Abrakebabra chief has big appetite for bagel market

If you hit adolescence during the 1980s, the chances are that you've done some of your growing up on food served by Graeme Beere…

If you hit adolescence during the 1980s, the chances are that you've done some of your growing up on food served by Graeme Beere.

Not by him personally, but in the sense that he is one of the people behind Abrakebabra, which has been so successful at sustaining night owls over the past 24 years, that people automatically associate going for a kebab with a night out.

If you've reached the point where kebabs no longer loom large in your diet, he has come up with a way of keeping your custom at lunchtime and during trips to the shopping mall.

Beere's latest venture is the Bagel Factory, which is now one of the country's fastest growing food service franchises. From a standing start two-and-a-half years ago, it's just opened its 30th outlet, located in the Castlecourt shopping centre in Belfast.

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"That gives us an annualised turnover of about €12 million," he says. "And we're opening another eight stores before Christmas, which will be 38 stores, and approaching an annualised turnover of €20 million."

Beere doesn't want to take all of the credit. The idea of expanding their operations into this area came from Denis Desmond of MCD and Mean Fiddler fame.

He is the other shareholder in the Abrakebabra business - he bought in five years ago - and got keen on bagels when he began buying them for lunch from a place near his office.

"Denis and I were keen to expand the business and he said we should look at bagels, so we looked around," he says. "Ultimately, we sourced an operation in the UK [ The Bagel Factory] which had 25 outlets, and we did a deal with them for Ireland.

"We sent over a team to learn the business from them, and now, two-and-a-half years later, we have more outlets than they do, and they are sending people over to us to find out what we're doing." Bagel Factory required an investment of €4 million to get it this far. Now, into its third year of operation, it is earning profits of €500,000 a year, one-quarter of the €2 million surplus produced by the combined Bagel Factory and Abrakebabra businesses.

The basic model was straightforward, various types of bagels, plain, with sesame seeds etc, combined with various fillings, along with coffee. Beere says that this had to be tweaked for the Irish market, so they also offer juices, smoothies and a number of options aimed at the health-conscious - a phrase that embraces most consumers.

It is pitched firmly at working people and shoppers, so Beere says that they have put a lot of effort into getting the right locations. "There's got to be a high footfall," he says. Along with the obvious urban business districts, shopping centres have turned out to be particularly successful, hence last month's move in Belfast.

The Bagel Factory has one outlet in Dundrum shopping centre in Dublin and is planning a second. But these outlets don't come cheap, in fact, up to €200,000 a year is the norm in the more expensive locations. The company leases most of its premises. It pays the rent and collects it from the franchisees.

Beere says that when he first heard the rents being asked for some locations, he believed the figures were "crazy", but he says that the turnover has come through at the other end and justifies the high overheads. Dundrum is heading for €1.5 million in sales.

Getting the right franchisees has also been key. Bagel Factory finds the outlets, leases them and fits them out, while at the same time looking for franchisees. When they get the right person, they put the two together. This approach has allowed the company to grow the business quickly.

"They give us a deposit, ranging from €20,000 to €150,000, depending on the size of the outlet, because some of the outlets have cost us €350,000 or €400,000," he says.

But he says that the quality of the people is important, and he indicates that the company pays close attention to how its franchisees are doing.

"We bankroll them, and that has given us quality, because we are able to choose the people who are willing to put the time into it," he says. "With a lot of franchise businesses, you're just looking at the people with the money, and you're not worried if they're not very hands on."

Getting a Bagel Factory franchise means getting the business and the training necessary to run it. But the company uses its purchasing power to ensure that franchisees get favourable terms on their supplies. This gives them a 70 per cent gross margin, which, Beere says, is good for a coffee shop. In return, they have to pay 7 per cent of annual turnover to the company in franchise fees.

The "twin track" approach to getting the outlets and the franchisees may be driving the expansion, but it is unlikely that the business would have taken off if consumers didn't catch on. Beere isn't sure that there is just one reason for its popularity.

"I think we're getting a bit of a wave going, people like it when they try it, a lot of our franchisees say they're getting good repeat custom," he says. "Branding is another thing, people like brands and they feel safe with them."

He and Desmond are not going to leave it at 38 shops. They are looking at increasing it to 50 in six months and believe that they can go to 100 by 2009. The only thing that can really derail it is if large numbers of people in this country suddenly stop working and shopping, a risk that is not altogether remote, but definitely distant.

In the meantime, he says he is looking at another franchise opportunity, also in the food business. Going by his form so far, it should be a solid bet.

Barry O'Halloran

Barry O'Halloran

Barry O’Halloran covers energy, construction, insolvency, and gaming and betting, among other areas