March 4, 2019 |
A self-fulfilling prophecy is “a prediction that directly or indirectly causes itself to become true, by the very terms of the prophecy itself”. That is the exact definition from Wikipedia.
Everyone in the F&B industry right now is talking about the sector slowing down, and the market being saturated. I believe that if the media keeps reporting about the industry in this manner, the negative coverage will actually help it slow down.
Now, I do not want to “Trump” the media by blaming them, yet I think it’s important to get true F&B experts to address this slowdown claim and formulate an action plan to combat it.
It’s important to distinguish that the saturation that everyone is talking about is based on numbers rather than quality. There are many horrible restaurants out there that should not be competing with the good ones. They should just leave the business. However, I am sure they will not, because they are being led by non-professionals, who are only interested in a couple of years’ worth of employment. If there is no integrity and transparency about the potential success or failure of a brand, we will continue to see many bad brands come and go.
I am willing to give free advice to any investor looking to either develop a brand or franchise a brand. Let us save the industry from the impending collapse, which is definitely not being caused by the best restaurants out there. In my opinion, the problem has more to do with the integrity of the operators, than industry saturation. Allow me to illustrate.
A company hires a leader (let’s call him Joe) whom they think is an accomplished industry professional (based on his CV) and gives him a mandate to scout a brand. Joe (for the sake of fulfilling the emotional wish of his boss) convinces the boss that a brand in some country which has only one location and a niche cuisine will do great in the UAE. After all, the UAE is a hot bed for new brands. Then, the boss gives Joe a mandate to find a location for that brand. Joe has a friend at ABCD Mall who always ensures he meets his leasing quota. The leasing manager at the ABCD mall has a lousy spot that no one will take. He/she convinces Joe that since his brand is new, no one knows it, and it has only one location in the country of origin, the only spot available for that brand is a corner at the end of the hall next to the cleaning closet. Joe is afraid of losing his job. He goes to his boss and tells him that the lousy brand will work at that lousy location. After all, Joe just needs to buy a couple of years of employment. The boss (since he knows nothing about the industry) agrees.
It takes at least eight months to launch the lousy brand. The ABCD mall does not mind, since they benefit out of imposing a penalty for late opening. Joe spends a lot of money on marketing and opens with a huge bang (only because the invitees are all eating for free at the grand opening). The boss feels good, since at the grand opening, he had a chance to brag about his new restaurant. That excitement lasts few months and then the sales start to drop. Joe asks for more marketing money. The boss spends it. Yet it does not help. It is a lousy brand at a lousy location. The mall is happy since they have postdated cheques. Two years later when the boss fires Joe due to the losses, a new leader (Joe #2) enters and promises the boss that he can save the brand. Trying to do so will buy him few pay cheques. What the boss should have done is close the lousy place. Yet, no one likes to look like a loser.
That, my friends, is how malls keep filling up with brands that should have never been launched here. The media counts that lousy restaurant and hundreds like it as failures, and start talking about the saturation of the sector.
Here’s what I suggest: let us hold a roundtable discussion (with the media of course) where the attendees check their egos at the door and speak the truth without fear of retaliation from their bosses. Then, I think we will really be able to identify why the industry is facing so many changes. If this ever does happen, I think we will see people admit that some of the brands they manage need to be closed – thereby stopping the bleeding of money. I firmly believe that investors only throw money at bad concepts when the operators deceive them by promising improvements that are never coming.
It will also improve rental costs because malls will lose at least 30-40% of the F&B locations, and they will be forced to drop prices. That, in turn, would make anyone that ventures into our beautiful industry think twice before hiring Joe, or agreeing to launch a lousy restaurant at a lousy location. In addition, I think malls will have larger cleaning closets.
Now I have a final bit of advice for all the bosses. Go to your Joe and ask him: “Do you swear to tell the truth, the whole truth, and nothing but the truth, so help you god?” If he says ‘no’, fire him. If he says ‘yes’, ask him if you should continue to throw good money at the lousy restaurant? If he answers positively, again, fire him. If he says ‘no’, give him time to find another job, then fire him.
Now, is there saturation or not? I welcome your comments challenging my view.
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