Abrakebabra: Growing Pains in a Fast-Food Restaurant Chain
CASE A

Rosalind Beere, Peter Mc Namara and Colm O’Gorman (UCD Business Schools) wrote this case. We wish to gratefully acknowledge the help of Abrakebabra Limited who have co-operated in this research by giving access to management, staff, franchisees and company documents. Financial support of a grant from Davys Stockbrokers to undertake a series of case studies is gratefully acknowledged. Disclaimer: This case is intended to be used as a basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. © Copyright Rosalind Beere, Peter Mc Namara and Colm O’Gorman, 2004, UCD Business Schools.

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“A LICENSE TO PRINT MONEY” In the early 1980’s Dublin city lacked the restaurant culture of other European cities. Instead Dublin’s social life centred on a vibrant pub culture, with bars focusing on drink sales, rather than offering food to customers. So, on leaving a pub after an evenings drinking, Dubliners had few options for late night eating. For one twenty-two year old, Graeme Beere, this problem represented a business opportunity. In 1982 Graeme, with the help of his brother Wyn, opened a new fast-food restaurant targeted at Dublin’s pub going population. The offering was new for Dublin: a product mix of kebabs, burgers and chips; late night opening; and the option to ‘eat-in’. Making a play on the word ‘kebab’ and Steve Miller’s No. 1 hit song ‘Abracadabra’, Graeme called his new restaurant ‘Abrakebabra’.
Abrakebabra expanded rapidly during the 1980s and 1990s. 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. Abrakebabra expanded from one owner-operated fast-food restaurant in 1982 to sixty outlets by 1997- twelve company-owned restaurants and forty-eight franchised restaurants. However, by 1997, this period of sustained growth was leading to strategic and organisational problems. Graeme and Wyn began to question the sustainability of the dual growth strategy.

START-UP: THE FIRST ABRAKEBABRA RESTAURANT The Opportunity Graeme Beere grew up in Donnybrook, a prosperous district in the heart of Dublin city. Graeme ‘oozes’ the traits of a ‘young entrepreneur’: ambition, high energy, determination, vision, creativity, an un-moving self-belief, and the ability to take risks. For example, at eight years of age he had cooked french fries at home and sold bags of them to local children; at twelve he held bicycle auctions in his front garden, selling to both children and adults; after leaving school he established a trucking business; and by twenty-two he opened the first Abrakebabra restaurant. In the early 1980s Irish law required all pubs to close at a fixed time, which was, for example, at 11pm during the winter months. Therefore, following an evening of consuming ‘pints’ of beer, many young Dubliners sought food and further entertainment. However, the only available food at such a late hour was from the local fish and chip shop, more commonly referred to as the ‘chipper’. A ‘chipper’ serves a standard menu of food of chips, sausages, fish and burgers, which has remained largely unchanged for decades. The food is served on a ‘to go’ basis- with no facility to ‘eat-in’. The limited range of food, the lack of seating and the general décor of these venues; meant that for many, the ‘chipper’ experience was not very satisfying. The alternatives to the ‘chipper’ were to eat at home, an unattractive option after a night out, or a restaurant, an option beyond the budget of most young people at the time.

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Graeme regularly socialised in the central Dublin area and its surrounds, including the areas of Ranelagh and Rathmines1. He was frustrated by the lack of eating options late at night. He started selling fast food at the front of an off-licence (Deveney’s) in the Rathmines area. Graeme asked himself ‘what food is available to people like himselfyoung image conscious people on a limited budget?’ Graeme’s answer was to create a new concept in fast-food- Abrakebabra.

