As some establishments close their doors we investigate how some succeed – and the reasons for failure
Unlocking the secrets to success in Dubai's tough eating-out business
If you’ve been planning a night out at Frankie's Bar and Grill, the Italian restaurant that has sat bang in the middle of Dubai’s JBR Walk since 2007, forget it. It very recently closed its doors for the last time, just one casualty among dozens each year in the UAE, where new venues and concepts appear practically every day (the Abu Dhabi branch of Frankie's remains open).
Competition in the eating-out business is tough across the UAE. While Dubai might have fewer restaurants and cafes than Paris (which is to be expected), it does have more than many other major cities per capita, including New York. Yet the scene here isn’t what you’d call established. In many respects, it’s just getting started.
A changing city means moving competition
For many business people, a restaurant closure can mean the unedifying end to long-held dreams and huge investments that have vanished along with an often-fickle clientele. As sad as it is, it’s an understandable predicament. Within a couple of years, areas of the city where restaurants have previously prospered can change beyond all recognition, expanding and attracting rival outlets. The Beach development opposite the JBR Walk is a perfect example of this – with dozens of fancy new places to dine in, it puts unforeseen pressures on venues that, until recently, had the place to themselves.
In Dubai alone, according to government statistics, in 2017 there were 480 hotels offering 81,781 rooms, as well as 198 hotel-apartment buildings with a total of 24,387 units. And most, if not all of them, will have in-house restaurants. Throw in the incredible number of shopping malls, each packed with restaurants and cafes, and the problems facing restaurants owners are easy to work out.
Some of the restaurants that have shut down in Dubai over the past year or so include Zahira (which opened last summer), Laluz, Totora Cebicheria Peruna, Ceviche, Cocktail Kitchen. Firebird Diner, Ping Pong, Eric Kayser, Le Classique, Crab Tavern, Morah and Dragonfly by Tim Raue (which may move to another location).
The VAT effect
Worldwide auditor KPMG’s 2017 Food and Beverage Report for the UAE says that outlets are facing challenges galore when it comes to staying afloat, and that this year, the issue of VAT will rear its head in unexpected ways. “Operators, for their part,” the report states, “have tried to maintain prices, to the extent that it does not hurt their business, and have selectively increased prices through a mix of menu refreshes and price increases on specific items. Despite such conscious efforts, these changes have not gone unnoticed: consumers believed they were currently spending much more when they eat out compared with last year. An overwhelming 78 per cent of the consumers felt that it has become more expensive to eat out over the last 12 months. As a consequence, they are attempting to modify some of their eating-out habits. They are more aware of what they order, or opt for more affordable options. Some consumers have also cut down on their frequency of eating out.” More closures, then, are probably inevitable.
The Ivy, Rivington Grill and Fortnum & Mason: All closed
Even the big names find it tough at times. For the Brits among us, three names are perfect reminders of the magic of home: The Ivy and Rivington Grill restaurants, and Fortnum & Mason, the centuries-old department store and purveyor of fine foods and teas, known the world over for its decadent hampers. Between them, they traded from four locations in Dubai and they’ve each shut shop in the past three years. Fans, of which there were many thousands, could stamp their feet all they liked, but market forces cannot be reckoned with.
“My time with Jumeirah group and the Caprice brands [a UK holding company that runs The Ivy and "The Rivi in London] was an extremely beneficial learning experience for me,” says Andre Gerschel, who used to be responsible for the operational management of both the restaurants here. “Navigating operations between two well-established companies is always a tough but highly rewarding experience. The Ivy and The Rivington were excellent brands that offered the best of London restaurants and, while both are regrettably closed, it’s my understanding that this was simply a choice to refresh old spaces with new assets by different principal partners.”
Gerschel, who went on to become the driving force behind the successful Baker and Spice brand, adds that “restaurants close all the time for many different reasons, and I believe as we enter a period of ‘gentle course correction’ in retail and hospitality, the brands that survive will do so for a couple of highly specific reasons.
The responsibility of landlords
“The success formula is simple. Restaurants succeed in the UAE, or anywhere in the world for that matter, when landlords act as partners and owners act as operators of the business. If these two ingredients are in place you have an extraordinary amount of control and agility that allows for peaks and valleys [in customer patronage]. Everyone I know in the industry is able to achieve operational profit,” he says adding, after taking a deep breath: “before rent”. In short, many restaurants fail because of skyrocketing rents and other overheads – costs that cannot really be passed on to the end customers. If rents are more reasonable and landlords work with establishments, rather than an all-too-common adversarial approach, everyone will benefit.
He goes on to advise that people don’t want to feel compelled to spend any more (than they already do) and that, ultimately, the way to win is to put value on the plate – the best possible service and products at the most reasonable possible prices. “At Baker and Spice, we have paper napkins but Rolls-Royce ingredients. That’s why we are still here and part of the fabric – nine years, eight branches, and three countries later.”
The other keys to success (and reasons for failure)
Gaby Mather is the managing director at Restaurant Secrets in Dubai, a company founded in 2009 to help potential and existing food outlet operators make successes of their businesses. Over the past decade, she’s seen and heard everything, and says that there’s still reason for good cheer for the UAE’s restaurateurs; they just need to do their homework before thinking about opening their doors if they’re to prosper, even in the short-term.
“There’s no one solution to longevity,” she says. “Certain concepts are failing or don’t quite hit the mark, while some just run their course until customers are swayed by somewhere new. This business is not just about cooking food, which is something often overlooked by people starting out in the industry. Staff here are lowly paid and need to be incentivised in other ways – it’s worth the effort because happy and enthusiastic staff do a great deal to attract business, and if your turnover of employees is lower then so will your costs be."
She adds that the pressures of running a restaurant can be too much for some, even those who might have operated successful ventures in the past. “Many new starters are ‘freshers’ straight out of university who have access to investors or family money – some are clueless regarding the efforts required. Some we’ve helped over the years have rushed into securing a venue without considering the importance of location, sustainability or even the ambience of a building. That’s not to say that location is everything, though. Consider [Dubai’s] Tom & Serg, which has been a huge success in the most unlikely spot. And The Farm at Al Barari, which is really out of the way, but is always busy – the people running these businesses have hit upon formulas that work brilliantly despite their less-than-obvious locations.”
Many restaurants fail, advises Mather, because those in charge don’t understand that price, consistency and quality are paramount. “The successful places,” she says, “understand that people don’t like change; they like to know what they can expect. They like to see certain constants on menus, too. So whenever I’m putting one together, I always ensure that there’s eggs Benedict on it, or home-made granola – classic staples that you’re free to experiment with and make your own.”
It’s equally important to have faith in your concept. “Do your research, get it right before you start,” she says. “If you do that, if you consider the different people whom you’d expect as customers and make sure you’re able to cater for large groups of friends who might all want something different to eat, if you carry out meaningful market analysis, then you have a much greater shot at success. And then there’s the issue of strong leadership – restaurants won’t run on autopilot, they need a passionate individual or team at the helm.”
As for the future, Mather sees young Emiratis and so-called millennials as greatly impacting restaurant revenue. “Tastes and demands are shifting – organic has been a success, but now ‘wholesome’ food is all the rage. This constantly changing scene makes our country thrilling. Dubai and Abu Dhabi are lifestyle cities, and the food served in restaurants should match that."