Atlanta-based Franchise PITA Mediterranean Street Food, the made-to-order Mediterranean cuisine franchise, continues to expand across state lines since opening its first location in Peachtree City. They now have over 30 locations but share some of the same concerns as many other small business owners, the rising costs of goods and the high cost of real estate. The fresh, made-to-order Mediterranean cuisine, has been recognized once again by Fast Casual magazine as one of the Top 100 Movers & Shakers.
Today on the Atlanta Small Business Show, we’re pleased to welcome the CEO and Founder of PITA Mediterranean Street Food, Nour Rabai, who takes a deep dive into experiencing growth despite rising costs.
Transcription:
Jim Fitzpatrick:
So, Nour, thank you so much for joining us on the show. Very much appreciate it.
Nour Rabai:
I really appreciate it and thank you for having me.
Jim Fitzpatrick:
Sure. So before we get into some of the things that I’ve got on the list here to talk to you about, take us back and tell us a little bit about how you got started in this business?
Nour Rabai:
Absolutely. So PITA’s inception came about in 2012. 12/12/2012 we opened up our first location in Peachtree City, Georgia. Ironic, right?
Jim Fitzpatrick:
Yeah.
Nour Rabai:
We’re coming up on our 10-year anniversary at this location.
Jim Fitzpatrick:
That’s great.
Nour Rabai:
So we’re very happy and pleased to be in the Peachtree City community, south of Atlanta. We grew organically for the first few years. We opened up a second location in Newnan, Georgia. And then our third corporate location happened to be in Dunwoody, Georgia. So that was our first stint into the Atlanta market. And from there we continued to have great success and we branched out into franchising and here we are 10 years later.
Jim Fitzpatrick:
That’s fantastic. So the first few operations were all company owned and just kind of a chain of them before you got into franchising?
Nour Rabai:
Absolutely. We needed to make sure that we had proof of concept. So we opened up, the first five locations where corporate owned, all organic growth before we really had the concept down, proven 100% before we branched out to franchising.
Jim Fitzpatrick:
Okay. That’s a really big step for a company to get into franchising, isn’t it? I know a lot of people, they think they’ve got a great idea and they say, “Well, let’s go franchise it. It sounds pretty easy. We’ll be the next McDonald’s,” but at the end of the day not only is it a very complicated process, but it’s an expensive one too, right? Talk to us about that?
Nour Rabai:
Absolutely. Franchising is not for the faint of heart.
Jim Fitzpatrick:
Right.
Nour Rabai:
It’s really difficult to jump in and deep dive into franchising as a restaurant concept, to even begin with.
Jim Fitzpatrick:
Sure.
Nour Rabai:
It takes a lot of people, a lot of paperwork, and understanding the business aspect of it and understanding the people’s aspect of it.
Jim Fitzpatrick:
Sure.
Nour Rabai:
Because when you franchise you’re branching out not just yourself, but with other individuals, other franchisee business owners. So to grasp onto that and continue to grow, it’s a difficult transition, but it’s also an amazing transition for us to take on.
Jim Fitzpatrick:
Yeah, for sure. And it can help you really expand very quickly nationwide, certainly regionally, and then nationwide for sure. But does one franchise owner said to me, he said, “I woke up each day early on when we started to sell franchises and I realized I had 50 franchisees out there, and every morning I’d have 50 phone calls. And they would, what about this? What about that? What do I do here? What about this?” He said, “And it was a struggle at first, but we got beyond that and then started to build the team out to take care of everybody. So you could kind of talk those franchisees down the ledge if they were like, ‘Wait a minute, we’re running into a problem here.” So I’m sure you get some of those calls, right?
Nour Rabai:
Absolutely. I mean, believe it or not, when you go to sell a franchise, you’re really selling yourself as an individual, right?
Jim Fitzpatrick:
Right.
Nour Rabai:
And those people that do sign up with you become part of your PITA family. And literally, and figuratively you’re at their disposal at any given time of the day. If you are a small concept and you want to grow, you have to be at their disposal, understand them, assist them and really walk them through the process on a daily basis.
Jim Fitzpatrick:
Yeah, that’s very true. Very true. And as many franchise people will tell you that the franchise system and the franchise that you buy into is only as good as that support team that’s working at the franchise or headquarters, because if that’s not in place, you’re going to have a problem. And I know your franchisees are very happy with the job that you guys are doing there at PITA. And so wow. Who doesn’t like a pita sandwich? I mean, you guys, your timing was perfect, and certainly you made it through COVID, which is great. Probably your to-go business took off during those months, right?
