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Foreign brands eye bigger slices of the American pie

Foreign brands eye bigger slices of the American pie

The locals booed in protest along the roadways when President George W.Bush’s motorcade passed them during his visit to five South American nations last month, illustrating the anti-American sentiment that has gripped much of the globe these days.

But America’s $13 trillion economy and consumers who are not only fond of eating away from home but also eager to try something novel are inspiring a growing number of foreign restaurant concepts to put any bad feelings aside and stake a claim in the United States.

While such Canadian concepts as Boston Pizza from Toronto or Elephant & Castle and Manchu Wok, both from Vancouver, have long taken advantage of proximity and similar cultural traditions and language to expand south of their border, they now are being joined by concepts from Belgium, Germany, Brazil, Guatemala, England, Japan, Ethiopia and elsewhere.

“U.S. franchisors have been going to markets around the world for more than a generation now, and I just think it is most surprising and telling that it has taken foreign restaurant franchisors this long to gain the critical mass to finally come here,” says Matthew Shay, president of the International Franchise Association in Washington, D.C. “The market in the U.S. has been fantastic for franchising for decades, and it is just a little surprising that they are finally fishing in our pond after all this time.”

Shay notes that even the tougher immigration policies and heightened security efforts the country has put in place since the terrorist attacks of Sept. 11, 2001, do not deter foreign-born concepts intent on opening in the United States.

“Capital is apolitical, agnostic and goes where the market is most attractive to its needs, which is why you see these brands coming here now,” he says. “The U.S. market is the most entrepreneurial market in the world, and you combine that with a relatively affluent consumer base that is brand-sensitive and you realize it is attractive to do business here.

“I’m not diminishing the high hurdle imposed by the Patriot Act,” Shay continues, “or the monitoring of foreign investment, immigration, visa problems and Homeland Security pressures that diminishes opportunity for some and which we are most concerned about. But on balance, what market is more attractive, where is opportunity more abundant?”

Coming to America

Despite immigration-related hurdles, many foreign-based restaurant operators who are expanding, franchising or opening maiden outlets of their concepts in the United States say the same issues that confront native-born operators—finding sites, labor and quality vendors—are more problematic than the country’s heightened security.

Kent Hahne, a U.S.-born German American whose family migrated back and forth between the countries for decades, went on to become one of McDonald’s most successful franchisees in Germany. This month he is to debut in Ballston, Va., a suburb of Washington, D.C., a northern Italian, cafeteria-like concept called Vapiano. It would be the first U.S. outlet of what is currently a 17-unit, multicontinent chain.

After cashing out of his seven-unit, 20-year-old McDonald’s franchise, Hahne founded Vapiano in Hamburg, Germany, five years ago with three other partners. One of his associates is a fellow former McDonald’s franchisee who sold a nine-unit business, and another partner is a wealthy hotelier.

Deriving its menu and marketing style from northern Italy, Vapiano is a seasonally driven concept that features 20 to 30 types of pasta and pizza daily.

While the food is served in a cafeteria line format with cooking stations where guests can converse with the cooks about ingredients and preparation, bussers deliver the ordered meals to the tables. The units also feature lounge areas and, unlike many U.S. midrange to upscale tableservice restaurants, customers are encouraged to stay as long as they want. Hahne says that the typical unit serves about 700 customers a day and many spend two to three hours there.

Vapiano restaurants are located throughout Europe as well as in Dubai, United Arab Emirates, and Riyadh, Saudi Arabia. Hahne explains that the location of the first U.S. unit was chosen because of his familiarity with the market, and like any new startup, his biggest stumbling blocks were finding affordable real estate, labor and a marketing firm.

“It’s a tough labor market, without a doubt,” Hahne says. “It even delayed our getting the necessary permits to build and open because the local zoning authorities were even understaffed.

“But then, coming here as a nobody meant landlords don’t know who you are. Didn’t matter that we have 17 units worldwide. All the landlords are worried about is getting their money if we fail,” he says.

Hahne says he surmounted the labor challenge by offering better-then-competitive wages and benefits to hourly workers.

“We just didn’t want to get in that game where we were paying just 50 cents more than our competitors to find talent,” he says. “So we are doing way much better than minimum wage, we have full health insurance, a 401(k), and we like older workers, too.”

Another European tableservice concept set to debut in the United States is Rouge Tomate from Belgium. The single-unit, full-service concept bills itself as “healthy fine dining with a Mediterranean flair.”

Rouge Tomate has set its sights on opening its first unit in Manhattan later this fall. It has contracted with Paul Fetscher, president of the Great American Brokerage, to be its exclusive broker in New York and beyond.

Fetscher says the concept probably would generate a $60 check average and that many consumers would be attracted to its claim that 60 percent of the menu items have no animal protein.

Another Italian concept that recently hit U.S. shores is Piola, a 20-year-old chain with 19 units on three continents. Nine units are located in Brazil, while four are now open in the United States, including two around Miami Beach, Fla., one in Washington, D.C., and the newest in New York, where it is earning high praise from critics and drawing a hip, late-night crowd.

Founded and based in Treviso, Italy, Piola uses locally harvested products on its thin-crust pizzas.

Crossing the border in search of franchisees

Driving into the United States from south of the border is Pollo Campero from Guatemala, a 200-unit fried-chicken chain with units throughout Latin America and Mexico. Pollo Campero currently has 30 U.S. units.

Like many foreign chains that look to jump-start their U.S. growth, Pollo Campero opened a dedicated North American headquarters and looks to grow through master franchise companies whose operators know their domestic markets. The company recently opened a U.S. office in Dallas. The U.S. office is led by Roberto Denegri, president and chief operating officer, who moved there from Guatemala with his wife and two young daughters.

