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Feeding the Gulf
After 12 years of running two small, organic tea shops in the New York borough of Brooklyn, Jonathan Spiel had to close one down when his landlord increased the rent in 2009. Facing that setback, Spiel decided to look into selling Tea Lounge franchises to expand into new markets and keep his business going.
The Tea Lounge's first franchise opened this year, in Kuwait.
"When I and my family and friends first heard 'Kuwait, ' it seemed a little out of the blue, " Spiel, the Tea Lounge's founder, said. "There are limitations and we'll have to adapt our concept, but the key is that the ritual of socialising over tea and coffee for hours already exists there in people's homes, " he said.
Big-name American brands have not been able to open franchises in the Middle East fast enough to satisfy demand in recent years. Fast-food concepts like KFC and Subway have been popular for years, but recent additions include IHOP, The Cheesecake Factory and Papa John's Pizza. These franchises have the backing of major family-run businesses, like the Al Shaya Group in Saudi Arabia.
The success of these well-known American names has encouraged midlevel brands, like Tea Lounge, to venture into the region in search of financing and some market share. And often, it is Arab businessmen that reach out to them.
"It's been difficult for small businesses to get loans for a while now in the US, and even when banks do give money, it's just not enough, " Spiel said. In the Gulf, he said, people "will always have money, which is appealing. "
In December, Tea Lounge will open a new store in a mall in Kuwait. There will be the same 65 kinds of loose-leaf teas, 55 kinds of coffee and a variety of snacks on offer - all organic.
Unlike the cafe in Brooklyn, the Tea Lounge in Kuwait will not serve alcohol or allow live bands to perform, out of respect for cultural traditions.
"We don't have nightclubs in Kuwait;when young people want to have fun they go to a coffee shop in the mall, so what we're doing is staying true to that and adding Tea Lounge's community touch, " said Mohamed Al Arbash, the franchise owner of the Tea Lounge in Kuwait and an executive at the Arbash Group. "Since we can't serve alcohol, we target families more by offering children's story time or movies. "
Still, these franchises will face challenges, like maintaining a brand identity while adapting to new cultures. Famous Dave's, a barbecue restaurant founded 15 years, has grown into a public company with 133 branches across the United States and one in Canada. The company's logo is a pig roasting ribs over a fire, highlighting one of its most popular dishes - an item that is hardly acceptable in the Middle East, where eating pork is often taboo.
Yet Famous Dave's plans to open up to 30 stores in the Middle East and North Africa in the next few years as part of a global expansion, said Brett Larrabee, the company's director for franchise development. Larrabee has based his regional forecasts on an analysis of other US casual dining companies that have successfully entered the market, as well as population and demographic figures. "When we go into these new areas, we want to meet local needs, so we're obviously not going to sell things to people that don't want them, " Larrabee said. "But the essence of our brand is in our barbecue flavor, which we can serve everywhere. " Famous Dave's plans to tweak its menu to cater to local needs and find suppliers capable of providing Halal meat, which meets certain preparation guidelines and is acceptable under Islam's dietary requirements.
Larrabee said that the chain was currently in talks with Mideast companies interested in opening afranchise, particularly in Dubai. "When one part of the world is challenged, another is prospering, and there's great opportunity for us in Dubai" and the Gulf region, he said.
One mistake restaurant chains often make is to think of the Middle East as a homogeneous place, when, in fact, each country has its own legal framework and cultural norms.
This is what Wing Zone has learned after successfully entering Saudi Arabia last November. The company, an Atlanta-based restaurant chain that specialises in chicken wings, hopes to duplicate its US success by opening branches in Kuwait and the United Arab Emirates. The chain says it will need to treat each market uniquely.
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