More closures seen in tougher UAE F&B market

Posted by: charles Tuesday, 31 May 2011 3:40 PM[UAE] - uae

I am really intrigued by this statement "In other parts of the world, it is perfectly normal for failures in year one to exceed 70-80 percent of openings".
Is there any data to back this up? which countries?

Posted by: Telcoguy Saturday, 4 June 2011 5:16 PM[UAE] - UAE

@Charles you should be aware that 82.79% of the statistics you find in internet are made up in the heat of the argument.
Actually, there is a surprising lack of proper research on this area. Best I can find is roughly 20-30% of failures in the first year (based if my memory serves me well on OECD report. of course as Anonymous has pointed this does not apply in the UAE).
Trick is how you define "new venture" and "failure", not so straightforward as may seem, with plenty of gray areas.
If you add the huge differences in registration and deregistration processes across the world you can imagine how difficult is to come up with reliable numbers.
But yes, the numbers are totally fishy, and honestly that does not help to build credibility for the rest of the article.

Posted by: Anonymous Tuesday, 31 May 2011 6:23 PM[UAE] - Dubai

Probably no data because it is not true. Failures in the first year are rare in Dubai because as Breg knows full well most mall developers require post dated rental checks when Leases are signed. There is usually no negotiation even if a restaurant has a difficult first year. Just go ask Mirdif City Centre tenants as well as 50% of the Dubai Mall tenants. Most if not all have gotten nowhere with renegotiating their original Leases. If someone really wants out they usually have to go ahead and pay most if not all of the remaining rent in order to "close" otherwise if rental checks are deposited and they are returned because of lack of funds, well, we all know in the UAE that is a big no-no!

Posted by: Red Snappa Monday, 30 May 2011 10:20 PM[UAE] - Ireland

Popularity goes in cycles, whether it be restaurants, nightclubs, brands, shops. Also when you have a downward shift in the disposable income of the average member of the population and there has certainly been a general drop in consumer spending over the past two and a half years.

Add the fact that the payment cycle that companies find themselves subjected to has extended, along with an awful lot of restructured debt, then expense accounts are constricted and business class travel is reduced.

The result is that many outlets opened during a free spending boom and now with less money being spent amongst an inflated number of consumer points you are bound to have closures. Markets inevitably have to slim down to meet changing financial circumstances.

Property and construction were the dominant driving force for high salaries, commissions and a 'money is no object' social order. However, both industries are now well down the commercial contribution scale .

Posted by: Lex G Monday, 30 May 2011 3:09 PM[UAE] - UAE

I'm somewhere in the middle of the comments below. Dubai is definitely busier than a year ago but will never (and should never want to) reach the heights before the bust. Malls are busier, restaurants are busier and generally disposable income spending is coming back. There will always be winners and losers in any market, the restaurants above had no real selling point and were in bad locations. There are plenty of places where you need to book well in advance to get anywhere near them though (hint, Dubai's finest bars and restaurants are not found in shopping malls!).

Churn in F&B and indeed retail is notoriously high in all countries, if anything I've been surprised there haven't been more failiures in the market here as it needs it. Less reliance on poor imported brands and more innovation are needed to succeed in the long term.

Posted by: ukfb Monday, 30 May 2011 12:28 PM[UAE] - UAE

I miss Tang...not really a victim of the recession but a case of right restaurant, wrong place, wrong time.

Posted by: Paul King Monday, 30 May 2011 12:24 PM[UAE] - UAE

The region's cheerleaders are so entertaining. They are the worst investors in the world. They buy high and sell low. Someone should tip them off, that's not the way it's done. This Dubai busy-ness that they are quick to point out to support their misguided claims looks productive and dynamic. But without solid thinking behind it, it's as empty as a whirlwind! Sustainable economic growth will not begin until these magic shows end. It's important to remember that this great correction is like a five-course meal. It arrives in stages... The lending institutions don't possess the balance sheet strength to choke down all these bad loans - (lent on even badder ideas) all at once. So instead, they take a few nibbles from their heaping plate of debts, then pause to digest the losses and then nibble away again! Any sign of economic recovery in this region is just a pause between the enormous portions of debt!

Posted by: Mike DeLonghi Tuesday, 31 May 2011 11:46 AM[UAE] - UAE

You are absolutely spot on. The "everything�s fine" propaganda is tiresome, so was the recent "Dubai will benefit from the Arab Spring being a safe haven". Really, does anyone really think that the problems in Egypt, Tunisia, Libya, Yemen and Bahrain is good for the Dubai re-export business?
The problem now is that the crucially slow moving write offs and consolidations is blocking for genuine economic and regulatory reform - now thats a big problem. This will be a long and painful summer with some serious fallouts to materialize when things pick up after Ramadan.