What's on a F&B investor's checklist?
With new market dynamics and the growing influence of millennials, F&B investors are after smarter investment choices that will enable them to cater to market demands, while boosting their returns on investment (ROI).
Abdul Kader Saadi, managing director of Glee Hospitality Solutions, offers his insight into the key F&B investment trends and current talking points in evidence across the MENA region
Investing in casual outlets on the rise
When looking at investments in the F&B and hospitality sectors in the MENA region, we need to consider a broad spectrum of factors that range from social to economic and current market factors. First and foremost, we should weigh up the broader, current regional economic climate, which has seen a slowdown in the retail and F&B sectors. Market challenges mean operators and investors are having to adopt a much leaner approach in terms of running a business and calculating the capital expenditure required to open an outlet. As a result, we have witnessed a shift in which investors are shying away from high-end concepts and moving, instead, toward fast-casual outlets. This refocus is allowing investors to forego having to deal with the disadvantages of high-end investment, which involve heavy investment, higher risk and huge amounts of capital expenditure, and reap the benefits of being able to negotiate more favorable rental rates and overall terms.
Compact concepts and startups
In light of these market challenges, most investors are currently keen to scale their concepts, which allows them to make them more compact and, in turn, far easier to replicate or franchise out regionally. Further complementing this trend, less sophisticated investors and startups are also seeking out small, street-food concepts as more favorable investment targets, due to the benefits they are seen to offer in terms of required capital expenditure.
Food delivery apps are king
It goes without saying that food delivery and social media play a far more important role in today’s current market than they did three-to-five years ago. Small and streetfood concepts often use different channels of promotion and are marketed through online avenues in particular, especially social media. Today’s F&B clientele are heavily skewed towards the online delivery market, using countless apps to give them access to a massive selection of F&B outlets. These delivery apps grant their users myriad benefits, such as the ability to finetune their search results, pull up their previous order info, make payments and even track their delivery driver’s position in real time via GPS. In response to this, almost any F&B concept under development will need to consider its food delivery model to remain competitive and relevant. In today’s market, online delivery apps, such as Deliveroo, Zomato, Ubereats and Talabat, have become too integral to the customer experience to be disregarded. To summarize, in today’s climate, investors need their concepts to be visually appealing on social media space and have been forced to place a greater focus on factors like food presentation.
Dubai first, Riyadh and Cairo follow
In terms of attractive MENA markets, Dubai is still considered the main draw for investors, since it is perceived to be the gateway to the region. Most secured franchises aim to open and establish themselves in the emirate first, building a strong foundation there, before moving on to other hubs. Within Dubai itself we are seeing a few new developments popping up that feature licensed outlets. Examples of these include real estate projects La Mer, City Walk 2 and Blue Water, all of which have significant numbers of F&B outlets within their space. For some of these secure franchises, the potential profits from setting up shop in these beachfront or city-walk properties may be sufficient to counterbalance the current market challenges in terms of their own margins. Outside of the UAE, other MENA cities, such as Riyadh, are becoming much more attractive to local and foreign investments as potential alternatives, in light of current developments and social changes. Riyadh’s draws include a huge market that remains relatively untapped, in terms of professionally developed and operated outlets. Another strong contender is Egypt, which is also enjoying a significant influx of investment, thanks to its attractively sized market. Investors turning to Egypt, and Cairo in particular, are also benefiting from the country’s decision to devalue its currency in 2016, which has reduced the cost of opening numerous outlets by almost 50 percent, signaling opportunities that many see as too good to miss.