Pollo Campero already has a 16-unit master franchisee operating in Los Angeles, Adir Restaurants, which launched four years ago and covers five Southwestern states.

When Adir debuted its first unit in Los Angeles in 2003, Central American immigrants who remembered the concept from home waited in line for as long as seven hours for meals. The inaugural unit ended up doing $1 million in just 47 days, according to the company. Similar results—with lavish press attention and even police-cordoned traffic lanes—attended the opening of a Pollo Campero in Brooklyn, N.Y., which has since moved and merged with another outlet on Long Island, where traffic is said to exceed company projections.

Jose Cofino, president of Adir, says that with KFC, Churchs Chicken, Popeyes and other regional fried-chicken concepts being far better known than his brand, the initial idea for growth was always to open in neighborhoods heavily populated with Central American immigrants and Mexicans.

But now that the chain has tapped the market it wanted, it’s time to reach native-born consumers and recruit savvy entrepreneurs as franchisees, he says.

Cofino notes that one reason he is confident Pollo Campero can attract both U.S. consumers and franchisees is its flavor profile. Unlike most American fried chicken that relies on heavy batter and breading to achieve crispiness and crunchiness, Pollo Campero is made with a richly flavored, secret marinade that is injected into the meat. Then the chicken is fried at temperatures slightly higher than most recipes for fried chicken call for, so the skin cooks rapidly to a crisp and the meat remains moist.

Most of Pollo Campero’s side dishes are traditional Latin American favorites like fried plantains, fried yucca and Mexican beans with chorizo.

Denegri, a former Coca-Cola executive who joined Pollo Campero in 1995, says the 36-year-old brand decided to expand into the United States when a subsidiary of American Airlines selected the company to provide its food for the in-flight meal service between Guatemala and the United States.

Denegri says the company’s confidence grew when marketing research indicated Pollo Campero would play well in Asian, African-American, Caribbean and West Indian communities.

With the exception of Adir’s territory, Pollo Campero USA has the right to expand and franchise in the rest of the country. So far the company’s operations and franchised outlets—about 15 in total—are concentrated along the East Coast, with some in Chicago.

But with the recent hiring of several veteran American executives from IHOP, Yum! Brands, Dunkin’ Brands and Coca-Cola, and based on committed projects already in the pipeline, Pollo Campero could be a 500-unit brand by 2013, Denegri says.

The company also is expanding in Spain, Indonesia and China, where it has just opened an office in Shanghai.

Another foreign-based chain with ambitious growth plans is the 20-year-old Made In Japan Teriyaki Experience, from Toronto. The 90-unit brand—with operations in Italy and the Middle East—is to debut in Atlanta in May.

Joe Arancio, vice president of U.S. operations for the company, expects rapid development given that MIJTE has entrepreneurs committed to open 130 units across the United States, from northern California to Georgia to western New York.

Foreign chefs struggle to get visas

While many foreign-based operators find that their biggest hurdles to opening in the United States are similar to those encountered by their U.S. peers, some have found that navigating U.S. immigration laws can be a nightmare.

Because the U.S. Bureau of Citizenship and Immigration Services does not recognize culinary skills as “specialty skills,” chefs and other culinary professionals have difficulty obtaining H-1B visas, which allow highly trained professionals to enter the country.

Thus, foreign-born chefs trained in the world’s most revered cooking schools are unlikely to receive any of the 62,000 H-1B visas issued annually, say immigration lawyers and operators. Instead, models, actors, college lecturers, medical and computer professionals, and airline pilots get first crack at the specialty visas, they note.

A CIS spokesman says the agency has been working to establish a category for professionally trained chefs since 2005. But, he adds, many agency officials believe that the specialized knowledge restaurant employers say they need in their kitchens could be found in the American workforce. Moreover, the spokesman adds, the agency is not as pressured by restaurant employers to create a culinary professional category as it is by the medical, academic, computer and airline industries to bring in qualified professionals.

The spokesman denied allegations by operators that the CIS looks askance at issuing visas to foreign-born chefs of color.

Nonetheless, stories of the deaths or near deaths of big-budget independent restaurant projects with authentic Indian, Chinese, African, Brazilian or Arabic menus abound in cities like Cleveland, New York, Dallas and Phoenix. The common theme of most of these stories is the inability of foreign chefs, sommeliers or owners to obtain H-1B visas.

Instead, foreign-born professional chefs often are lumped into the same “seasonal worker” category as migrant workers and resort town sous chefs, making them compete for the 66,000 H-2B visas available annually.

In New York, the owner of Rosanjin, a Kyoto-style restaurant from Japan that serves food prepared using the region’s traditional Kaiseki technique, has yet to get its chef in the country despite opening six months ago.

“It’s not like I can put an ad in the paper looking for Kaiseki chefs,” a partner said through a translator. “It’s a specialty cooks are not trained for here.”— Milford Prewitt

What sets MIJTE apart from other sushi players, Arancio says, is the quality and diversity of its ingredient mix and the company’s system to train workers who never had to slice fish or roll a banana leaf how to master sushi preparation.

Wagamama, a 15-year-old, 65-unit chain based in London that operates in eight nations, also is jumping into the U.S. market. The award-winning noodle concept is set to open its first unit this spring in Boston.

With a mission statement “positive living, positive eating,” Wagamama distinguishes its menu with fresh ingredients and eclectic pairings of flavors and textures not normally associated with noodle houses.

“We think Boston is a marvelous city to debut in and is a great gateway to the U.S. from Europe, as we already have a solid customer base there,” says Glyn House, Wagamama’s director of human resources and marketing.

Wagamama has so far franchised its stores outside of England, but future units in the United States will be company-owned, House says.

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