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Red Velvet Cupcakery owner Aaron Gordon thought it was a scam the first time he was contacted about opening a shop in the Middle East.
“Dear Mr. Aron,” began an email from Malik Awan in January 2010. “We would like to open dialogue with you for the opening of Red Velvet within Qatar’s prestigious project—The Cultural Village.” The $15 billion project, the message went on to say, was conceptualized by His Highness Sheikh Jasim bin Hamad bin Khalifa Al Thani, the former crown prince of Qatar, and would also include a beach, boardwalk, opera house, museums, boutique hotels, and more.
“I was immediately skeptical,” Gordon says. “I thought it was some kind of shyster because how in the world would the crown prince have possibly tasted our cupcakes?”
But after Awan, a retail consultant for the project, called and emailed about 20 times, Gordon called him back. It turned out that Al-Thani had traveled to D.C. several times at the height of the cupcake craze and loved Red Velvet. So, four or five times in the weeks following their conversation, a representative from the Qatari embassy picked up a few dozen cupcakes from the shop and sent them on an overnight flight to Doha.
Next, Awan said he wanted to bring Gordon to Doha. But Gordon had no intention of opening a shop overseas and barely knew a thing about Qatar. He agreed to go if they bought him and his father/business partner tickets to Qatar and Dubai, which he’d always wanted to visit.
Before he knew it, Gordon was on a first-class flight. As he departed the plane upon landing, Gordon noticed a black limousine on the tarmac. “The guy looks up and goes, ‘Aaron Gordon?’” he recalls. “Are you serious? Who do you think I am, Michael Jackson? I just make cupcakes.” In the whirlwind week that followed, Gordon and his father stayed in the finest hotels, ate in the best restaurants, and talked plans about bringing Red Velvet to the Cultural Village project.
Gordon eventually agreed to a franchise deal, and his head baker Lindsey Walker decided to move across the world to oversee the shop. The former crown prince paid for the million-dollar buildout of the cupcake shop, which has curved, shiny red walls and ceilings and furniture shaped like giant cupcakes. “It’s probably 10 times more expensive than any shop I’ve ever built,” says Gordon, who collects 7 percent of the cupcakery’s sales, amounting to $30,000-$40,000 a year. Gordon, who also owns Tangysweet, has licensed the rights to the frozen yogurt shop in Doha, too, although it hasn’t been built yet overseas.
Red Velvet may not be the only familiar D.C. business heading to the Persian Gulf. In recent years, wealthy oil-producing countries like Saudi Arabia, Kuwait, Bahrain, Qatar, Oman, and the United Arab Emirates have become hotspots for American restaurant franchises. Pinkberry, Shake Shack, P.F. Chang’s, IHOP, Potbelly, and The Cheesecake Factory all have locations in the Middle East, as do celebrity chefs like Alain Ducasse, Gordon Ramsay, and Jean-Georges Vongerichten.
Washington-area restaurant groups are getting in on the action, too: Arlington-based Elevation Burger has multiple locations, while BGR: The Burger Joint is working on a possible deal in Dubai. There’s hardly a fast casual concept in town that hasn’t at least been approached about the prospect. The owners of Sweetgreen, Georgetown Cupcake, H &pizza, and Taylor Gourmet say they’ve all been pitched opportunities to franchise in the region.
“There’s crazy amounts of money,” says Dan Rowe, CEO of Alexandria-based franchise development company Fransmart. While well-financed American companies might invest $1 or $2 million developing a franchise, Rowe says, it’s not unusual for those in the Middle East to invest $10 million in the first year and more than that the second—in cash.
Most residents of the countries where U.S. restaurants are expanding speak English, and they love American brands. Rowe says he’s done about 40 deals in the last five to six years in the Middle East, including Vapiano, Elevation Burger, and zpizza. The concepts that work there are the concepts that work here, he says, particularly if they have anything to do with burgers, pizza, diner food, sandwiches, or cupcakes. (French and Mexican food flops, while Italian is popular.)
“The biggest thing is street cred. They want a brand that’s already got a story,” Rowe says. “Even Elevation Burger. It’s here in Washington, D.C., and that’s a big deal. The whole grassfed organic free-range meat, fries cooked in olive oil—even if an Arab started the concept on their own, it wouldn’t have quite the appeal because it didn’t come from the States.”
Elevation Burger already has seven locations in the Middle East, with seven more coming just this year. “It seemed a little pie in the sky until we met somebody who we thought was really capable,” says founder Hans Hess, who visited the region for the first time last year and is on his second trip this month. “I did have a sense of how good of a market it was for an American concept.”
