May 09, 2016

"Semsom" from Lebanon to New York: The Wall Street Journal Reports

Is the U.S. Ready for a Lebanese Restaurant Chain?

Entrepreneur Christine Sfeir thinks so, as she prepares Americans for shawarma and hummus

Semsom

In 1996, Christine Sfeir decided to introduce Dunkin’ Donuts to Beirut.

It wasn’t an easy sell. Not only had her home country of Lebanon been through a civil war less than a decade earlier, but the foods she was trying to push—doughnuts and American-style coffee—were alien concepts. Fast-food franchises themselves were uncommon.

Now the 42-year-old Ms. Sfeir has what may be an even tougher mission: to bring her own Mediterranean-food franchise to the U.S. Preparing American palates for shawarma and authentic Mediterranean hummus has meant huge investments in promotion and market research.

I’m passionate about Lebanese cuisine, and I want to take it all over the world,” says Ms. Sfeir. It has “been very challenging, but we are determined to make it happen.”

semsom-opening-new-york

Battling the odds

Ms. Sfeir faces long odds. Not only is food franchising one of the riskiest businesses in the U.S., foreign franchises rarely successfully penetrate the U.S. market, says Benjamin Litalien, adjunct instructor and program adviser of the Certificate in Franchise Management at Georgetown University, who also works as a consultant to various franchises. Other Lebanese chains have tried and failed to make a go of it in the U.S., according to the Lebanese Franchise Association.

Ms. Sfeir comes from an entrepreneurial family and graduated with a degree in food science from Montreal’s McGill University. She says she spent more time at cafes than in the classroom, observing how the restaurant business worked and dreaming of opening a place of her own. One restaurant in particular caught her eye: Dunkin’ Donuts. She thought she could replicate its North American success back home if she promoted it in the right way. Lebanese like sweets, and she thought they would take to doughnuts even if they hadn’t seen them before. The country is also open to foreign concepts, she says.

Ms. Sfeir, just 22 at the time, spent months at malls and universities and on the streets of Lebanon handing out samples of doughnuts and hot drinks to get people used to flavors and concepts that Americans take for granted.

She also made a key design decision: making her restaurants hangouts for college students. Many shops had closed during the civil war, and young people had few fun places to meet, she says. So she created outlets that were often more spacious and higher-toned than those in the U.S., with full seating and couches—sometimes even valet parking.

With each neighborhood they moved into, they adapted their design as a way to fit in with the community and be a good neighbor, she says. For example, she says, a restaurant in a university neighborhood will have bright colors and communal tables; one in a residential area might have areas for strollers. “I always say that our stores look like brothers, not like twins,” Ms. Sfeir says.

Her idea took off. She now runs 29 Dunkin’ Donuts in Lebanon, with two more scheduled to open this year. Her own franchise, Semsom, came later. The chain—whose name means “sesame” in Arabic—spread across the region, with its ninth and 10th outlets due to open soon. Plans to enter the U.S. crystallized in 2014 when Ms. Sfeir visited her sister, Carine Assouad, and they were frustrated trying to find what they considered authentic Mediterranean food in Manhattan. “When you taste hummus in the U.S., it doesn’t taste good,” with restaurants using canned ingredients instead of fresh, Ms. Sfeir says. “It’s a misrepresentation of how it’s supposed to be.”

She secured financing from Beirut-based investment bank FFA Private Bank—$4.4 million so far, with an additional $3 million due by the end of this year. About $1 million went toward pre-opening expenses, including research into the U.S. food-franchise market.

The biggest issues were presentation and service. In Semsom restaurants in the Middle East, there’s table service with menus and it’s not uncommon for customers to linger over a three-hour lunch. That wouldn’t mesh with U.S. fast-food culture, so table service was scrapped in favor of ordering from a counter. And because the food wasn’t familiar, the company let customers choose their dishes from pictures and displays of food. And it comes in bowls and wraps, as opposed to big plates in the Middle East. “People want the healthy and the familiar,” Ms. Sfeir says. “When we go to an ethnic store, we sometimes feel anxiety if we don’t know what or how to order.…You really have to be specific in the way you describe the food.”

The flavors also got tweaked. The company held hummus-making competitions and quizzes and discovered that U.S. consumers liked hotter spices than in the Middle East. On the other hand, U.S. customers weren’t crazy about the heavy use of lemon juice—which gets poured on almost everything in Lebanon, Ms. Sfeir says—so the restaurant has cut back heavily on it.

Semsom Opening

The way forward

The first store opened in New York last year, and two more are due to open there this spring. Revenue from the first location is meeting expectations at roughly $1.5 million, and Ms. Sfeir says they’re seeing a lot of repeat customers—around 20% are now regulars. “There are people who didn’t know what hummus and shawarma were, and now it’s their weekly habits,” she says.

Ms. Assouad, who left her financial consulting job to run Semsom’s U.S. operations, says they scouted more than 100 spots in Manhattan before finding their first location in Greenwich Village. When they finally settled on their spot, bureaucracy delayed their opening by five months. All of this surprised them—they expected New York to be more efficient than the Middle East.

“Every step of the way there were bad surprises. But we felt the perseverance in our bones,” says Ms. Assouad.

For Ms. Sfeir, the support of her family and colleagues has been invaluable. Her mother helps take care of her two daughters, 10 and 12, while she’s traveling. Her husband tries to schedule his own business trips to make sure he’s home with the children when she’s away. And the former CEO of Dunkin’ Donuts, Jon Luther, now serves as an informal adviser to Semsom.

As a Dunkin’ franchisee and businesswoman, “she earned my respect for her courage,” he says. One of his key pieces of advice now is to take time to tweak the concept before going into different cities—one reason Ms. Sfeir is focusing on New York for the time being.

The long-term plan is to open the chain up to franchisees at the end of the year and have capital raises every few years as needed for expansion. “Once we get to a critical mass, then we’ll go out and get good franchise partners,” says Julien Khabbaz, head of corporate and investment banking at FFA, which has a 49% stake in Semsom in the U.S.

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Not only is Semsom fighting the odds, it’s fighting potential competitors from back home. The Lebanese Franchise Association says other restaurant chains expressed interest in expanding to the U.S. after Semsom made its move. “There’s a lot of pressure to make it work,” Ms. Sfeir says. “It’s a race.”

Read more on The Wall Street Journal

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