The Halal Guys Is a Business on a Roll, Growing From Food Cart to Restaurant Chain
By CHARLES PASSY
The Wall Street Journal
For much of its 26-year history, the Halal Guys has been known for its value-priced Middle Eastern fare, as well as the half-hour waits at its food carts in Midtown Manhattan.
The Queens-based business is now venturing beyond New York City, working with franchisees to open brick-and-mortar Halal Guys restaurants across the U.S. and overseas.
There are 12 franchised locations outside New York, including ones in Dallas, Milwaukee, San Jose, Calif., and the Philippines. The Halal Guys has sold development rights for about 340 additional locations in the U.S. and 50 in southeast Asia.
Ultimately, the privately held company wants to turn itself into a food brand with big-name recognition, perhaps similar to Chipotle Mexican Grill or Five Guys Burgers & Fries but with a New York vibe.
It is a move that comes with plenty of risk and questions, including whether a company whose food adheres to Muslim dietary laws commonly referred to as halal can find mainstream success in the U.S.
Halal Guys executives and franchisees said they are confident that it can—at least in East Brunswick, N.J., where a Halal Guys location that opened in the spring in a local strip mall has been drawing up to 800 customers a day.
“When we started, the line was around the building,” said franchisee Khattab Abuattieh, a veteran restaurateur who plans to open other Halal Guys locations in the Northeast and mid-Atlantic region as part of his territory.
Another franchisee, with more than a dozen investors, plans to open locations in the next few months in Newark and New Haven, Conn. The investors said they expect to open a total of 15 Halal Guys restaurants over the coming years, mostly in the tri-state area.
“We grew up on this food,” said Nazmul Huda, a pharmacist who is one of the investors and is leading the Newark opening.
While attending St. John’s University, Mr. Huda often trekked from Queens to Manhattan for late-night Halal Guys meals. Becoming a franchisee, he said, “wasn’t a tough sell.”
Halal Guys executives are counting on such passion as they woo entrepreneurs, who must pay a $40,000 franchise fee for each location in addition to an 8% royalty on sales. Franchisees also are responsible for all capital costs, which can easily top $600,000 a restaurant, according to Mr. Huda, who said he and his partners are prepared to invest a combined $10 million for their 15 locations.
Franchisees go through training, the company said, including even learning how the gyro meat is chopped so they can replicate the formula that made the Halal Guys a street-corner sensation.
The business wasn’t trying to win over the world when it started in 1990.
Its three founders were largely targeting the city’s Muslim taxi drivers, who were looking for inexpensive, convenient food they could get during their shifts. Halal Guys, which still operates at its original location at West 53rd Street and Sixth Avenue, soon attracted a larger base of customers.
The company is still under its original ownership but has started to gear up for expansion by looking beyond the cart business and opening two corporate-owned restaurants in the city. It also has brought in executives with experience in the restaurant-franchising world.
Halal Guys executives believe the locations outside New York can thrive during a time when American diets are increasingly diverse. Prices are part of the appeal, too: At the East Brunswick location, a heaping “regular” gyro-and-chicken platter costs $8.49.
About 95% of the company’s current customers aren’t Muslim, the executives said, underscoring their belief that anti-Muslim sentiment won’t be an impediment to the business.
Aaron Chaitovsky, a partner with Citrin Cooperman, an accounting firm that works with many franchise brands, agreed, saying quality usually trumped political concerns.
“People will refuse to buy cars from a certain country—unless they make a really nice car,” he said.
Still, Mr. Chaitovsky and franchise experts said a good product doesn’t necessarily guarantee a good franchise. Factors ranging from franchisees’ experience to back-office support can make a difference as well.
The Original SoupMan, which became a pop-culture phenomenon thanks to a “Soup Nazi” parody on the television comedy “Seinfeld,” launched as a national chain about a decade ago, but within a few years, several of its franchised locations had closed. Officials with the company, which is still operating, couldn’t be reached for comment.
It is too early to tell what the future holds for the Halal Guys and its franchise operations. Daniel Michael, a student who lives in South Brunswick, N.J., is already a regular at the East Brunswick location, saying he was relieved he no longer had to invent excuses to go to Manhattan for his Halal Guys fix.
To his frustration, he still often has to wait in line. Even in New Jersey, he said, “you have to find the right time.”
Source: www.wsj.com