Birthing Pains: the Issues faced by Start-Ups in the Middle East
Ashraf A. Mahate:
Sanjai K. Parahoo:
Food and Beverages
June 2016
Abdulla Mohammed is a UAE national from an entrepreneurial family; however he had never personally owned or even managed a commercial enterprise. As an independent minded individual Abdulla did not wish to take over any of the family businesses that were originally established by either his father or grandfather but start his own venture using his own savings and funds borrowed from a local bank. Abdulla carried out a brief study and found that in Dubai the hospitality sector, as a result of growing number of tourists and foreign workers, was a promising area to enter. As a result Abdulla decided to establish a coffee store as the investment was reasonable and there was a strong tradition of drinking coffee in the region. However, Abdulla found that Dubai was well served with major international, regional and local brands each serving their own specialty of coffee. In such a congested market Abdulla had to differentiate his coffee shop while attracting a regular flow of traffic. Abdulla was faced with the tough decision of developing his own format or to franchise a well tried and tested model from overseas. The tried and tested nature of a franchise would also mean that Abdulla would receive considerable assistance in establishing his coffee shop in terms of start-up advice, design and layout of facility, selection of location, training of staff, development of menu items, etc. For someone with no experience in the food service industry these were very important considerations. However, Abdulla realized that even if a model is successful overseas there is no guarantee that it would do well in Dubai. Abdulla recognized that Dubai with its large expatriate population meant that as long as he was careful to select the right franchise model there would be some customer loyalty to the brand. Then there was the issue of identifying the right franchiser, carrying out the due diligence and maintaining the relationship with the franchiser. This case study deals with the decision choices that are faced by a first time entrepreneur and the lessons that are learnt.
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