Nour Rabai:
Absolutely. When the pandemic first started, obviously we were all in shock. We didn’t know what to do. We didn’t know the next steps we took. Right away we pivoted over to curbside pickups with our first play for all the PITA locations. That was our first battle we took on. We did curbside pickups. And then we transitioned over to online ordering. And then we introduced a new POS system into our concept with Totes partnership. We built the app as well. We worked very, very diligently with our third-party members like Uber, DoorDash, and Grubhub as well to really implement those tools that help assist us really fight the COVID.
Jim Fitzpatrick:
Yeah. Yeah. And now you’re back. I mean, people are back in the stores, obviously, and in-store dining I’m sure. And probably those people that now have been introduced to your product through COVID because of DoorDash and some of the other services that are out there are now coming into your restaurant saying, “I tried your to-go and this is great.” So we’re bringing the family into the stores, right?
Nour Rabai:
Yeah, so during the pandemic, we really pivoted. Pre-pandemic we were about 75/25, 75% dine-in to 25% takeout and delivery. During the pandemic it kind of shifted to 75% delivery takeout to 25% dine-in. And coming out of quarter two of 2022, we’ve had our best quarter as a company.
Jim Fitzpatrick:
Wow, that’s great.
Nour Rabai:
And I think a lot of that was derived from the new customer base that was introduced to PITA over the last two years during the pandemic.
Jim Fitzpatrick:
Boy, that-
Nour Rabai:
So, I’m very happy with where we’re at and where we’re going.
Jim Fitzpatrick:
… That’s fantastic. And as you know, a franchisee, many people know that I’m an entrepreneur myself with a number of companies right here in Atlanta. So they’ll give me a call and they’ll say, “Jim, what do you recommend? I’m thinking about opening up a company. I’m thinking about opening up a business.” And I say, “Stop. First, check out to see if there’s a franchise that does that and if there is look into the franchise, because I’m a big believer in the franchise system,” because of the proven techniques and the concepts that you all have put together already, it makes it just a turnkey opportunity for anybody that’s thinking about becoming a small business owner, you’ve already gone through all of the trials and tribulations. You know what works and doesn’t work.
In addition to that, you’ve got a brand out there. Somebody that buys into the PITA family now and puts that sign up, you have an instant rapport and an instant market of people that are now coming into your store or ordering. People that say, “Oh, I know that food. I eat it all the time. And here’s a location near me.” That is huge out there. For small business owners or entrepreneurs that are listening to us today, definitely look into a franchise first. And by the way, if you’re thinking about food, look into PITA. This is a great company right here. We want to be bringing these types and showcasing these types of businesses right here on The Atlanta Small Business Show because we know that this group has been doing just an incredible job through good times and through tough times, like you just heard, with COVID-19. They have come out on top. And talk to us about the growth, Nour. What does the growth look like for your company? What does the next 12 or 24 months look like?
Nour Rabai:
So for us, our growth strategy right now is hyper focused on our current franchise group that have signed multiple locations.
Jim Fitzpatrick:
Okay.
Nour Rabai:
Pre-pandemic we signed on well over 80 locations to open.
Jim Fitzpatrick:
Wow.
Nour Rabai:
And right now we’re well over 35 open and operating with two food trucks in that count. So our focus now is opening the current franchisees that have the agreements with us, assisting them, allowing them to open into the trade area they’ve signed on for with us. And really we’re looking to do about 10 to 15 locations between now and next year. So in the next 12 months, we’re hoping to open 10 to 15 locations.
Jim Fitzpatrick:
Wow.
Nour Rabai:
Hopefully a second location in our Chicago, Illinois area. Our current master franchisee has signed on for 21 locations up there. We’re assisting him in opening his second location up there. And then our Orlando, Tampa group who are area developers and we’re opening their second and third location down there in Flamingo Crossing as well.
Jim Fitzpatrick:
That is fantastic. Congratulations on all of that. Opening up one franchise every 30 days, even less than that if it’s 15. How do you do that? I mean, you’ve got to have just an incredible staff put together and a well oiled machine that every department, whether it be site location, or financing, or the people that build out these units for you. And of course, on the side of ordering the foods, and the softwares and everything that goes into one location. I guess you’ve built that team, right?
Nour Rabai:
Yeah. So believe it or not, Jim, pre-pandemic, we were doing that. We did 13 stores in the 12-month calendar period.
Jim Fitzpatrick:
Wow. That’s great.
Nour Rabai:
So we’re acclimated to that. We understand it. We’re a small-knit group in the corporate office. We know what we’re doing. Then this plays a big part on you saying you buy into a franchise.
Jim Fitzpatrick:
Sure.
Nour Rabai:
Well, you’re buying into the PITA franchise because we have the connections in place. We have our food vendors in place. We have our contractors in place. We have our systems in place. So everything really works like a well-oiled machine when you come on. Once things start kicking we’re opening.
Jim Fitzpatrick:
Let me ask you this. What kind of an impact has the rising costs have that we see out there right now with this 9.1 inflation and interest rates going up, gas prices and what have you? What kind of an impact has that had on your business, if any?