The Abrakebabra concept Graeme’s concept was a fast-food restaurant that would offer a menu and physical layout that would appeal to his generation – a menu of exotic fare such as kebabs as well as the ‘old reliables’ of burgers and french fries, and a design that was trendy. Graeme had visited London on a number of occasions, which exposed him to kebabs as a fast-food product- a product not widely known in Dublin. He sought to differentiate his restaurant concept from his rivals (the traditional chipper), in two additional ways. First was in terms of opening hours: he would open for longer; and second, he would offer an ‘eat-in’ option by having seating. For this new venture to work Graeme realised that location was key. The restaurant needed to be situated close to pubs and in an area where his target market lived and socialised. While Graeme felt he knew his target market well as they were people like himself and his friends, though he lacked knowledge of the property business. Fortunately Graeme’s older brother Wyn had many years experience in the property business. Graeme turned to his brother for advice on obtaining a leased building in the Rathmines area. Rathmines was the heart of Dublin’s flatland. Wyn found a suitable premises in Rathmines that was adequate in size, inexpensive to rent, and was located close to several pubs, nightclubs and within minutes of an abundance of shared accommodation, apartments and flats. Wyn also helped Graeme acquire the necessary planning permission needed to open a restaurant. Once this was completed Graeme could go about turning his concept into a reality. Having obtained a suitable location for his first restaurant, the next important issue for Graeme was design. Graeme wanted the restaurant to be trendy and appeal to the youth culture inhabiting the area at the time. Graeme set about choosing a name, designing a logo and most importantly designing the physical look and layout of the restaurant. Graeme sought help form a friend, Donal McDonald, a Dublin designer. Searching for a name for his venture Graeme chose a play on words: a mix of the name of the then number one hit by Steve Miller, “Abracadabra”, and the name of the core product, “kebab”. Hence Abrakebabra. For both the logo and restaurant interior and exterior Graeme chose bright colours. Graeme chose green, red and white. Green was chosen to evoke a patriotic feeling among
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This area of Dublin was at the time populated by a diverse community of students and young professionals who were attracted by its proximity to central Dublin, the availability of affordable flats and shared accommodation, and its vibrant pub culture.

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Irish customers; red was chosen for its vibrancy; and white was chosen to create a feeling of cleanliness. The logo was designed to be eye-catching and exotic. Graeme chose two Palm trees on either side of the word ‘Abrakebabra’ (Figure 1).

Figure 1: The Abrakebabra logo

Graeme sought to differentiate his new restaurant from the traditional ‘chipper’ by making it look different. He used the latest in 1980’s fast-food décor. During the 1980s McDonalds had pioneered a new design concept for fast-food restaurants, and Graeme decided to adopt and adapt some of its features. For example, Graeme adopted the ‘bucket seat’ from McDonalds, a seat designed to encourage customers to be uncomfortable enough so that they would ‘eat and go’. Seating was either in the form of high plastic bar stools (which were new to the Irish restaurant market), or low plastic ‘bucket seat’ table and chair units. The floors and walls were all tiled: this was for practicality, for image, and for cost reasons: the white tiles were easy to clean, they promoted a modern and hygienic atmosphere, and they were cheap. Graeme put modern artwork on the walls, something that had never been used in an Irish fast-food outlet before. The lighting of the restaurant was bright and the music was trendy and loud. This combination of design (seating, lighting and music) was attractive to his target customers. Pictures of the exterior and interior of a typical Abrakebabra are presented in Figure 2 and a floor plan for an Abrakebabra restaurant is presented in Figure 3.

Figure 2: Examples of interior and exterior of a typical Abrakebabra.

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Figure 3: Floor plan of a typical Abrakebabra.
Over Head Menu Hot Food Lamps Burger Grill Deep Fat Fryer Kebab Skewer

Till Sauces

Salad/ Cabbage

Freshly sliced Kebab Meat

Pitta Bread Toaster

Main Counter

Seating

Toilets

Security

Main Entrance

Figure 4: Product offerings: a kebab; a burger; and a burger, chips and drink2.

The first Abrakebabra restaurant

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Source of pictures in Figures 4 and 5 is http://www.abrakebabra.net.

Abrakebabra

Staff

Staff

Staff

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In the Spring of 1982, Graeme had fitted the premises in Rathmines and was ready to open his first restaurant. He financed this restaurant with his own money. This was possibly the only option for Graeme as access to bank debt was very difficult and expensive in Ireland in the 1980s due to very difficult economic circumstances. On entering the restaurant customers were immediately struck by the strong branding of the restaurant. The counter was a long and sleek looking focal point, and had in large green letters the ‘Abrakebabra’ logo across it. There was also a huge branded menu located above the food preparation area, running the length of the food counter. Mirroring the Abrakebabra branding, the restaurant’s colour scheme permeated the red, white and green theme throughout the entire restaurant, from staff uniforms to the seating areas. Thus the seats were red, the supporting table poles green and the tables white. In addition, the restaurant’s cooking and serving areas were visible to the customer. The skewer of lamb was positioned near to the window so that customers and passers-by could witness the kebab making process. For the first time customers could see their food being prepared. Graeme offered customers the option of eating their food in the restaurant or taking it away. He opened until 4am, catering for both people leaving the pub at 11pm and also for those who ‘partied’ until 2am in the local nightclub. Graeme priced Abrakebabra’s products so that there were competitive with ‘chippers’. This business model was quite different from traditional offerings in Dublin, where your food was either served at your table, or you waited passively in line and had food handed to you in a paper bag by a cashier (as in the case of a ‘chipper’).

