Meet the Company Taking The Halal Guys Global

Eater Magazine:
By Whitney Filloon

How a beloved NYC food cart grows into a successful chain

On any given day in Manhattan, be it a balmy 80-degree afternoon or after midnight in the dead of winter, a long line of people can be seen snaking up the sidewalk at West 53rd Street and 6th Avenue in Midtown. They’re not waiting to get their hands on the latest Cronut flavor or the new iPhone, but rather foil platters heaped to the brim with fragrant chicken and rice from the Halal Guys.

The food cart’s tagline is plastered in large, bright blue type in at least four different places: “We are different.” Likely adopted in an attempt to differentiate itself from all of the other halal food carts that dot NYC streets, the slogan has come to ring especially true over the past couple of years. While chicken and rice bathed in garlicky white sauce can be purchased from numerous other street vendors, the Halal Guys is the most well-known. It’s also the only one that also boasts a multi-million dollar franchising agreement that’s taken it from Los Angeles to Boston and as far off as the Philippines — and the team is just getting started.

The Halal Guys origin story so perfectly embodies the archetypal immigrant success story that it would sound like a made-for-marketing cliche if it weren’t actually true. After emigrating from Egypt to New York City, founders Mohammed Abouelenein, Abdelbaset Elsayed, and Ahmed Elsaka worked in restaurant kitchens and as cab drivers. In 1990, they launched a hot dog cart, but quickly realized Manhattan didn’t need more hot dogs. What was in demand, however, were more dining options for the city’s sizable fleet of Muslim cab drivers. After pivoting to slinging halal rice platters and gyro sandwiches, word of mouth propelled the cart into cult status; before long, it was a popular haunt for locals and tourists alike. Nearly three decades later, the Halal Guys has 35 storefronts — most opened in just the last two years — with plans for hundreds more in the works.

The Franchising Whizzes

So how does a concept go from a lone street cart to a chain that’s rapidly being replicated across the globe? The answer, of course, is franchising. In 2014 the Halal Guys inked a deal with franchise development group Fransmart, an agreement that the latter’s CEO, Dan Rowe, says was hard-won: “It took me a good year to talk them into working with us because they weren’t really enamored with the idea of having hundreds of stores. They were concerned about messing up what they had built.” (The Halal Guys declined to be interviewed for this story.) “We’re specifically trying to find the next big thing.”

Rowe is a restaurant industry veteran — “a back-of-house grunt,” as he puts it — who got his start as a dishwasher. After finding quick success with a bagel shop franchise he purchased in his mid-20s, he was hired on to help expand the company’s footprint. It didn’t him long to grow the business to 200 locations, at which point AFC Enterprises — the company that, until just a couple weeks ago, owned Popeyes — bought it for $30 million. From there, Rowe says he wondered, “Instead of growing one company at a time, why don’t I grow a whole portfolio of emerging brands?” and in 2000 he launched Fransmart to do just that.

One of his bagel shops had been located right across the street from the original Chipotle in Denver, which Rowe quickly recognized as a concept with huge growth potential. Owner Steve Ells wasn’t interested in franchising — but Qdoba, a fast-casual Mexican copycat that sprang up soon after, was. Rowe and his partners invested in Qdoba when it had just one store, helping to grow it to 100 locations before Jack in the Box forked over $45 million for it in 2003. One of Fransmart’s other early picks was Five Guys; with its help, the “better burger” restaurant became one of the fastest-growing restaurant chains in America, eventually expanding from five locations to more than 1,000 worldwide.

What Makes a Concept Franchisable?

Though some may envy what looks like a great streak of luck in picking winning horses, Rowe has turned identifying a franchisable concept into something of a science — one the company hopes to replicate many times over. “We’re specifically trying to find the next big thing,” Rowe says. “The whole premise [of Fransmart] is to find these really early stage emerging concepts and give them every resource and best practice that we have to become hugely successful.”