Nour Rabai:
In the restaurant industry, since 2020, we started with the pandemic, then it went to the labor shortage, then it went into the food shortage, then the distribution, now the inflation. So every quarter we’re combating something and fighting through it.
Jim Fitzpatrick:
It’s amazing.
Nour Rabai:
Unfortunately in the restaurant industry, if you want to stay open and you want to be in business and be profitable, we have to pass that cost on to our consumers, right?
Jim Fitzpatrick:
Right.
Nour Rabai:
And to this day, we’ve had a couple menu increases that we’ve had to implement to offset the rising cost, whether it be the delivery for the gas that’s increasing our food-
Jim Fitzpatrick:
Sure.
Nour Rabai:
… and decreasing our margins. So we’ve passed that on to the consumer.
Jim Fitzpatrick:
Right.
Nour Rabai:
And to this day, I think at least our consumer base, they’ve been very understanding. We haven’t had any pushback which has been an awesome transition for us.
Jim Fitzpatrick:
Sure.
Nour Rabai:
Again, it’s a battle every single day.
Jim Fitzpatrick:
Yeah.
Nour Rabai:
Because every day you have something coming for you.
Jim Fitzpatrick:
Sure.
Nour Rabai:
But if you have a franchise system, your franchisor has the purchase power to adapt to the price changes and inflation-
Jim Fitzpatrick:
That’s a good point.
Nour Rabai:
… because of purchase power. So
Jim Fitzpatrick:
That’s a good point. Yeah.
Nour Rabai:
That’s a great point.
Jim Fitzpatrick:
Sure.
Nour Rabai:
Yeah.
Jim Fitzpatrick:
I spoke to one of your colleagues that runs a big QSR, quick service restaurant chain. And I said, “How do you cope through tough times like this?” And he said, “How do we cope?” He said, “We’re gearing up for our best year ever,” he said, “because the reality is that in a tough economy, people say, ‘Well, I’m not going to be so apt to go spend a couple $100 dollars on a sit down meal in a restaurant. I’ll take the family over to a quick service restaurant and have a great meal and leave just as happy and it won’t cost me an arm and a leg.” So do you find that to be the case, that you now become the alternative to those people that instead of spending 25 bucks on a lunch, they can get in and out and spend whatever, 10, 15 bucks on having a great lunch with you guys. And now you become that alternative, that go-to through tough times.
Nour Rabai:
Yeah. It’s a great point you pick up because this is one of the reasons that actually PITA became successful. During the downturn of 2008 to 2011, the QSR concepts really started ticking.
Jim Fitzpatrick:
Yes.
Nour Rabai:
And when we opened up PITA as a first, that was kind our niche market of, this is where everybody wants to eat now because our price points at that time, you were getting quality food, amazing, with quality ingredients-
Jim Fitzpatrick:
Right.
Nour Rabai:
… for a fraction of the price of a sit down restaurants were having.
Jim Fitzpatrick:
That’s right.
Nour Rabai:
So for us, I think we’re transitioning with higher inflation, and what’s going on in the market and rising costs. I think people are going to pivot back to QSR in fast casual concepts to dine because they’re going to get this quality leading, quality food for the fraction of the price of dining out.
Jim Fitzpatrick:
That’s right. That’s right.
Nour Rabai:
Yeah. I forecast at least for the next 12 to 18 months, 100%.
Jim Fitzpatrick:
Sure. So when you’re doing the site locations of new franchises to open up, we hear so much now about people working from home and that commercial real estate is maybe coming down in price because of that. People, companies don’t need these offices. We hear a lot of about Amazon and the notion that brick and mortar may be dead and what have you. Of course, that’s different for the quick service restaurant industry, because people want to be able to go in and get their meal and get on with their life and what have you. They’re not going to call Amazon to have a meal ordered and sent to them, and you can’t really have your cooks working from home per se, but have you found real estate to have gone down in pricing over the last few years or has it gone up?
Nour Rabai:
Honestly, it’s gone up. But for us, we’ve negotiated a few deals over the past few months.
Jim Fitzpatrick:
Sure.
Nour Rabai:
And the real numbers that are coming in are just astronomical. And at corporate office we really try to inform the franchisees of what that dollar amount is going to be for safety in terms of profitability.
Jim Fitzpatrick:
Sure.
Nour Rabai:
And we’ve had to walk away from certain deals because it just doesn’t make sense on paper for us.
Jim Fitzpatrick:
Right. Right.
Nour Rabai:
And especially in the high traffic Midtown areas where you have a lot of offices and people not coming in, we’ve kind of based 100% off of that and said, let’s pivot our focus into the rural areas and to outside the perimeter and really focus on that demographically.
