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Sun 1 Sep 2019 02:07 PM

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Should F&B operators in Dubai focus on business models rather than blaming landlords?

Landlords and food and beverage operators must stop playing the blame game and work together to ensure success

Should F&B operators in Dubai focus on business models rather than blaming landlords?
Operating costs: F&B operators have expressed concerns about high rents

Every day in Dubai, it seems as if restaurants close, change management or are quickly replaced – often after only being open for a few years or less.

More than once, I’ve planned an evening out, only to find that my favourite places have shuttered their doors or have transformed into something else. The operators working in this difficult and cutthroat industry often blame market conditions and high rents. But who really is to blame?

Many F&B operators place the blame squarely on the landlords, with some – such as Aegis Hospitality founder Samer Hamadeh – saying that “short-sighted” landlords, coupled with inexperienced operators who accept their terms, often result in the premature death of many a restaurant concept.

“High rents are a reflection of lack of experience, instead of being a reflection of something more logical, like guaranteed footfall,” he told us recently. “New hotels, malls and locations with zero footfall charge rent based on ‘market rates’, which I find ludicrous in a developing market. Rents should be charged based on formulas and not ‘what the neighbours charge’.”

Hamadeh’s concerns are heard often these days. Other operators have complained that landlords often seek the highest rents they can, demand quarterly cheques in advance and up to 15 percent turnover rent – all resulting in tight cash flow and hard times.

That’s to say nothing of deliveries. We live in an age of convenience and instant gratification, and delicious, full meals are just a few mobile phone clicks away from our front door at all times. Naturally, this means that some restaurants will see fewer customers walk through their doors and sit down at their tables than they may have before this technology came to the forefront.

A two-way street

Perhaps, however, we are looking at the issue the wrong way. Are failed operators blaming their woes on external factors, when really their own flawed business models are to blame?

Although not a local example, this point of view was starkly highlighted recently by a public spat between celebrity chefs Jamie Oliver and Marco Pierre White. When Oliver blamed the downfall of his F&B empire on the looming spectre of Brexit, White shot back: “it’s the lamest excuse in the world...we’re all in the same boat. If it’s Brexit’s fault, we’d all be bust.”

“How can you blame everyone but yourself? Is he delusional?” White added.

Similarly, an argument can be made that most restaurants in Dubai are in the same boat, with high rents and no guarantee of footfall. Why then do some enjoy spectacular success, and others fall by the wayside and into the dustbin of history? Simply put, if a restaurant isn’t making enough money, who is really to blame?

“That’s the challenge. It’s not the landlords fault if the rent to sales ratio is too high,” Dubai Retail CEO Nabil Ramadhan tells us. “There is something wrong with your concept or the way you promote it, or the original business model. It’s a two-way street.”

The answer probably lays somewhere in between the two points of view. Some landlords are probably doing their tenants – and themselves – a disservice by charging too much. If operators lack the experience to be able to hack it in a market as competitive as Dubai, they should probably think twice before opening up a restaurant.

At the same time, if an operator’s business is failing, they should ask themselves: am I doing everything I can to stay competitive? Am I meeting the needs of the Dubai customer? Am I taking advantage of the new technological possibilities made available through online ordering and deliveries?

Unfortunately, too many have quit before they found the answers. Some try again, but others just move on to other challenges.

More importantly, if Dubai’s F&B scene is to thrive – not just scrape by – landlords and tenants should work together to ensure that everyone gets what they’re after. Dubai’s competitive market – and its discerning customers – demand it.


Bernd Debusmann Jr, Chief Reporter

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