EXPANSION: THE SECOND, THIRD AND FOURTH ABRAKEBABRA RESTAURANTS Graeme’s judgement proved correct with Abrakebabra proving popular with customers. About a year into the running of the restaurant in Rathmines, Graeme realised that this concept could work elsewhere. The search for new attractive locations became a pressing concern. Graeme turned to Wyn to help him manage and develop this new business venture. Graeme offered Wyn a 50% stake in the company. Wyn accepted, and thus the brothers’ business partnership began with the founding of Abrakebabra Limited. Wyn was a qualified Chartered Surveyor and Auctioneer, was married with children, and was ten years older than Graeme. Wyn was as determined and ambitious as Graeme. At the time of the founding of Abrakebabra, Wyn was working for a large and prestigious property company. He had previously opened his own auctioneering firm but the responsibilities of a family prompted him to seek more secure employment. However, the success of Abrakebabra in Rathmines persuaded Wyn that Abrakebabra had potential. He turned his back on his secure job and joined his younger brother. To the partnership Wyn brought his professional expertise of property and his general business know-how. Both Wyn and Graeme accept the commonly quoted analogy that portrays their relationship: Graeme as the accelerator and Wyn as the brakes. On many occasions during the expansion and growth of Abrakebabra Wyn was the voice of caution and reason. The

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partnership was one of two very different personalities sharing a united vision, to create a highly successful and profitable business. The brothers as partners now set about making a second restaurant a reality. Wyn located and secured a site on Baggot Street, an area in South Dublin that is similar to Rathmines in that many pubs and clubs surround it. Together Graeme and Wyn operated Abrakebabra as owner-managers. They worked long hours to address the constant flow of problems and issues involved in running what was proving a highly lucrative, though labour intensive, business. In terms of division of responsibility, Graeme oversaw the management of staff and the operational running of the restaurants, while Wyn was in charge of the property and financial side of the business. Together, they oversaw the hiring of all staff. In practical terms, the brothers decided that Graeme was to run the Rathmines location and Wyn was to oversee the Baggot Street restaurant. Two members of staff who proved to be good managers were promoted to the level of restaurant manager. This allowed Graeme and Wyn to spend time opening a third and then a fourth restaurant. By 1984 they had opened a restaurant in Donnybrook (an area like Rathmines) and a restaurant at O’Connell Bridge (a site overlooking Dublin’s main street). Both of these new properties were located close to a number of pubs and a significant passing trade from nearby clubs. Overall, this initial expansion was successful. Each restaurant produced an astounding turnover. Everything the brothers touched seemed to turn to gold, they were riding the wave of success. Furthermore, the opening of the O’Connell Bridge restaurant had an unexpected impact on the company’s brand awareness. O’Connell Bridge is in the very heart of Ireland’s capital city. It offered a constant supply of customers passing by and had the added bonus of the attention drawn from being in such a central location, Abrakebabra was pictured in many national TV programmes showing scenes of central Dublin. This exposure heightened interest in Abrakebabra and created awareness of the brand nationally. The name Abrakebabra was now a major part of the Dublin fast-food scene. As Wyn Beere recalls: “It was one of my biggest coups to get that location on O’Connell Bridge. In my opinion and judging by turnover figures it was the best site in Ireland for a fast-food restaurant. It was visible from four different directions… from up along the Liffey, from O’Connell Street, from West Moreland Street and from Trinity College. It was positioned in the very heart of the capital. The turnover in those early days was around IR£10,0003 a week, which was enormous. O’Connell Bridge was one of the most successful shops.4” However, growth problems began to arise amidst this early success. With four highly successful shops came a barrage of management and staffing problems. The brothers were experiencing problems managing the four existing restaurants and they couldn’t
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This is an annual turnover of IR£520,000 or approximately 660,000€. The average industrial wage in 1984 was IR£8,000 or approximately €10,000. 4 Interview with Wyn Beere, Founder and retired Director and Company Secretary

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physically devote the necessary time to each of the outlets. By the time they had opened the fourth restaurant Graeme and Wyn believed that there was no tenable way to continue to expand. They believed that they lacked the management staff to operate more restaurants. The brothers faced a dilemma- the restaurants were highly profitable and they wanted to open more Abrakebabra restaurants, but how could they as they were working ‘flat-out’ operating the existing four restaurants.

