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by Simon Lord,
last updated 09/02/2012

January 2012 - Esquires Coffee Houses is boldly going where few franchises have gone before: Mongolia!

Esquires Coffee Houses is closing in on a deal to open the first 15 Esquires Coffee Houses in Ulan Bator, the capital of Mongolia. The company's master franchisor, Stuart Deeks, has just returned to New Zealand from his second trip to Mongolia so we asked him to tell us more. First, the obvious question:

Why Mongolia?

Mongolia is perhaps not one of those countries that would be top of the list for New Zealand businesses looking to export. ‘It wasn’t top of my list either, but last year I received an invitation from my friend Albert Kong of AsiaWide Franchising to participate in Mongolia’s first-ever franchise expo,’ explains Stuart, who worked extensively in the Middle East and Asia before acquiring the Esquires master franchise for New Zealand in 2001. ‘I thought about it then jumped on a plane and went. There were only about eight exhibitors, but that meant we each attracted a lot of attention.

‘That’s where I made contact with our new partners, Nomad Group, who are the largest hospitality retailer in Mongolia. They have over 50 restaurants, mostly under their own brands with one exception – ironically, a Mongolian barbecue brand from the US! They were interested in a café franchise, and had actually contacted one of the large US chains only to be told, “We have no intention whatever of ever going to Mongolia.”'

Ulan Bator, Mongolia’s capital, will be home to 15 Esquires Coffee Houses outlets in the next 5 years.Stuart Deeks was more open-minded, and the more he learned about the market, the more he could see the opportunities. Perhaps best-known as the home of Genghis Khan, Mongolia is bordered by Russia to the north and China on all other sides. It was under Russian influence until the break up of the USSR, when it became a parliamentary republic. It has a population of just 2.75 million, with almost half living in the capital, Ulan Bator, and a young and literate population. Economic growth is being fuelled by the mining of copper, gold, coal and uranium, and financial services specialist Citigroup has identified Mongolia as being one of eleven countries with the most promising growth prospects for 2010-2050.

Virgin Territory

From Stuart’s point of view, Mongolia is virgin territory. ‘There are none of the international burger, coffee, pizza or chicken chains here,’ he explains. ‘There is one Ramada Hotel in Ulan Bator and that’s it. The city itself is low rise, Soviet-style architecture, and the Mongolian language is written in Cyrillic script, like Russian, yet it is more Asian, and the country has a rich and fascinating history which will increasingly attract visitors from all over the world.’

Stuart's iPhone screen shows the weather forecast for Ulan Bator - wrap up warm!They will have to wrap up well. Stuart says that on his most recent visit, in January, the weather was ‘Unbelievably cold – look at the weather forecast on my iPhone (right). It is hard to explain how cold that feels. Of course, this was the middle of winter, but their summer is short and it’s basically down to zero by September. Good, hot coffee is going to be very welcome!’ The weather will also come as a bit of a shock for Esquires’ regional operations director, Nizar Al-Ali, who is based in Dubai where the temperature varies from 25-50 degrees. Will he have a special clothing allowance when he travels to Mongolia? ‘That’s a very good point,’ laughs Stuart. ‘I think he may have to...’

Fertile Ground for Franchise Brands

The first Esquires in Ulan Bator is due to open in July 2012. The franchise, originally founded in Canada, was brought to New Zealand by the Deeks family in 2002. The New Zealand and Australia rights were bought by the publicly-listed Retail Food Group in 2011, while the Deeks retain global development rights for all other areas apart from the Americas and Europe.

Ulan Bator has a population of around 1.2 million people - not much smaller than Auckland.‘I’ve always focussed on developing markets,’ says Stuart. ‘Throughout all the financial chaos of recent years, they’ve not been affected to the same degree as the western world – they’ve continued to grow and catch up. We might have our challenges but people will always need food, and coffee is a cheap treat that is popular everywhere.’

Stuart says that, as a result, the Middle East, North Africa and Asia are fertile ground for franchise brands. ‘We have already appointed partners and opened stores in China, Saudi Arabia, Bahrain, the UAE and Fiji, we are opening in Kuwait in July and have negotiations under way in Korea, Libya, Tunisia, Malaysia and India. We’re starting to get momentum and establish Esquires as an attractive and effective international opportunity.’ Meanwhile, BurgerFuel is also targetting the Middle East/North Africa region, with its latest outlet opening in Northern Iraq - another of Citigroup's top 11 prospects.

Read our 2010 article on Kiwi franchises expanding overseas with more case studies from Esquires and BurgerFuel.



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