Chains and franchises VS stand-alone restaurants

Chains and franchises VS stand-alone restaurants

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The topic of whether Dubai has yet to establish itself as a true food-destination city is one that prompts animated discussion within the industry. Some experts think independent restaurants are at risk of falling into the standardization trap and losing that all-important passion for food. Daniel During, principal and management director of Thomas Klein International, looks at the pitfalls and how to avoid them

One business model that seems to thrive in Dubai is the chain or franchised restaurant. Think of your favorite restaurant outside of a hotel and the chances are that it has several branches across town, quite possibly one in every shopping mall.

The franchise model has several advantages for the investor/operator; it basically offers a restaurant ‘in a box’, meaning that everything from the interiors, menus and uniforms to the way in which it should be run has already been set in a series of corporate manuals. This model allows new outlets to be opened fairly quickly and with relatively low start-up costs. This has been a prime consideration for many investors looking to cash in on the boom years: rapid expansion in order to cater to what appeared to be never-ending demand.
But as we come back down to earth, it is clear that the franchise model has several drawbacks for the consumer; precisely because everything has been predetermined and standardised, there is little scope for individuality. Chains and franchises have, by definition, something inherently systematic, distant and corporate.

From the consumer’s point of view, this provides the comfort of knowing what to expect, a sense of belonging and the ‘no bad surprises’ element. On the other hand, the very same thing that acts as the strength of a franchise – the standardization of service and the sameness of products – is its shortcoming in the form of a lack of creativity innovation and passion.

A chain or franchise’s key strength is its sameness and relatively reliable quality from place to place. Standardization goes against creativity, passion and flexibility. Flexibility and creativity tailored to the guest’s whims and desires are what make the individual customer go from “the food was good” to “they went out of their way to please me”. Applied passion and creativity are what make a customer travel kilometers to try a specific restaurant offering that something special.

In the real world, individuals want to visit local restaurants that provide unique and excellent food and service. It could therefore be concluded that the strength of large chains and franchises is also their weakness. The core element of any F&B business is its product – its food. Its success or failure is in the hands of the people who purchase it, cook it and serve it. The USP is passion.

People

Chains target the largest market, so individuality or anything beyond the confines of the operational manual is discouraged. Employees are trained to follow strict procedures, but in the process, they are discouraged from catering to individual customers’ needs as this would disrupt the flow.
It can seem tiresome to cater to individual needs, but it is hugely rewarding to the employee, the client and ultimately the business to provide a service and product that is truly appreciated.

Because everything is standardized, the staff and management employed are not allowed to contribute any form of personal input, and they cannot change anything or add a level of personal touch. This can be frustrating for an employee with the motivation and the skill to excel, and it may increase employee dissent and turnover. Word of mouth is the most important marketing component of an independent restaurant and happy customers talk. Happy employees are those who feel useful and can hone their skills to learn and grow.

Product

As franchises and chains menus are defined in head offices, sometimes distant from the day to day reality, it is difficult for franchises to respond to dynamic conditions, these being seasonal or micro-demographic. Individual outlet managers are prevented from adjusting the menu to take advantage of seasonality or market specials, even though the end result would likely see increased sales.

In order to guarantee product standardization, large chains supply semi-prepared products on a large scale, establishing central production areas that oppose the concept of freshness. Additionally, to take advantage of economies of scale, many chains and franchises tend to use frozen produce purchased centrally and distributed globally. Sacrificing quality is therefore inevitable.

Not all chains use lower grade products or sacrifice quality during mass production. However, they all distribute globally or at least regionally. Worldwide distribution has a direct negative impact on the local producers and increases airline/shipping traffic, thus affecting the carbon footprint. More directly, it affects the consumer, who does not get the benefit of tasting local seasonal produce at its peak when it comes to flavor and textures. Take the small joint on the beach, where papa goes fishing at night so that mama can serve the freshest fish every day. There you have a product a franchise can never compete with. City chefs that are passionate about their food will go to the fish and vegetable market every morning and select what they judge to be best for their customers: the tenderest cuts, the ripest fruits, the freshest fish etc. Franchises, on the other hand, offer the consumer the same ‘standard’ product pretty much the world over. Mediocre standard, I would say.

