World Partners: Bennigan's Lost in Translation
Bennigan's Grill & Tavern has gotten off to a shaky start in Ireland.
By David Farkas, Senior Editor -- Chain Leader, 8/1/2006
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At first blush, opening a faux-Irish tavern in Ireland seems about as shrewd as bringing pizza to Italy. There’s no harm in trying, of course, but an authentic and arguably better product already exists. It’s certainly the case on the Emerald Isle, in which thousands of friendly taverns—called public houses or pubs—make the country a drinker’s paradise. Yet that’s not how Dallas-based Bennigan’s Grill & Tavern sees it. “We’re an Irish concept, and we are going everywhere but Ireland. That’s crazy,” declares President of Worldwide Franchising Vince Runco.
Two years ago, Runco signed Tom Coleman and Michael Ryder, former McDonald’s franchisees and business partners, to a master franchise agreement for the Irish Republic and Northern Ireland. The Irishmen met Bennigan’s officials at an International Franchise Association meeting in New Orleans in 2002 and later traveled to Dallas headquarters. Their deal calls for four to six new restaurants within five years. (Ryder, by the way, is no longer a partner.)
The 33-year-old chain hadn’t exactly ignored the Republic of Ireland. It first registered its trademark with the Irish Patents Office in 1996. Officials nonetheless occupied themselves signing up franchisees in Korea, India, Bahrain, Cyprus, Greece, El Salvador and Mexico before taking the concept to the land of its putative roots. (History tells us the chain was named after Bertha Bennigan, the American-born grandmother of Bennigan’s co-founder and industry veteran Lou Neeb.)
One can only speculate as to why it took so long. Consider, though, that the island is sparsely populated. Fewer than 6 million people live on it—some 3 million fewer than in California’s Bay Area. What’s more, the restaurant scene is mostly comprised of independent operators and a handful of global and local fast-food brands. In short, finding a well-capitalized, highly sophisticated native wise in the ways of restaurant real estate and eager to franchise is difficult to say the least.
That’s where Coleman fits in. He believes the island can accommodate up to 15 units. “There are only 4 million people [in the Republic]. That’s like a big American city with 10 Bennigan’s,” he says. Interestingly, there are 22 branches in Greater Dallas alone. Population: 2.3 million.
The restaurants don’t go the faux-Irish pub route. Coleman, 42, claims he’d be laughed out of business were he to plaster his restaurant with shillelaghs and shamrocks. Instead, photos of Chicago buildings line the walls in his first unit, in a shopping mall in the city of Cork. The walls in the second restaurant, opened last October in an upscale Dublin suburb, Dundrum, display backlit photos of New York City skyscrapers. Both restaurants are sleek, contemporary-looking establishments
Erin Go Bust?
So far, neither restaurant has opened with the bang Coleman and Runco expected, which point to the difficulties of American casual dining in a small country loyal to pubs and independent restaurants.
“A lot of people going out for a night will go for an indigenous local restaurant,” says Sean McGarry of Franchisedirect.com, a Dublin-based franchise directory. “[American] restaurants have the perception of having deep-fried food.” Seven of 10 appetizers on Coleman’s menu are deep-fried, though most of the entrees are not.
Coleman isn’t blaming his menu for the poor start of his first restaurant, which opened in February 2005. He faults the shopping center’s developers. “When we were pitched the site, we were told there’d be foot traffic of 150,000 people a week,” he says. “But we started with 75,000, and now it’s 100,000 and growing.”
Confusing access to the mall from city streets kept people away, he says. Worse, retail shops closed at 6 p.m., leaving little reason to visit the center after dark. “People don’t come to the center just to eat,” he says. “They come to shop and then decide to eat here.”
Sales remained lackluster for months, providing an insufficient return on his €1.9 million (about $2.4 million) investment in the 6,200-square-foot, 275-seat eatery. “I just barely lasted,” Coleman says. Sales have climbed from €18,000 to €48,000 in April, he claims, spurred largely by a €20 dinner-and-movie promotion he runs Monday through Thursday. The movie deal—a ticket delivered to the table along with one of eight main dishes from a special menu—has been drawing 1,500 people a month to the two restaurants, comprising 25 to 30 percent of business.
