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Habib's: A Franchise Not from the U.S.
Mexico Business / June 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 Copacabana Beach.

At last count, there were 135 Habib's franchises throughout Brazil, making the chain second in importance there only to McDonald's (which has 384 outlets) and far more numerous than Pizza Hut, Burger King or Wendy's.

In March, Habib's became a true multinational with the inauguration of its first outlet in Mexico City -- where a team of strategists and joint-venture partners have already begun charting the opening of another 220 Arab fast-food restaurants across Mexico in the next five years.

Interestingly, the man behind Habib's isn't a real-life Mr. Habib, as many people think, but a Dr. Alberto Saraiva who was born in a small farming village in Portugal and emigrated with his parents to Brazil when he was six months old.

In a recent interview, Saraiva told MB that as a child in the 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 Hospital Santa Casa de Misericordia in 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."

Saraiva 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 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 luncheonette 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. Saraiva befriended a Lebanese chef, Paulo Abud, from whom he learned a variety of succulent Middle Eastern recipes.

In addition to esfihas -- hot Arab pastries stuffed with ground beef or cheese, lemon, tomato, chopped onion and seasonings -- Saraiva's original menu featured kibbe, kafta, stuffed grape leaves, humus and tabouli salad. Less adventurous diners could choose more predictable fare: hamburgers, chicken sandwiches, pizza, french fries and ice cream.

"I decided to create an Arab fast-food menu, aimed not only at the Arab immigrant colony but at the Brazilian palate, with one extra ingredient: very low prices," said Saraiva, 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 1988, following an initial $80,000 investment, Saraiva 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 its 16th restaurant, Habib's established a central kitchen in São Paulo so the chain could centralize its purchases and save money.

Today, Saraiva's 135 restaurants buy 1.2 million tons of products annually, employ 7,000 people in over a dozen cities and ring up annual sales of $200 million, with profits of $40 million. More than 220 million esfihas are prepared and served each year. Saraiva claims the market value of his company is roughly $600 million.

Asked why Arab cuisine has proved so popular in Brazil, Saraiva says it's simple.

"Since the first Habib's, we've applied the philosophy of very low prices," he said, noting that Middle Eastern food is cheap to produce, and therefore can be sold at rock-bottom prices." He adds that "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."

Not content with selling Arab fast-food only to Brazilians, Saraiva wants to make his chain international. At the end of March, Habib's will inaugurate its first outlet in Mexico City, with a varied menu that features esfihas for the equivalent of 19 cents each.

Saraiva's business plan: to open 220 restaurants over the next six years in the country's three most important metro areas: Mexico City, Monterrey and Guadalajara. Franchisees, who put up $250,000 to $500,000 per outlet depending on size and location can expect to make their initial investment back within two years.

"We'll have around 15 restaurants in the first year," he said. "This expansion in Mexico will be very important. Here we actually have a chance of being No. 1."

The first Mexican Habib's, whose Mar. 27 inauguration in the suburb of Nezahualcóyotl was accompanied by lots of hype, has already surpassed its initial expectation of 6,000 customers in the first month. At least 25% of its revenues come from breakfast, which is not served at any of Habib's Brazilian locations.

The chain's public-relations director, Reni de Lima, says the Nezahualcóyotl restaurant will be joined in the next 90 days by a second outlet in Iztapalapa, and a third along Avenida Insurgentes Sur.

Saraiva said he and his director of expansion, José Mauro Magon, have already scouted out hundreds more potential locations, driving 400 kilometers a day, beginning at 8 a.m. and finishing at 11 p.m.

That leaves Saraiva little time to enjoy his three children, or his spacious rented apartment in the upscale Mexico City neighborhood of Las Lomas, where he and his wife will be spending the next year in between shuttling back and forth to Brazil.

But for Saraiva, it's worth the sacrifice.

"Our final big objective is the United States, because in the U.S., even though there's fierce competition, everybody will want to be a franchisee," says the man who very nearly ended up devoting his life to medicine. "This always been a dream of mine. If it were just for the money, I would have stopped a long time ago."

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