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Arab fast-food chain plans to enter South Florida
The Miami Herald / July 9, 2001

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 logo is becoming almost as ubiquitous as the famous "dental-floss" bikinis on Rio's Copacabana Beach.

At last count, there were 180 Habib's franchises throughout Brazil, making the chain second in importance only to McDonald's -- which has 450 outlets -- and far more numerous in that country than Pizza Hut, Burger King or Wendy's.

And now, after a successful foray into Mexico, Habib's plans to bring its unique mix of cheap Middle Eastern-inspired delicacies to South Florida.

Boris Kozolchyk, a real-estate broker at Grubb & Ellis, which is representing Habib's locally, says a group of Brazilian businessmen will invest $15 million over the next three years to open a central kitchen in Miami, a distribution center in Orlando, and 32 Habib's restaurants in Miami, Tampa, Jacksonville and the Orlando area. Within seven years, there could be over 100 Habib's outlets -- most of them franchises -- throughout the Sunshine State.

"The idea is to have locations where they feel comfortable, and where they'll be exposed to visitors to the city, so that when they want to go into other [U.S.] markets, they won't be as unknown as today," said Kozolchyk, noting that the chain will most likely open its first Florida location later this year in Kendall, West Miami or the vicinity of Miami International Airport.

Kozolchyk, who's done similar location work for Wendy's, McDonald's, Burger King and Pollo Tropical, said Habib's would build new restaurants as well as convert existing ones throughout South Florida.

"Habib's is unique in that no one else here offers Middle Eastern food on a wide distribution basis," he said. "Although they have a core Middle Eastern orientation, they have the ability to adapt to local markets, as shown in their Mexican operations. We expect that the same flexibility will apply to the U.S. market. And their success in Brazil vouches for their ability to deliver value."

Interestingly, the man behind Habib's isn't a Mr. Habib, as many Brazilians believe, but 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.

Saraíva, 48, recalled 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," he said in a recent interview. "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 in 1980 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 round flatbreads commonly topped with ground beef or cheese, tomato and chopped onions, and seasoned with spices and lemon juice -- the 56-item Habib's menu includes kibbe (egg-shaped, cracked-wheat-and-lamb croquettes filled with spiced lamb); kafta (spiced meatballs grilled on a skewer); hummus (ground chickpea dip) and tabouli (a salad of parsley, cracked wheat, mint and tomato). 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."

At last count, Saraíva's 180 restaurants employ 8,000 people throughout Brazil, including 80 in Greater São Paulo, 30 in the interior of São Paulo state, 28 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 over $250 million, with profits of $45 million. More than 300 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 last year took 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. A second outlet opened earlier this year; the third will be inaugurated this week [July 14].

As for Florida, the plan is to offer franchisees Habib's restaurants in two configurations: a kiosk-type eatery of 1,100 square feet, requiring an up-front investment of $250,000 to $300,000, and a full-service restaurant of 15,000 square feet -- 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 Florida, the payback for Habib's will be more like 30 months.

"We won't have a lot of competition," he said. "In Miami, there aren't a lot of Arab or Middle Eastern restaurants. The few that exist have lots of business. People are very eager to have different options, and Habib's will be a completely different alternative."

In Mexico, Saraíva's original plan was to open 220 restaurants over a six-year period in the country's three most important metro areas: Mexico City, Monterrey and Guadalajara. In fact, the new Habib's along Mexico City's Avenida Insurgentes already rings up more sales than any Habib's in the entire chain.

Even so, says Saraíva, if he's successful in Florida and other potential markets like Los Angeles, Pittsburgh and Denver -- where potential investors are all waiting in the wings -- Saraíva says he'll reduce his Mexican expansion plans by 30% to 40%.

"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."

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