Lovers of upmarket burgers will feel a rumble in their stomachs at the news that a US chain is setting up in the UAE.
Smashburger, a fast-food chain based in Denver with more than 70 outlets in the US, will open a restaurant at Jumeirah Beach Residence in Dubai, as part of a local retailer's expansion plans.
Cravia, which is the franchisee in the UAE for Zaatar W Zeit, Cinnabon and Seattle's Best Coffee, has signed a deal with Smashburger to open 40 outlets over the next seven years.
Established in 2001 with one Cinnabon outlet in Abu Dhabi, Cravia is currently the franchisee in the UAE for 10 Zaatar W Zeit outlets, 22 Cinnabon and nine Seattle's Best Coffee outlets. The move is part of Cravia's plans to expand to 215 outlets in the Middle East and North Africa (Mena) over five years.
"We are going to leverage what we have here in terms of management and infrastructure to serve the whole region," said Walid Hajj, the chief executive of Cravia.
The privately owned retailer, which is based in Dubai and is a wholly owned subsidiary of Saudi Arabia's United Group,reported record sales last year of Dh100 million (US$27.2m), Mr Hajj said.
"The first quarter of 2011 was also fantastic," he said. "It's the best quarter we have ever had in terms of sales and bottom line. The last four weeks have been up 20 per cent across all brands compared to last year."
The company hopes to achieve sales of Dh600m per year by the end of five years through expansion of its current three brands and Smashburger in the Mena region. The Smashburger brand fits into the upmarket burger segment occupied by other chains such as Gourmet Burger Kitchen, BurgerFuel and Fatburger.The new outlet is due to open in Dubai before the end of the year.
"The next four years are going to be extremely aggressive because we think we have built the base to grow in terms of cash generation, profitability and brand," Mr Hajj said. "The idea is that 50 per cent of sales will be in Saudi and Egypt across the brands, obviously when Egypt settles down a little bit."
Mr Hajj said he felt many residential areas in Abu Dhabi, such as Khalifa City and Zayed City, did not have enough restaurants and coffee shops.
"The UAE is going to get 60 outlets. There's a lot potential to serve the local community, particularly in Abu Dhabi, where we only have two Zaatar W Zeit outlets," he said.
Cravia's franchise terms differ for each brand, but it pays three types of fees to each.
The first is a one-off fee to be the exclusive brand ambassador; the second an ongoing royalty fee as a percentage of sales, which ranges from 4 to 10 per cent. Finally, there is also a one-off fee for each new store opened.
The group's rapid expansion plans are expected to be funded by a combination of cash flow, debt and an equity injection from a new investor.
"The idea was to basically sell ourselves and track record and find someone who's interested in that sector," Mr Hajj said. "We are bound by a confidentiality agreement at the moment but we are getting a cash injection from an investor."