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“In Ireland, you’ve got to give somebody something to get them in. If you don’t go out and put your name out there, just because you sell good food, people won’t come in. You buy a sale,” Coleman says, adding he spent €20,000 in the first six months of this year buying radio spots.
He’s also scouring the phone book for local businesses that might want to hold meetings outside their office or reward employees with an after-work party. Delivering food to offices is rare in Ireland. “Most business, because of the economy, now take out employees every so often for a meal or a few beers,” he explains.
McGarry agrees: “He’s right. That’s the market.”
Model Economy
The Irish economy, the so-called Celtic Tiger, has been off and running for 10 years, growing an average 7 percent annually since 1995. Last year, the country’s per capita GDP, $34,100, outpaced that of England, France, Germany and Italy. The upswing in fortunes sparked inflation, making Ireland one of the most expensive countries in Europe.
The prosperity has nonetheless helped restaurants and bars, which number roughly 11,000, according to government figures. In a 2004 survey of its members by the Dublin-based Restaurants Association of Ireland, a substantial majority of respondents claimed increased confidence in their businesses.
A Euromonitor International study shows sales at Ireland’s 500-plus casual-dining eateries jumped 17 percent on a compounded basis from ’99 to ’04, outpacing all other full-service categories. Together, they rang up €164.4 million in ’05 and are expected to swell 20 percent by ’09.
Coleman also sounds confident, particularly about changes he’s made to the menu. While such changes have put him at risk of noncompliance with the franchisor, he believes he’s improved the offerings. “Our food here will be better than Bennigan’s food in America,” Coleman boasts. “I have no doubt about it.”
He has removed a core item or two and reformulated others to make them more palatable to Irish customers. “We tend to make our salads different,” he explains. “What Bennigan’s was doing was pouring all this stuff on top, and people were saying, ‘No, we don’t want that.’” The Irish prefer that salad ingredients are mixed together, according to Coleman.
Same with pastas. Cooks mix grilled chicken strips into the pasta instead of laying them on top. Coleman also introduced new items. “We invented Smothered Chicken,” he says of a dish that features chicken breast under a blanket of white-wine sauce, onions, mushrooms and cheddar cheese.
Bennigan’s franchise policy permits changing 20 percent of the menu, though not core items. “His menu is not a Bennigan’s menu,” Runco complains.
He also worries that Coleman’s prices are too high compared to American standards. An 8-ounce cheeseburger costs €11.95, or $15.20. Yet at TGI Friday’s in Blanchardstown, near Dublin, the same size burger with cheese is €13.85, or $17.64.
“[Runco] doesn’t have to pay the same labor cost we do,” retorts Coleman, referring to the 27 percent rate, which does not include a manager’s salary. The going rate for front- and back-of-house employees is €10 to €12 an hour (about $12.80 to $15.35). There is no tip credit in Ireland.
Many Irish restaurants, like their American counterparts, are staffed by foreign workers willing to do menial jobs. Coleman hires plenty of them. He cannot get away with paying less than the federal minimum because the workers, mainly from other European Union countries, are there legally. “They have to be paid the same rate [as the Irish], and all of them know their rights,” he says.
The booming economy has also driven up the wholesale cost of food, liquor and building materials, a fact that Runco is aware of. “Prices are higher there,” he acknowledges.
“These guys have a model that works in America,” Coleman says of Bennigan’s. “But it doesn’t work here.”
Fixing to Franchise in Ireland?
The demand for franchise businesses, including full- and quick-service restaurants, is increasing in Ireland, says Finola Cunningham, a commercial specialist at the U.S. Commercial Service, an arm of the American Embassy in Dublin. For franchisors looking for franchisees, she offers the following tips:
• To impress potential franchisees, franchisors should have a proven track record in the United States and be able to demonstrate an international strategy.
• Conduct market research.
• Determine if your restaurant has global legs. Be prepared to adapt aspects of the concept including decor and food.
• Have a well-defined master licensee or area-developer profile.
• Visit Ireland and develop contacts with the local franchise association, business community and real-estate players.
• Invite prospects to your restaurants in the United States to get a first-hand look at the concept and talk with franchisees.
• Expect a realistic development schedule. Don’t be surprised if franchisees insist on establishing a pilot restaurant for a period of 12 months or more.
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