FRANCHISING: A NEW GROWTH STRATEGY Graeme and Wyn decided that the solution to these growth problems was to franchise. They had seen the unrivalled success of McDonalds in the US. To the brothers, McDonalds was a testimony to the power and efficiency of franchising. Graeme’s explanation of the decision to franchise was: “Wyn’s idea… he read about it in the States… surprisingly we hadn’t heard about it here, [though] it was big enough in America. Franchising was growing and it has proved to be a good idea for expansion”. And, according to Wyn, franchising: “... was the way forward and we found that when we got to a certain number of restaurants that we couldn’t manage them ourselves and the obvious way forward was to franchise and we used McDonalds as the model to copy. So it was basically a method of growth and expansion.”5 Abrakebabra chose the business format franchise model (the model used by McDonalds). They would sell an entire business package and concept to a franchisee. Abrakebabra offered their franchisees certain key elements: the Abrakebabra brand, product and service trademarks, and the rights to operate in a specific location. The company found that franchising was an excellent way of expanding rapidly as it solved two key problems- cash flow and management capacity. Franchisees brought capital investment and management capacity in that they undertook the responsibility of running their own restaurant on a day-to-day basis. The first Abrakebabra franchised restaurant (the fifth Abrakebabra restaurant) opened in 1985 in Crumlin in Dublin. For the brothers this was a huge success and from this point forward they used franchising as the principal strategy for further expansion.

RAPID GROWTH: ABRAKEBABRA BECOMES A FAST-FOOD EMPIRE The period strategy from 1985 to 1987 was one of very rapid growth. The brothers used a dual strategy to drive growth. That is, they expanded using the franchise strategy and by opening company-owned restaurants. Fifteen years after the opening of the first
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Interview with Wyn Beere, Founder and retired Director and Company Secretary

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Abrakebabra restaurant in Rathmines, Abrakebabra had restaurants in every large town or city in Ireland. By 1997, Abrakebabra had sixty restaurants, twelve company-owned restaurants and forty-eight franchised restaurants. The logic of this dual strategy was that by franchising Graeme and Wyn could expand Abrakebabra quickly as franchisees provided capital and management. The larger the chain became the greater the brand recognition, the greater the brand recognition, the easier it was to attract franchisees. The success of the franchised stores provided the resources to fund company-owned restaurants. And so the cycle continued. From the initial five restaurants developed in the early 1980’s Abrakebabra began at first to expand within the central Dublin region. The capital was the brothers’ home city and they were able to easily identify locations that matched their criteria. After saturating the Dublin market, they decided to look at locations in other parts of Ireland. Franchising was an ideal vehicle to do this as the company could identify a site on the main street of any large city or town and select a franchisee from the local community. One of the first major cities they targeted was Galway, a city populated with young people. Encouraged by the success of franchising, Abrakebabra began a national rollout. The company began to open franchises in all the major Irish cities, such as Cork, Limerick and Sligo. As well as expanding in the Republic of Ireland the two brothers also took the Abrakebabra concept over the border into Northern Ireland. They established a foothold in the UK but these locations ultimately proved unsuccessful and they decided to remain focused on the Irish market. The brothers continued to operate and expand the number of company-owned restaurants. These restaurants were an important source of cash flow that helped fund the development of the franchising strategy. Additionally, the company-owned restaurants were an important learning mechanism. Both Graeme and Wyn gained practical insights into the management of individual restaurants: insights such as the impact of changes in any aspect of the business. Graeme and Wyn experimented with changes in physical design, in branding, in product and service delivery processes, in financial management systems, in supplier management systems, and in human resource management systems within the company-owned restaurants. Any improvements were then implemented in the franchised restaurants. Graeme and Wyn used knowledge gained from the companyowned restaurants to refine the management control systems and services offered to franchisees. Attracting potential franchisees was done through advertising in local media and by approaching locals who might be interested in an Abrakebabra franchise. Often individuals would see an advert in a local newspaper and contact the Abrakebabra head office in Dublin to arrange a meeting. Sometimes Graeme and Wyn would approach an established local fast-food restaurant and ask the proprietors if they would be interested in converting to an Abrakebabra restaurant. Sometimes potential applicants would simply telephone the head office unprompted and enquire about becoming a franchisee without any particular location in mind.