First and foremost, the concepts have to already be successful in their own right. “I know how to do manuals and systems and procedures and supply line and all that kind of stuff — what I can’t do is make people like a concept,” Rowe says. “But if I can take something that people already like a lot, I can help put the systems in place to replicate that appeal across the country and scale it up. Look at Halal Guys — they already had long lines. If you go look at old pictures of their carts, they would have people lined up 30 deep to get their food, even in the snow or freezing rain.”

Then there’s something that’s often referred to in marketing speak as “authenticity.”

“A brand has to have its own soul and its own story,” Rowe says, noting that Fransmart never dipped its toe into the fro-yo or cupcake businesses. “When someone comes up with a good idea, a whole bunch of other people inevitably jump into the pool. We don’t want the other people who are jumping into the pool, we want the people who have the authentic DNA that connected with people in the first place.”
A prime example of that is one of the company’s newest franchising projects, NYC’s legendary Papaya King. Open since 1932, the restaurant serves an unexpected but iconic combination of hot dogs and tropical juice drinks and has been heaped with public praise from Anthony Bourdain, Martha Stewart, and countless others. Pointing out what he sees as a dearth of modern, nationally branded hot dog chains, Rowe envisions as many as 1,000 Papaya King locations across North America.

“A brand has to have its own soul and its own story.”

Part of picking winning franchise concepts also involves carefully tracking food trends; Fransmart only jumps on those trends it believes are still on the upswing. According to Rowe, the time to get in on the “better burger” business has passed, and he believes the fast-casual pizza chain boom of recent years is already starting to die. Right now, he sees big opportunity in Middle Eastern food (in addition to the Halal Guys, Fransmart has a franchising agreement with NYC-based Mamoun’s Falafel), and fast-casual Indian, as well as the raw Hawaiian fish dish poke. Last fall the company entered into a franchising partnership with SF-based fast-casual spot Pokeatery, creator of the ultimate Instagram bait, pokecado toast.
Rowe also thinks there’s still room for major growth in the already booming quick-service chicken sector: “You’re starting to see a lot of chicken concepts pop up [lately], but no one’s really done anything new and nationally branded in chicken since Popeyes,” he says. “The only thing people eat more of than burgers is chicken. If someone can come up with today’s version of KFC or Popeyes, but organic or with [a focus on quality ingredients], I think you’re talking about thousands of units.”

Why Restaurants Turn to Franchising

The franchise model has enabled many of the world’s top restaurant chains to become the global behemoths they are today. More than 80 percent of McDonald’s 36,000 locations are franchises (a figure that the company hopes to eventually increase to 95 percent), while all of Subway’s 44,000-plus locations are the result of franchising.

Franchising, Explained

Many budding restaurateurs decide to go the franchise route instead of striking out on their own, particularly if it’s their first rodeo. In a restaurant franchising agreement, the brand owner licenses out a restaurant to be owned and operated by an independent franchisee. The franchisee gets to use the brand’s name, likeness, menu, and other intellectual property in exchange for coughing up franchising fees (and in some cases, ongoing royalties).Franchisees give up much of the creative freedom they might have if they were to launch their own restaurant concept, but that’s part of the appeal. Rather than going through a costly trial-and-error process of figuring out what works, they follow an established and (hopefully) successful business plan and have support from the parent company when it comes to advertising, finding suppliers, and establishing operating procedures.

As restaurant and hotel consultant Dennis Gemberling of the Perry Group explains, the most obvious advantage of a franchise model is that it makes it much easier for a restaurant to raise money. “There’s a lot of investor groups and other lending sources that will only put their money into restaurants that are an [established] brand or a franchise, or at least have the potential for one to be developed,” he says. “If you look at venture capitalists, for example, they will as a rule only invest in companies that are going to grow maybe 25 to 50 times over.” Banks too, Gemberling says, “want the stability of a brand or a franchise, as opposed to a one-off concept.”
And Fransmart doesn’t sign on just anyone to be a franchisee. “We don’t sell franchises to mom and pops, we sell to people that are organized [and experienced],” Rowe says. Prospective Halal Guys franchisees, for instance, must have a net worth of at least $2 million and commit to opening a minimum of five stores.

