even small players that have been attracted by the industry boom, who want to enter the market at any price. They come in and throw money right left and centre, paying whatever rents the landlords ask.

They come in for a few months or a couple of years, find that they're not successful and leave. But in the interim they have really ruined the market for the rest of us.

I'm of the opinion that over the next few years landlords are going to have to be realistic. It will take time for them to be affected by what is happening in the world, but there are some affects already: a lot of people are pulling out of malls, both small and large tenants who are running out of cash.

When you look at this situation on a micro level it's pretty bad, but when you look at it on a macro level, a long-term level, it's actually good for the market. It will get things back to realistic levels.

De Villiers: Definitely there's a positive to come out of it.

I think we understand the challenges that we all face, and it's understanding how turn them around and work with them positively that's important.

We're slightly different to a lot of the other outlets in place here in the fact that we're not actually a franchise, we're a company-owned and -managed brand, so that's one of our strengths.

The number one thing for us is to focus on our people. Brands often talk about the importance of people, but they don't necessarily understand how to develop people and how to turn negatives into positives in the workplace.

On top of that, the locations we pick are iconic locations and if you get that right it's also a big strength. So again, we try not to focus on the negatives but on the positive aspects that we can work with and think long-term.

Daud: To touch on an earlier point, despite the environment today, I don't think casual and fast-food dining has really been hit yet. People trade down in economic downturns.

Do I think something may come up? It's a possibility. But these malls and developments coming up all want restaurants, because restaurants are the biggest payers.

But then as Walid said, you have these guys who are fresh off the boat and think they'll try this out as well. And instead of looking at a location and estimating what their sales will be, they'll look at the rent and multiply that by 10 and believe that number will reflect sales.

You should never do that: you should work from the top down. But these people work from the bottom up. So there are great locations, but the astronomical rents mean you couldn't possibly make money there.

And the landlords point out that if you don't pay, someone else will. So that is what has really ruined our market over the past few years.

I'm hoping, with what's going on now, that a lot of these landlords will come to their senses and think long-term, as opposed to trying to make as much money as possible right away.

Hajj: Personally, with the brands we have, we've not been affected at all in the past few months by whatever is happening in the world. But I think it is coming; we'd be in denial if we felt nothing is going to happen.

First of all there's tourism - that's definitely going to be affected. And when that drops, our traffic is going to drop. Mall traffic has already gone down.

And when I said we live in a seller's market, that does not only apply to malls and landlords, it also affects the matter of providing housing for your staff.

Even regarding the people themselves - trying to hire and pay people fairly is impossible, in my experience, because of the inflated salaries being thrown around.

Bustami: Pirating, I guess, is the term that we'd use for that. Going back to what Sami said, I think the same players who took these locations at the malls and inflated the value of the location are doing the same thing when it comes to recruiting staff.

We have 1500 employees and the salaries that are being offered for them to move to other companies are hugely inflated.

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