Fast casual restaurants are a billion dollar industry in the United States. Many Americans rely on them for their convenience. It is not always easy to find time to enjoy a meal in our busy schedules, and these restaurants offer a solution. There are many different kinds of fast casual restaurants to choose from, with many offering unique styles of food or even ethnic-inspired dishes. The Halal Guys capitalized on this model of restauranteurship and applied it to provide halal meals for the Muslim community in New York City.
Revolutionizing the Hot Dog Cart Industry
In 1990, Egypt-descendant Mohamed Abouelenein opened a hot dog cart in Manhattan, NY with friends and compatriots Ahmed Elsaka and Abdelbaset Elsayed. After two years, they decided that they wanted to be able to offer a more substantial meal than just a hot dog. They decided to revamp the menu and started offering chicken, gyro meat, rice, and pita in 1992. Their cart quickly became popular among the Muslim cab driver community in New York City. As word of mouth quickly spread, the popularity continued to grow and spurred the emergence of several imitation carts. Hot dog vendors in the city began to see a decline in business due to patrons’ desire to purchase a more satisfying meal.
Halal refers to foods that are permissible to eat under Islamic law. The religion has strict rules about what can and cannot be eaten, similar to kosher food items in the Jewish faith. It is very important to devout Muslims that they abide by these laws and do not consume products that are not halal. Having fast casual restaurants that offer these kinds of products gives Muslim consumers more options when it comes to eating out.
The popularity of their flagship location, a cart on the corner of 53rd Street and Sixth Avenue in Midtown Manhattan, grew tremendously over the next 15 years. Wait times to order were reaching an hour or more on some of the busiest days. After an altercation in line in 2006, which resulted in a customer being stabbed, The Halal Guys hired bouncers to manage the crowd levels at this location and keep order among patrons. These levels of popularity and publicity are unmatched in most food service realms, especially when it comes to street food.
In 2014, The Halal Guys hired Fransmart, a franchise development company. Within the first year of selling franchise licenses, they had deals in development to open locations in California, Connecticut, Virginia, Texas, New Jersey, Washington, D.C., and Illinois. Outside of the United States, they were also receiving inquiries to establish franchised locations in Canada, Malaysia, Indonesia, and the Philippines. It was expected that these deals would result in over 200 new locations of The Halal Guys.
Selling Their Franchise Licenses and Expanding the Availability of Halal Foods
In 2014, before The Halal Guys first began selling franchise licenses, they were confined to the streets of New York City. By partnering the Fransmart, the same franchise development company that helped to grow Qdoba and Five Guys Burgers and Fries, as well as other franchise opportunities, they have allowed themselves to spread their message of fast-casual halal food choices around the country and internationally.
After announcing that they had several franchised locations in development within the first year of selling licenses, The Halal Guys confirmed their status as a fast-rising star of the culinary world. The success of their wildly popular locations in New York City has reached the far corners of the world and people are excited about the products they serve. It seems the larger they become, the higher their demand grows.
Entrepreneurs looking to get in on The Halal Guys’ success will need to meet specific requirements to be able to purchase a license and get in on the growing success. The Halal Guys’ ambition for growing their brand is intense and they are looking for qualified partners to help them reach that goal as soon as possible.
To even be considered for a franchise license, you will have to commit to opening at least five locations. They are not interested in entertaining franchisees with only one or two locations; they want operators who are committed to growing the brand with them. Each location does not necessarily have to be a brick and mortar restaurant, though. There are several Halal Guys locations that are simply carts in urban areas. Of course, the feasibility of opening a food cart depends highly on the location. Brick and mortar locations will encompass the majority of franchise locations to be opened due to their verstility in terms of location.
Potential franchisees who pass the application process will be eligible to purchase their licenses at a cost of $40,000 each. At this time, The Halal Guys does not offer a discount for the purchase of multiple licenses.
The cost to open each location will vary considerably, depending on the size, and whether it is a cart or a full store. The costs are estimated to fall in the range of $233,000 to $844,000. Start up costs for brick and mortar locations will being at the higher end of that spectrum, as they will require higher rent payments, more equipment to fill the space, etc.
