Saudi Aramco World / November-December 2000
By Larry Luxner
Habib's, the world's largest Arab fast-food chain, isn't a product of Egypt, Lebanon or Saudi Arabia -- but of Brazil, where the restaurant's famous logo is becoming almost as ubiquitous as "dental-floss" bikinis on Rio's Copacabana Beach.
At last count, there were over 150 Habib's franchises throughout Brazil, making the chain second in importance only to McDonald's -- which has 384 outlets -- and far more numerous than Pizza Hut, Burger King or Wendy's. The chain has already expanded to Mexico and is now planning to enter the U.S. fast-food market as well.
Interestingly, the man behind Habib's isn't a real-life Mr. Habib, as many people think, but a Dr. Alberto Saraíva who was born in a small town in Portugal and emigrated with his parents to Brazil when he was six months old.
In a recent interview in Mexico City, Saraiva told Saudi Aramco World that as a child in the Brazilian state of Paraná, he often accompanied his father on his rounds as a candy vendor. The turning point in his life came tragically in 1973, while he was a first-year medical student at the prestigious Santa Casa de Misericordia de São Paulo.
"My father had just opened a small bakery," recalled the 46-year-old entrepreneur. "One night, he was assaulted and killed by robbers. I was the oldest of three sons and had to support my family."
Saraíva decided to stay in school while running the bakery -- but gradually came to the conclusion that he really wanted to be a businessman, not a doctor.
"After eight years, I finished my studies, and together with medicine, I entered the restaurant business," he said. "At first, we didn't have money to buy new equipment. There was a restaurant that had closed, so we bought the equipment and opened a new restaurant in another location. We invested 600,000 reaís and sold it for 1.7 million. With this money, we built a second restaurant, a lanchonette called Casa de Esfiha."
At that time, São Paulo had only two or three Arab restaurants, even though the city boasted one of the largest Arab immigrant communities in Latin America. Saraíva befriended a Lebanese chef, Paulo Abud, from whom he learned a variety of succulent Middle Eastern recipes.
"I decided to create an Arab fast-food menu, aimed not only at the Arab immigrant colony but to Brazilian palate, with one extra ingredient: very low prices," said Saraíva, who has no Arab blood in him. "This was an original idea. I didn't copy it from anyone else. Nobody in Brazil had even heard of esfihas before."
In addition to esfihas -- which are Arab pastries stuffed with ground beef or cheese, lemon, tomato, chopped onion and seasonings -- the 56-item Habib's menu includes kibbe, kafta, stuffed grape leaves, humus and tabouli salad. For less adventurous diners, there's more predictable fare: hamburgers, chicken sandwidches, pizza, french fries and ice cream.
"When we started, we didn't advertise," he said. "All we had was a sign in front of the restaurant saying 'Esfiha Habib's -- the best in São Paulo.' I had a friend who always called people 'habib' [Arabic for friend]. So when I told him I was starting a restaurant chain, he said, 'why don't you call it Habib's?'"
Saraíva took his friend's advice, and in 1988 -- following an initial $80,000 investment -- he and his brother Belchior opened the first Habib's with 28 employees in the São Paulo neighborhood of Lapa. For 45 days, people had to stand in long lines to get in. Business was so good that the brothers quickly opened a second Habib's, then a third.
After inaugurating his 16th restaurant, Saraíva established a central kitchen in São Paulo so the chain could centralize its purchases and save money. As it is, Habib's buys 1.2 million tons of products annually, including 150 tons of meat per month.
"We had a period in 1993 when we had to change the prices every day. Inflation was running 80% a month. Habib's had one of its best successes during this period of crisis because while everybody went crazy raising prices, we did our best to control them."
As of mid-2000, Saraíva's 150 restaurants employ 7,000 people throughout Brazil, including 73 in Greater São Paulo, 19 in the interior of São Paulo state, 20 in Rio de Janeiro and the rest in major Brazilian cities such as Curitiba, Florianópolis, Fortaleza, Goiánia, Recife and Uberlândia. The eateries ring up combined annual sales of $200 million, with profits of $40 million. More than 220 million esfihas are prepared and served each year. Saraíva claims the market value of his company is roughly $600 million.
Habib's is no longer the only Arab fast-food chain in Brazil; Casa de Esfiha, Mister Sheik and several others now all compete for the same market. But Habib's is by far the oldest, best-known and most successful.
"Since the first Habib's, we've applied the philosophy of very low prices," he said, noting that Arab food is cheap to produce, and therefore can be sold at rock-bottom prices. "Fast food is always the same thing. They change the names and the uniforms, but it's all the same -- hamburgers, pizza or chicken. We're different."
Not content with selling Arab fast-food only to Brazilians, Saraiva wants to take his chain internationally. In March 2000, Saraíva inaugurated his first outlet in Mexico City, with a varied menu that features esfihas for the equivalent of 19 cents.
His business plan is to open 220 restaurants over the next six years in the country's three most important metro areas: Mexico City, Monterrey and Guadalajara.
"We'll have around 15 restaurants in the first year," he said. "This expansion in Mexico will be very important. Here we have a chance of being No. 1. If we don't succeed here, we won't continue."
Habib's offers potential franchisees restaurants in three configurations. The first are kiosk-type eateries of 100 square meters, usually in shopping malls, requiring an up-front investment of $250,000. The second are free-standing outlets of 300 square meters, costing $300,000. At the top end are complete, full-service restaurants of up to 1,400 square meters -- complete with drive-through operations, children's playground and parking for 50 vehicles -- costing $500,000 or more.
"In Brazil, franchisees in general make their money back within 18-24 months, but for Habib's franchisees, the return is very quick, around eight months," he says, adding, however, that in Mexico, the payback for Habib's will be more like 18-24 months.
In the United States, Habib's is negotiating with Wal-Mart to open a joint-venture restaurant in Los Angeles by 2001. From there, Saraíva plans to expand to other U.S. cities, with sales during the first year expected to reach $5 million. The entrepreneur says he'll start with Los Angeles because "its climate is similar to Brazil's, and it won't be difficult to sell our most important products there. McDonald's was the first fast-food chain in Brazil, and whenever you're the first, you'll be successful. But except for McDonald's, the chains have not done well in Brazil. KFC, Subway and Arby's have all gone kaput because they couldn't adapt."
Saraíva thinks he'll have even more success in Mexico because, according to his market research, Mexicans are more likely to eat breakfast away from home than are Brazilians, and Habib's offers an extensive breakfast menu.
Saraíva said he and his director of expansion, José Mauro Magon, have already scouted out hundreds of potential locations, driving 400 kilometers a day, beginning at 8 a.m. and finishing at 11 p.m.
That leaves Saraíva little time to enjoy his three children, or his spacious rented apartment in the upscale neighborhood of Las Lomas, where he and his wife will be spending the next year in between shuttling back and forth to Brazil. But Saraíva says it's worth the sacrifice.
"Our final big objective is the United States, because in the U.S., even though there's competition, everybody will want to be a franchisee," says the one-time doctor. "This always been a dream of mine. If it were just for the money, I would have stopped a long time ago."