DUBAI — Sometimes the best way to learn is through other people's failures, and Murad Alnasur of Prime Hospitality, was not afraid to share some of his mistakes Tuesday with franchisees and franchisors at the International Franchising Forum in Dubai.
Alnasur said his best advice to would-be restaurateurs was to view the franchisee/franchisor relationship as serious as a marriage.
"There are a lot of things to consider after you both say, 'I do,'" said Alnasur, who helped to open five Fuddruckers and two On The Border Mexican Grill restaurants in the UAE before joining Prime Hospitality as group general manager and director of business development.
Although there are countless aspects for new franchisees to consider before signing on the dotted line, Alnasur pointed out several he believes to be the most important. They include:
The opening schedule: If a franchisor claims that opening the first concept will take less than a year, they probably haven't opened any businesses in the Middle East, Alnasur said.
Fee details: And he's not only referring to the standard start-up fees. Alnasur looked back at his days as a franchisee and recalled how he ended up having to pay $300 a day per trainer, plus all their expenses, to help train the new staff that would be working in the new unit. His contract didn't specify how many trainers were needed, nor how long they'd stay, so the expense put him way over budget.
Concept design process: Franchisees need to know about any penalties they'll have to pay for opening delays, as well as how much detail is in the franchisor's design plan.
"Is it good enough to give to malls or is it just a sketch?" he asked. If it's just a sketch, the franchisee is going to pay more down the line to develop a 'real' design plan.
Food/supply chain: Franchisors should be clear on what they'll provide regarding equipment and be up front if there are certain foods or supplies the franchisee must purchase from them.
Employee screening: Some franchisors allow their franchisees total hire freedom, while others have been known to let employees get all the way through the training process and then veto the choice.
Marketing: Franchisees should find out how much marketing support they'll receive and if they have a say in the process.
Who will find the location: The franchisee should choose the spot with final approval from the franchisor, which should be in writing. The franchisee should also consult the would-be landlord before diving in.
"Their opinions will always differ," Alnasur said, "so it's beneficial to consult both of them to figure out if the business deserves an A-, B- or C-level location."
Relying on feasibility studies is a huge mistake, said Alnasur, who views them as nothing more than numbers on paper.
"You tell me where you want to open and I'll make you a study," he said. "They're useless."
Alnasur's final advice was simple: You get what you pay for. He shared a story about one of his friends who was excited about buying the franchise rights for a restaurant for nothing up front and only paying 1 percent in royalties. After checking back in with that friend a few weeks later, Alnasur learned that the restaurant was making no progress.
"Just because it's cheap doesn't mean that's a good reason to franchise it," he said. "If you pay nothing, you will get nothing."
Although Alnasur admitted that his presentation seemed a bit negative, he assured the would-be franchisees that doing business in the Middle East was wonderful as long as they found the right partners.
"Once you get into the market, it's the best, but to get there, there are a lot of headaches, so the franchisor has to help," he said. "Make sure you and the person saying 'I do' are walking in the same shoes."
Lastly, he advised to have an exit strategy in place because no matter how great a deal or an idea looks on paper or how successful a concept has been in another market, there is still a chance for failure.
"Culturally, sometimes it doesn't work out, so make sure to discuss an exit strategy," he said.
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Cover photo: Flickr.com: Weiss Brown