Freddy’s makes Dubai debut, UAE growth to follow
Freddy’s Frozen Custard & Steakburgers opens in ceremonial fashion at The Dubai Mall, with Tastebuds Group’s Yousef Khattar, center left, and Freddy’s COO Scott Redler cutting the ribbon.
Opening the first-ever international franchise location of Freddy’s Frozen Custard & Steakburgers in the world’s largest and most visited shopping mall certainly sets the bar high—exactly the aim for Yousef Khattar and Tastebuds Group as it looks to grow the brand in Dubai and throughout the United Arab Emirates.
The Dubai Mall, adjacent to the famed Burj Khalifa building in the heart of downtown Dubai, became home to a Freddy’s in July, and while the mall has 200-plus other food and beverage outlets and Khattar knows he faces a saturated restaurant sector in the UAE, he’s not deterred.
“I can immediately say there’s a lot of QSR brands but there’s always room for new QSR and fast casual. We have to differentiate,” he says matter of factly. An emphasis on Freddy’s signature items, namely that frozen custard and steakburger, are key, along with a heavy dose of marketing to stand out in a burger space Khattar notes is “spreading like wildfire here in the UAE.”
Tastebuds Group, of which Khattar is managing director, opened its second Freddy’s in Dubai, this one in the Mall of the Emirates, just two weeks after the first and has two more mall locations in the works. The momentum will help amplify the group’s messaging to consumers, which is “Freddy’s is all about the hospitality, quality and cleanliness,” says Khattar. Because Freddy’s lacks international name recognition, Tastebuds Group “invested a lot in marketing,” including public relations and social and digital media.
“I knew there would be challenges,” says Khattar of selecting a brand without an existing international footprint, but Freddy’s “excellent track record of success and solid 300 units in the U.S.” gave him confidence in the concept’s potential.
Freddy’s is also the first franchise restaurant effort for Tastebuds Group, formed as the dedicated food and beverage arm of Dubai-based family investment company Younata.
Younata itself doesn’t directly operate businesses, explains Khattar, “we take a position in different companies as investors. We engage in private equity, we have a portfolio of stocks and real estate.” Khattar was previously the business development manager for a medical equipment company owned by Younata and was brought in to form Tastebuds Group.
“The primary attraction in the restaurant industry for us is the cash flow,” says Khattar, adding Younata “didn’t want to get into any business that would require us to extend credit.” The company decided to go the franchise route because, as Khattar puts it, “none of us are culinary experts. We decided to say let’s not fool ourselves and try to start a restaurant.”
Scalability was one requirement, which is what led Khattar to evaluate fast-casual concepts he says lend themselves to the more flexible formats required in mall-heavy UAE cities. “We didn’t want, say, a Cheesecake Factory, TGI Fridays or a steakhouse,” which Khattar calls “riskier” because of their larger footprints. Another sticking point was the brand’s value proposition.
“In Dubai, the UAE, the residents are very well traveled and they know what authenticity means so you have to offer something that’s worth their money,” says Khattar.
Scott Redler, a co-founder of Wichita, Kansas-based Freddy’s and its COO, also emphasizes the price point as something that “sets us apart in Dubai.”
“Our combo meals are roughly $8, while the super premium brands are $12 to $15,” says Redler.
Then there’s the food. Khattar worked with a U.S. franchise consultant who told him to check out Freddy’s and “I took an immediate liking for the food,” he says, next asking himself, “I love it, but would the rest of my market in the GCC,” or Gulf Cooperation Council, like it. Tastebuds Group researched consumer tastes and restaurant preferences, with Khattar noting the high frequency for dining out and “huge demand” for U.S. brands.
Indeed a UAE consumer spending report by Dubai-based business consultancy Go Gulf found the percentage of household income spent on food and beverage is nearly 14 percent, the highest consumer spending category after housing. Also, according to the report, more than 245,000 households in Dubai have earnings of more than $250,000, making the market equally attractive for Redler and Freddy’s.
“Dubai is a great starting point in the Middle East, it brings in people from all over the world,” says Redler. And, “they’re craving U.S. brands that operate well.”
While Freddy’s wasn’t actively looking to expand outside the U.S., Redler says when interest came from Tastebuds Group “we felt our brand in the United States was strong enough,” and Yousef “had the brand passion that we do.”
Not willing to compromise on taste, Redler notes the establishment of the supply chain “was probably our largest hurdle,” and ultimately the burgers, custard, fries, Vienna Beef hot dogs, and sauces and seasonings are being shipped from the U.S. after comparable local suppliers couldn’t be found. “They were close on the custard but they just weren’t quite right on flavor and the richness and creaminess,” he says. The menu in Dubai mirrors its U.S. counterpart, save for more chicken options and the use of beef bacon instead of pork.
“What’s important to the guests here is to know they’re getting the exact same products as the United States, that’s the beauty of franchising,” points out Khattar.
Having introduced a smaller restaurant prototype last year in the U.S. to enable a push into nontraditional locations—Freddy’s opened college campus and stadium locations earlier this year—the brand was prepared for the mall food court setting common in Dubai. “We were able to really minimize every piece of equipment we could and maximize storage space for volume,” says Redler.
Translating the hospitality component so central to “the Freddy’s way,” however, “is a little more difficult in a food court setting,” he continues.
Training emphasized engagement with customers, and Khattar notes even though the two groups are “culturally different,” the Freddy’s team and Tastebuds group share “the same values and principles and ways of doing business.”
More international growth isn’t in the immediate future for Freddy’s, and while Redler says they’re having discussions with other prospects, “it’s critical that we don’t work on international to the detriment of our U.S. development,” which is still the main focus. Tastebuds Group, meanwhile, is focused on Freddy’s with a goal to “generate a profit as soon as possible,” says Khattar. If another, non-burger franchise brand reaches out, he’ll listen, but “we’re very, very selective,” he says. “We want relationships that are long-term.”