Shezad Jiwani, a franchise operator whose prior experience includes a gelateria and a Jimmy John’s sandwich shop, says he went through four rounds of interviews before signing on the dotted line with the Halal Guys, finally culminating in a face-to-face meeting with the company founders. Jiwani says he visited the original food cart on a 2011 trip to NYC and when he learned that the company had begun franchising, he jumped at the chance to be a part of it; his first store will open soon in the moneyed Dallas suburb of Plano.
“I don’t think it’s a fad,” he says. “It’s been 30 years in the making.” He sees the concept as sustainable long-term, noting that the Halal Guys fills a previously vacant niche in the fast-casual realm: “We’re basically the Chipotle of Middle Eastern food.”

From Street Corner to Storefront

Of course, there are plenty of challenges that come along with translating a street food cart into a fast-casual chain. “The food isn’t quite as good as it is in NYC,” a Yelp reviewer writes of a recently opened Halal Guys location in Richardson, Texas. “Something about getting it fresh off the food cart, maybe, as opposed to at this stuffy storefront.”

The brick-and-mortar expansions certainly lack some of the urban ambience a bustling Manhattan street corner provides: Instead of honking yellow cabs whizzing by, there are parking lots full of minivans and SUVs; instead of office workers in suits grabbing foil platters to eat back at their desks, the storefronts’ dining rooms are just as likely to be populated with young families having dinner. The meaty, savory aromas emanating from the street carts seem to encourage those in line that the wait will be worth it — an atmospheric effect that’s somewhat lacking at the stores, thanks to more sophisticated ventilation systems.

The process of ordering food at a Halal Guys franchise will be familiar to anyone who’s visited a Chipotle (or one of its countless imitators): Patrons step up to the counter and pick their dish from an overhead menu as a staffer begins to assemble it: platter or pita sandwich? Gyro, chicken, or falafel?

“We’re basically the Chipotle of Middle Eastern food.”

The most popular menu item at both the carts and the dozens of new stores is the combo platter, a generous pile of finely chopped chicken and beef gyro served over a heap of turmeric-tinged rice, flanked with iceberg lettuce, diced tomato, pita bread, and drizzled generously with a tangy white sauce (and, for the brave, a fiery red hot sauce).

But as the Halal Guys continue to expand, it’s likely that the vast majority of customers will never have visited the original carts at all, meaning the company has a chance to make a fresh impression. In order to successfully replicate a concept, Rowe says, “You have to really understand what it is about the concept or the brand that people really like” — and in the case of the Halal Guys, the thing that seemingly keeps customers coming back for more is that addictive white sauce.

“It is tangy yet mellow, creamy yet deceptively light, with vague and probably spurious allusions to ranch dressing and tzatziki, a strong implication of garlic and lemon, and maybe even (wild card) tahini,” the New York Times’ Ligaya Mishan mused in a 2014 review.

Devoted fans of the street cart have tried their damnedest to reverse-engineer the condiment, and if they have yet to crack the code, they can at least now stock their fridges with it: The sauce now comes in generously-sized packets enabling devotees to douse their chicken and rice — or anything else they can think of — to their heart’s content. (According to the ingredients label, it’s mayo doctored up with some mysterious “natural flavors”.)

Thanks to food that travels well — chicken and rice hardly suffer from being sealed into a foil tray for a half hour or so — and the popularity of delivery apps like Postmates and Caviar, Halal Guys has become a popular order-in choice in cities such as San Francisco, Vegas, and Dallas, providing a new alternative to the usual pizza, Chinese, or Thai. The company even has a rewards program now, directed at the frequent diners who just can’t quit that chicken and rice. And despite its rapid expansion, the company is staying true to its roots: Though an estimated 95 percent of its customer base is not Muslim, each new franchise is using certified halal meat, a fact that’s proudly displayed on the Halal Guys’ website.

Rowe believes the Halal Guys will eventually be bigger than his early success Five Guys, which now boasts more than 1,000 locations — and no matter where in the world the Halal Guys land, that inimitable white sauce will taste exactly the same.