F&B CLUSTERS HOW TO AVOID THE BUBBLE
With the regional bourgeoning of F&B clusters, understanding what it takes to survive if the bubble bursts is essential. Ralph Nader, CEO of Amber Consulting, unveils the fauxpas and how to avoid them when building your cluster
Outing plans that include food and drink remain the Middle East’s number one leisure activity and have symbolized the signature convivial lifestyle in the region. Scanning through the MENA region, the notion of F&B clusters exists by default in some countries. Canicular weather and the abundance of malls will inevitably push the concept of clusters forward. In fact, Dubai and the Gulf countries are anticipating an exponential development of the F&B industry, on the back of an increase in visitor numbers, large immigrant populations keen to obtain food from their home countries and ongoing population growth. In recent years, the Lebanese restaurant industry has switched its point of view from a standalone restaurant perception to F&B clusters. It all started a few years back, when the first clusters in the country started to pop up, from Uruguay Street in the heart of Beirut to Publicity in Jbeil. Today, the clusters market is looking stronger than ever, with future projects in Lebanon, including those undertaken by Venture Group, with three locations in Lebanon (Achrafieh, Jounieh, Jbeil). The same trend is evident, to a lesser or greater extent, in other countries. Venture Group is planning to open five hospitality clusters in Egypt, with the first, comprising 50 outlets, due to be ready this June.
An undertaking with ups and downs?
Developing an F&B cluster could look promising, but success isn’t guaranteed. In some scenarios, operators might find themselves facing a not-so-pretty ending. The closure of the first seven restaurants that began operating when Lebanon-based Blueberry Square opened in 2013 is a prime example. Another shock was the decision by Publicity (a Lebanese cluster) to shut down 10 pubs that formed part of a 12-outlet cluster it opened in 2013. Other failures in the region are to be expected. So what are the reasons for these closures? Why did they give a disappointing performance, and why are some projects failing, while others survive?
F&B clusters: the recipe for failure
It all starts with the honeymoon period; curious customers roll in and the marketing campaign is aggressive. Sometimes, you might even get a minister or other high-profile personality to attend the opening. The cluster is filled with intrigued food lovers and the future looks bright. But, as all married couple will tell you, maintaining
the momentum post-honeymoon is the hardest part. There is one main reason for F&B cluster failures, and it can be summarized in a single word: unpreparedness.
Know your customer!
A major factor in the success of an F&B cluster is understanding current customers. Do cluster owners invest the time, the money and the energy to assess the demand, prior to the launch? It’s highly unlikely. Opening a restaurant is an action that comes from the heart. Operators tend to offer the food they’re passionate about and, in turn, hope customers feel the same. But opening an F&B cluster is really primarily about economics. Just like any business, an accurate study on consumer behavior must be undertaken before any physical development is made. Operators must be aware of what consumers want, such as what type of food they eat and whether they want to get away from their surroundings for a night out or stay close to home. Unfortunately, most clusters owners would accept a tenant without considering the basic notion that a tenant’s success or otherwise is also theirs. One empty restaurant impacts all of the restaurants.
Opening a restaurant is an action of the heart, but an F&B cluster is mainly economics
Design is crucial
F&B clusters are complex, disarticulated, intricate structures that need to be well designed. The flow of food, cars, customers and supplies must be irreproachable. One pitfall in the design and you’re out of business. Have you ever had to wait 20 minutes for your car because the valet-parking system was inadequate? Did you ever go for a burger but noticed your clothes smelling of the shishas from next door? And what about seeing food come in from the same door as that used for the neighbor’s garbage? These scenarios, inspired by real-life experiences and with failed design at their core, could deter anyone from returning to an outlet.
Don’t be empty
This might sound somewhat obvious, but full coverage is a must, any month of the year, any day of the week, any hour of the day. Low times are the enemy of F&B clusters. There is nothing more depressing for the image of the cluster than the perception of emptiness. It can be fatal. Continuous revenue and resilience is what owners should target. For example, as summer is everyone’s favorite season; people go out almost every day of the week and it’s the most profitable period of the year for the F&B industry, especially for clusters. But when the rain starts pouring and the temperature drops, everyone heads for shelter. Unfortunately, this is a challenge for some F&B clusters, whose seating is mostly outdoors and only adequate for the dry, warm season. Consequently, when winter comes and it’s too cold for anyone to enjoy a night out, these outlets experience a decline in activity. On another level, clusters that operate every day of the week, from sunrise to past sunset, must be able to offer meals throughout the day, from breakfast to dinner. This concept is non-existent for pub clusters, for example.
Fight with a plan
Truth be told, those who make it through the hard times are the ones with a trustworthy, established, regular clientele and adequate cashflow to continue functioning in harsh conditions. There is no secret recipe to success, but common sense is a key ingredient. To stay on the scene, the cluster should keep creating value for consumers and avoid giving a disappointing experience. If you have a piece of land and want to create an F&B cluster, our advice is simple: invest time and money in preparation and planning because in a highly demanding region, where eating out is an important part of life, the devil is in the detail. The number and quality of F&B clusters will increase, and only the strong will survive. When an F&B cluster faces severe criticism from food lovers, one additional failure could impact the entire ecosystem.