Passion

Which takes us to another point: passion. As mentioned, large franchises offer little or no incentive for staff to make suggestions on improvements, even though they are far more likely to spot issues than senior managers who aren’t out there waiting on tables. Franchisees and their employees are often forced to implement corporate standards without even considering whether or not these align with the local culture. Being better means sticking to the corporate manuals. Individuality is discouraged and, in general, passion is dampened down in the individual; after all, how passionate can you be about doing the very same mediocre thing day in and day out knowing that the standard can be improved? The result is lower drive, lower motivation and passion, and less incentive to excel.
Since employees in the production chain are asked to conform to the norm, no creative chef will join a chain at store level. Stores can therefore only attract mediocre staff. Mediocrity attracts mediocrity, and even if staff have the potential to ‘shine’ it is futile, since they are all paid the same wage and there is no encouragement to break away from the standards. The processes are so well established that everything is distant and impersonal, and staff cannot change anything or add their own flair, which ultimately makes them lose interest in what they are doing.
I firmly believe that without passion, anything in life, including restaurants, can never rise above mediocrity. Dubai has some highly successful restaurants that are built on passion. These good independent places are mainly cafes, however there is still place to grow in the fine dining scene. They have owners who care about food and can often be seen waiting on tables and greeting customers. Inevitably, that well deserved success has led to expansion and they are now on the verge of becoming too big for the owners to micromanage in the same way that they did before. The danger is that they fall into the standardization trap. I was recently at one of these restaurants, which I love, and asked to have mashed potato with my main course instead of the accompanying fries listed on the menu. My server told me that I couldn’t have it as “it wasn’t in the computer”. I can’t imagine that happening a year or two ago, when that company had fewer outlets and the owner would make sure every customer was given an experience rather than a meal. But experience is another subject all of its own.
Once standardization starts to take over, some of that magic begins to evaporate. Yet again, a franchise’s strength is also its weakness, and that weakness is the individual restaurant’s strength.

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The way forward

There are several solutions to creating a reputable chain of restaurants with excellent food and service. When faced with expansion, it would be better to open unique restaurants, each of them with a personality of its own. An artist paints a different painting each time, yet his hand is seen on every one of them.
Give each one a different menu – even a different name – set it up, give guidance to the local team, but let the individual chef at the location run the show with passion. That model has worked well for Jean Georges Vongerichten, the renowned chef-restauranteur. Vongerichten hires head chefs whom he trusts and give them relative freedom to improve or twist his own dishes, within guidelines set by him. Each of his restaurants has a different menu, a different theme, a different feel. However, the excellence for food is always there.
But you don’t have to hire a world-famous chef to have a successful restaurant, just teamwork, development time and passion. In larger corporations, where the investment comes from group level, there is the option to involve key managers and chefs in a joint venture. Giving them a personal stake in the business translates into a strong will for the individual outlet to succeed.
It is also important to get line personnel involved, not just through incentive schemes, but by allowing them to make suggestions on how their jobs could be made easier. Incorporating the team’s ideas into the system makes employees feel important, as well as part of the restaurant and its success.

There is a lot to be said for franchises; if you are in an unfamiliar city and lost, with no one to ask and you don’t want surprises, you choose a franchise because you know that you will get consistency when you enter a branch. The challenge is to make sure that it’s consistently excellent, not consistently mediocre.

Franchises in the Gulf are usually part of large conglomerations and are therefore managed in an impersonal corporate manner. At corporate level, the first step is to negotiate a certain degree of flexibility to adapt corporate standards to local requirements, taste and customs. In order to add passion and personality to your store, you also need to pre-establish systems that allow the right manager flexibility within the system – the ability to ‘bend the rules’ within set limits and go ‘out of the way’ to meet customers’ needs and wants.
This set of rules will need to be negotiated with your franchisor and incorporated in the ‘corporate manuals’. If you don’t have the expertise, get a consultant to set up the major guidelines and negotiate with your franchisor on your behalf. Hiring the right individuals with personality and passion will complete the equation.

Finally, setting up a corporate culture that is equal parts individuality, passion and profitability will manifest itself in an improved bottom line and market longevity. Some people argue that in hotels you find numerous high-quality restaurants that are not franchises or chains. While these restaurants are much better than chains, many are restricted by corporate constraints and overzealous executive chefs which often limit the personality, flexibility and creativity of the restaurant chefs.
What Dubai really needs is more standalone restaurants that are not as highly regulated by their landlords, allowing them the freedom to be as creative as they like. More Dubai hotels should also be looking at leasing their premises to individual restaurateurs and chefs at reasonable prices. This will not only create more interesting and unique restaurants, but will also position the hotel as a food and beverage destination.

thomaskleingroup.com

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