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Kebab Franchise Case Study(Business & Finance Via Thomson Dialog NewsEdge) A case study of Abrakebabra tells the story of how Graeme and Wyn Beere created and managed the rapid expansion of one of the most successful restaurant chains in Ireland. From humble beginnings as a single outlet in 1982, through a period of rapid and sustained growth during the Celtic Tiger, we explored the process by which Abrakebabra rose to be the second-largest fast-food franchise in Ireland in 2003. In 1982, Graeme Beere was a 22-year-old Dubliner who was frustrated by the lack of late-night eating options in Dublin. Despite his young age, his lack of business or restaurant experience and his limited financial resources, he opened a fast-food restaurant in Rathmines, Dublin. The restaurant offered a menu and physical layout that appealed to his generation - a menu of exotic fare such as kebabs as well as burgers and French fries, and a design that was trendy. The name Abrakebabra was a play on the word kebab and Steve Millers hit song Abracadabra. The new venture was extremely successful. Building on the success of the first restaurant, Graeme, with brother Wyn, opened further restaurants. Success continued: each restaurant was producing an astounding turnover- everything the brothers touched seemed to turn to gold. Graeme and Wyn adopted a franchise growth strategy in the mid 1980s, a strategy common in the US but largely unknown in Ireland at the time. This allowed the business to grow rapidly, but the business experienced significant growing pains such as the challenge of managing a dual-growth strategy, increased competition, and organisational issues, and the management of franchisees. Graeme and Wyn responded to these challenges by introducing changes to strategy and to the organisations structure. In undergraduate, diploma and masters business courses, the Abrakebabra case is used to explore the start-up process and subsequent managerial control issues that arise from a period of rapid growth. There axe two published cases on Abrakebabra. The first, which won the European Entrepreneurship case award for 2007, focused on the challenges of starting up in the economically depressed period of the 1980s and rapid growth of the early 19905. The second explores the response to a franchisee "revolt" and the challenges of managing a mature, large business format franchise. We use the first case to show students that business creation is much more of an "art" than a "science". For example, when starting Abrakebabra, Graeme did not write a business plan or undertake any formal market research or analysis. Would a business plan have allowed Graeme to definitively "prove" the concept prior to start-up? And even if a business plan could demonstrate the viability of the Abrakebabra business model, would Graeme attract any external investment given the economic conditions of early 1980s Ireland and his inexperience? We then use the Abrakebabra case to illustrate how entrepreneurs often rely on their judgement rather than "hard" market information; how they use personal contacts - family and friends - to open doors and solve problems; and how they use resources to hand, rather than raising external finance. This is the typical experience of most entrepreneurs. The second case explores the challenges of rapid growth of a business format franchise system and how Abrakebabra responded to these challenges by transitioning from an "art' towards a "science" approach to managing franchisees. In 1997, franchisees held a series of secret meetings with the objective of renegotiating the franchise contract. The brothers realised that they spent 80% of their time managing their own restaurants, which generated only 20% of profits. The decision was taken to franchise out these restaurants, thus Abrakebabra became a 100% franchising model. Franchisees were met individually. Frank discussions ensued about the benefits and obligations of both franchisee and franchiser. As a result, a small number of franchisees left Abrakebabra. The revolt prompted the brothers to consider how they could improve the franchising model. They considered objectives and responsibilities of both parties and then redesigned Abrakebabra with these in mind. The new system would create mutual wealth, while managing conflicts of interest. Over time, a more structured approach to managing the franchisee-franchisor relationship emerged. A systematic approach to selection of new franchisees is important for the franchise system as a whole. The second case details how, over a period of time, Abrakebabra installed a series of simple but effective systems that managed the quality of new franchisee selection and initial training, in addition to systems that monitor and improve the efficiency and effectiveness of current franchisees. Success of a business format franchise requires careful selection of franchisees and ongoing monitoring and support of franchisees to ensure individual restaurants operate efficiently, thus maximising profits. The system benefits when new franchisees run successful restaurants, as this widens public exposure to the brand and shares franchisor fixed costs across a wider pool of franchisees. The system as a whole is the poorer when current franchisees fall short on key standards in the domains of market image, quality control and customer service. Abrakebabra faces three challenges in maximising the value it can create: selecting quality franchisees, ensuring franchisees continue to improve standards in customer service, and accuracy of sales reports. Franchisees are selected using a funnel system. First point of contact is via an online application. In the second, some applicants are invited to interview, after signing a confidentiality agreement. In the third, they participate in on-the-job training with an established franchisee for a period two weeks to three months. Finally, if acceptable by both parties, a 10-year franchise contract is signed. Submission by the franchisee to the managerial control systems of the franchisor offers considerable benefits. For new franchisees, the franchiser provides initial operational training, a powerful national brand (one franchisee reported that conversion to Abrakebabra enabled him to reverse a one-third decline in sales caused by Me Donalds opening in his town), and assistance in fitting out the restaurant. Franchisees receive four to five weeks of on site support once the restaurant opens. Performance of restaurants is monitored via weekly sales reports. Staff from the franchiser visits every two weeks to discuss operational issues. Every six weeks regional supervisors undertake a hygiene audit. Customer service levels are monitored via customer comment cards in all restaurants and regular mystery shopper visits, who report their findings to Abrakebabra headquarters. Collectively, these control systems help franchisees to think about detail. Taking the two cases together, we consider the changing roles of an entrepreneur over time as they move from initial development of a business model to the long term managerial challenges that movement to a mature business model causes. The two cases are available at http:llwww.ecch.com/casesearch/ Rosalind Beere, Peter McNamara and Colm O'Gorman of UCD Business School were winners of the 2007 European Case Award for an Entrepreneurship Teaching Case Study. Copyright 2007 Moranna Ltd, Source: The Financial Times Limited |