Hess declines to say exactly how much more sales his stores do in the Middle East. “I can tell you it’s much, much higher,” he says. On average, Rowe says the Middle East franchises tend to do 50 to 100 percent more business than their American counterparts. Part of the reason is that restaurants and malls are the center of social life there. In Saudi Arabia, for example, where Elevation has a franchise in Riyadh, the government does not allow movie theaters, bars, or dance clubs. With temperatures reaching 140 degrees, restaurants are one of the few refuges from the heat to hang out with friends.
Most restaurants get an upscale lift when they open in the Persian Gulf. “They’re very brand-conscious, very fashion-conscious,” Rowe says. “Any of our restaurants that are over there tend to look a little bit nicer than the rest of the chain…They use the best finishing, the best furniture; they overhire with labor.” Elevation Burger installed more expensive tiles and light fixtures overseas, and the Dubai location has a 17-foot sign out front. Real estate is limited, so in order to get leases, the restaurants need to impress the landlord, Hess says.
But in general, the restaurants try to replicate as much of their American outposts as possible. Almost all the food supplies, kitchen equipment, and furniture are shipped in from the U.S., allowing restaurants to use many of their same vendors. Meanwhile, restaurants must work through staffing agencies that bring in employees from Sri Lanka, the Philippines, and dozens of other countries all over the world.
Walker has a two-year contract as head baker at Red Velvet, which will end in June. She says moving from D.C. to Qatar was an opportunity to travel, work with other nationalities, and broaden her culinary abilities. “There’s not really much differences,” she says of the cupcake shop’s locations. “The only thing I can think of is that all of our ingredients are imported, so we have to wait a bit longer for some stuff.”
During the week, the shop does more business with Qataris. On weekends, it draws a mostly expat crowd. For both groups, Walker says, the “Southern Belle” red velvet cupcake is the best seller. While cupcake mania may be dying down in the U.S., it’s just getting started in the Middle East: New York’s Magnolia Bakery just opened in Doha, and Sprinkles has a location in Kuwait.
There’s also a whole set of Islamic dietary laws these eateries must comply with, including bans on pork and alcohol (with a few limited exceptions in certain countries). Elevation Burger’s veggie burger used white wine vinegar, so it had to change the recipe. Beer-battered onion rings and anything topped with bacon wouldn’t work, either, says BGR’s Mark Bucher.
Other menu changes have to do with cultural tastes. For example, Red Velvet serves more tea than coffee, and it added ice cream to the menu to help combat the heat. Elevation Burger offers “fancy fries” with melted cheese and other toppings. At a U.S. location, the burger shop gets maybe 20 total orders of the dish a week. But at its Middle Eastern locations, 80 percent of fries have cheese—so much that Elevation Burger had to install additional equipment to more efficiently melt cheese.
Another thing that doesn’t happen often in the U.S., Hess says: Sometimes a diner will buy one of everything on the menu and set it out in front of him. “He’ll have four sandwiches, a milkshake, a drink, a cheese fry, and a regular fry, a veggie burger,” Hess says. “It’s not that he’s going to eat all of it. It’s a sign of wealth.”
But not everyone gets rich overseas. For every success story like Elevation Burger, Hess says he’s personally heard 10 failures: Stores close, partners don’t carry through on their commitments, and at worst, there’s protracted litigation. “The problem selling to the ultra-wealthy is it’s just one of several projects for them,” Hess says. “It’s very financially oriented, so sometimes those groups lose interest, and sometimes they find a better deal, and there’s so many ways to lose over there.”
Everything is harder, Rowe adds, whether it’s getting a location, employees, or products, and there are also other banking and legal hurdles that come with opening a business overseas.
Some D.C. restaurateurs have passed on the chance to expand. In January, Taylor Gourmet co-owner Casey Patten says he was approached about franchising H Street NE cheesesteak spot Taylor Charles Steak & Ice in Dubai. He heard that Tony Luke’s Cheesesteaks from Philadelphia was killing it in Bahrain. But the conversations didn’t last long. Patten says he’s not interested in taking time away from “what we know is great” to go chase a quick buck somewhere else.
Still, many restaurateurs find the relatively low risk tempting. “If it works over there, it’s amazing, right? People may hear about it and know about it,” Patten says. “If it fails over there, no one’s going to know.”
Additional reporting from Doha, Qatar, by Sam Hasler.
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Photo by Sam Hasler