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GROWING PAINS: STRATEGY, STRUCTURE AND MANAGEMENT ISSUES AT ABRAKEBABRA The company reached its peak of sixty restaurants in 1997. This far exceeded the brothers’ original expectations of growth. However, this rapid growth was not without problems. Increased competition and management and organisational pressures raised serious questions about the sustainability of the dual growth strategy. Increased Competition Abrakebabra competes with its rivals on two different levels, one is competition for customers and the other is competition for competent franchisees. At start-up, Abrakebabra’s main competitors were local ‘chippers’. However, during the 1980s Abrakebabra faced increased competition from international fast-food restaurant chains such as McDonalds and Burger King and from the Irish owned Supermacs6. During the 1980s, due to the early adoption of the franchise strategy Abrakebabra had a solid and largely unrivalled position. For example, by 1990 Abrakebabra had about twice as many restaurants in Ireland as McDonalds (twenty versus ten). During the 1990s various internationally franchised pizza chains such as Domino’s Pizza entered the Irish market (Table 1). Abrakebabra continues to face new competitors, as Ian Beere, Abrakebabra’s Health and Safety Officer claims: “Ireland has more money to spend on food, whereas in the eighties and the [early and mid] nineties… we weren’t too sure where things were going… and then there was all the Supermacs and everything [continues to] change…. the garage shops are selling food… the pubs are selling food so it is a different market and people eat out more, they party more…7” Table 1: Selected competitors: Restaurant numbers throughout Ireland in 19978
Name McDonalds Abrakebabra Supermacs Four Star Pizza Burger King Domino’s Pizza ‘Eat-in’ option Seating Seating Seating No Seating Seating No Seating Number of restaurants in Ireland (1997) 35 60 16 10 12 9 County of origin U.S. Ireland Ireland U.S. U.K. U.S.

This increased competition, combined with a recession in the local market in the late 1980s, and changing customer preferences in the 1990s (customers were becoming increasingly health conscious) caused Graeme and Wyn to expand Abrakebabra’s product offering. The menu was expanded from about ten items in the 1980s to about thirty-five items in the 1990s. Although originally specialising in kebab style pitta sandwiches, the menu was developed to include burritos, hot filled baguettes and burgers. Kebabs are still
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Supermacs is a large Irish owned fast-food restaurant chain operating throughout Ireland Interview with Ian Beere, Health and Safety Officer 8 All competitor information was obtained by contact with each company’s head office

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the top seller, accounting for about 27% of sales. The chicken baguette has proved to be a popular addition and has experienced rapid sales growth. The menu features lamb, chicken, beef, pork, fish and an increasingly popular range of vegetarian options, and is constantly updated to keep apace of changing customer tastes. Illustrations of some of these new product offerings are provided in Figure 5. Figure 5: Selected new product offerings: Succulent Chicken Breast Baguette, Crispy Chicken Dippers, and Garlic and Cheese Chip ’n Dip.

Management and organisational pressures By 1997, Graeme and Wyn faced significant management, organisational and strategic challenges. These issues were how to manage both the company-owned restaurants and the franchised restaurants. In the words of Wyn Beere and Dominic Kelly (financial account) the problems were: “…. twelve company shops... we had to meet them [the managers of the companyowned restaurants] every Thursday and go through every figure… gross profit, wages I mean everything… it was a nightmare… to monitor them was impossible… they were all individuals… you’d probably have most of them being very good but then the other half… would drive you nuts…”9. “… what was happening was 80% of management’s time was being taken up dealing with their own shops… the franchises were largely being ignored”10 THE FUTURE Graeme and Wyn face a number of difficult choices. They must decide about the identity of the firm. Can Abrakebabra continue to function effectively with a split focus- that is both as a franchiser and a restaurateur?
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Interview with Wyn Beere, Founder and retired Director and Company Secretary (all interview carried out during 2002). 10 Interview with Dominic Kelly, Company Financial Accountant

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