In addition to the license fee, the franchisee will also be required to pay ongoing fees to The Halal Guys. A 6 percent royalty fee and a 1 percent advertising fee are charged as the cost of continuing business under the Halal Guys’ name. Most franchisors charge these fees and the amount that The Halal Guys are charging in royalty fees is spot on with the national average. Their advertising fee percentage is lower by half than that of the average. These fees are non-negotiable and must be paid throughout the entirety of the license period, which is 10 years. If the license is renewed for an additional 10 years, the fees will resume at whatever rate the franchisor is charging at that time, under the new contract.
Performance of Current Franchise Locations
Because The Halal Guys have only been selling franchise licenses for four years, there is little data regarding the success rate of these locations. In the business world, four years is an incredibly short amount of time and the number of locations that have been able to sustain themselves so far may not be indicative of those that will be able to remain in business for very much longer. A smart investor may have had enough liquid cash when opening their location to sustain it for a period of 5 years in the event of a slow start, but if sales do not pick up enough to turn profits, it could turn the lights off very quickly after the cash runs out.
Despite the unreliability of these statistics, we can at least gauge the growth rate of the chain, and determine if any have closed in that short amount of time.
It was reported by The Halal Guys that in the first year of selling licenses, they had closed deals that would result in roughly 225 franchised locations worldwide. To date, it appears that they have only opened 22 franchised locations in the United States, which is far under the estimate. While they continue to open corporate locations, it seems the franchise growth has not exploded nearly as quickly as they thought it would.
In 2016, The Halal Guys opened the first Canadian location in Quebec. Despite large crowds at the grand opening, the location would close less than two years later due to low sales. Sources stated that the locals preferred long-standing favorite, Boustan, over the options offered at The Halal Guys, causing a rapid decline in the latter’s performance.
Of the 22 franchised locations that have opened in the United States, none have closed, yet. So far, it appears that Americans are enjoying The Halal Guys’ expansion across the country. Knowing their level of adoration in New York City, and of the remote corners of the U.S. that have waited for the opportunity to try their fare, it stands to reason that they will be able to enjoy at least some level of success as a franchise. Middle Eastern cuisine is growing in population with Americans, but there are very few, if any, fast-casual restaurants that offer it. The Halal Guys offers the food they want with the convenience they need.
Participating in the Expansion of The Halal Guys
The Halal Guys are in the midst of a lofty brand growth, both in the United States and around the world. Their recognition in the New York City area and excellent reviews have catapulted them to a level of stardom that has much of the population’s mouth watering in anticipation of a location opening up near them. With this level of interest in the product being offered, it appears that there would be an enormous opportunity for these franchised locations to succeed in their chosen markets. While it seems that this has been true for the locations opening in the U.S., it may not be the same case for international locations.
As was shown with the Canadian locations, there may already be other chains in place in these international countries with which The Halal Guys would have to compete. There is something to be said for brand loyalty, and it can oftentimes take a big change or an extremely superior product to sway consumers away from what they know and love. The United States does not currently have a large-scale chain offering Middle Eastern food in a fast food-type environment, offering no real competition for The Halal Guys.
Coupling the lack of competition with the ambitious expansion plan paints a picture of predictable success for the chain in the United States, at least until the novelty of being a new restaurant wears off. Franchisees looking to invest with The Halal Guys would be advised to strongly consider the demographics of the area of the proposed location, as the Middle Eastern food movement has not piqued the interest of all communities. Urban areas are the most likely to succeed with this particular brand. With their diverse populations and eclectic cultures, metropolitans are generally more open to “exotic” cuisine offerings. Suburbanites, while not as likely as their inner-city neighbors, may also be inclined to give the new restaurant model a chance. Rural areas are the least likely to be able to sustain a Halal Guys location at this time.
Like all franchises, The Halal Guys licenses would be a gamble for any owner/operator. Knowing the quality of their product and loyal following of their fans, they stand a good chance at succeeding with their goal of massive expansion. Careful selection of location placement will be the key to pulling it off. The franchisee and The Halal Guys will work together to find the perfect place to open the new location and get one step closer to achieving the number they are seeking.