Jim Fitzpatrick:
Right. Do you leave that decision up to the franchisee, though, that if somebody is adamant and says, “No, I’ve got just the spot. I know it’s going to cost me more per square foot to have this in this office building or in this location downtown, but I feel passionate that I really want to have this location there.” Do you, as a franchisor say, “Okay, just so long as you know it’s a lot more money per square foot than what we’re paying in Alpharetta, or paying in Peachtree City in a strip center. But if you want to do that, you can do that.” Or do you say, “Nope, we’re not allowing it.”
Nour Rabai:
We would block the deal. Our franchisee success is obviously our success at corporate. So if something doesn’t make sense on paper and we know from our years of experience it will not be profitable. And especially with our price points. So the majority of our stores don’t serve beer and wine. You’re talking about fast casual QSR concept. There’s only so much that we can do to take on such a large rent number. So yeah, we would block the deal just to make sure that they’re successful.
Jim Fitzpatrick:
Sure. And then you’ve got to look at situations where you might not get any breakfast business, and you might not really get a big dinner business if it’s downtown, financial district, what have you, where you don’t have that tremendous residential business coming in. And now it’s just lunch, that you’ve got to make it or break it on a lunch. And obviously you turn around and you say, wow, we’ve got to sell 1,000 pita sandwiches in order to make a profit during lunch, that’s not going to work. Right?
Nour Rabai:
Yeah. And in those trade areas we survived, pre pandemic, on catering. Catering business was amazing.
Jim Fitzpatrick:
Okay. Yeah, that’s fantastic.
Nour Rabai:
And with people not being in the office, there’s no need to cater.
Jim Fitzpatrick:
Yeah.
Nour Rabai:
So the reps are not spending the money on catering business.
Jim Fitzpatrick:
Sure, sure. Let me ask you, are your opportunities still out there for, I know because we’re probably going to get some inquiries here, for those entrepreneurs that are saying, this sounds like a great concept. I’ve eaten in one of his restaurants. I know the brand, I’ve been onto his website, I see the growth. Now I’ve seen him on ASBN having said all that. Can somebody buy just one franchise from you now, or are you only selling areas or master franchise setups?
Nour Rabai:
No, absolutely. Yeah. We promote single unit operators.
Jim Fitzpatrick:
Okay.
Nour Rabai:
Our whole system is based on owner operators.
Jim Fitzpatrick:
Okay.
Nour Rabai:
I think the majority of our success is based on the franchisees that own and operate those single entity locations.
Jim Fitzpatrick:
Okay. Can you give us an idea of how much cash an owner operator, if they wanted to buy a franchise from you, just a range as to how much they would have to have liquid in order to get into a franchise?
Nour Rabai:
Sure. Yeah. So we’ll start with the First-Gen. A First-Gen Location will run you about $300 to $400,000 all in. That’s to open the doors, with inventory, furniture, and FF&E.
Jim Fitzpatrick:
Yeah.
Nour Rabai:
Furniture and equipment and everything. For a Second-Gen location, you can go as low as $100 to $150, which is, for the viewers that don’t know what a Second-Gen is, it’s a restaurant that was shut down, that we are rehabbing to reopen as another restaurant.
Jim Fitzpatrick:
Gotcha. Okay.
Nour Rabai:
And then we do have, in our current store group, we have a lot of food halls. We have two food halls that are open operating in Halcyon, Georgia and in Marietta Square.
Jim Fitzpatrick:
Oh that’s great.
Nour Rabai:
Yeah, they’re amazing. 400 to 600 square foot footprint.
Jim Fitzpatrick:
Okay.
Nour Rabai:
And they’re about a $100,000 or less to get in, and that’s to open the door, so everything. Yep.
Jim Fitzpatrick:
Sure, sure. Well, I appreciate all the time you’ve given us. One last question, and I know that there’s going to be some people out there that want to get this from you, but what advice would you give to other business owners looking to build a franchise? To say, I’ve got a really successful hair cutting business, and I’ve got a great name out there. And so many people tell me that I should franchise my business. As a lot of customers will tell you that. Right?
Nour Rabai:
Yeah.
Jim Fitzpatrick:
That’s probably how you heard about it and then listened. But what would you tell people that are thinking about embarking on becoming a franchisor?
Nour Rabai:
So for the individuals that are embarking on becoming a franchisor, I would give them the advice of making sure that your FDD is 100% intact, and in line to understanding your systems and the way that you operate internally. That’s number one. So make sure your FDD is intact.
Jim Fitzpatrick:
And that’s the Federal Trade Commission’s disclosure for franchise?
Nour Rabai:
Yes. FDD. Federal Disclosure Document.
Jim Fitzpatrick:
Okay.
Nour Rabai:
Yep. And that’s number one priority. I think you have that. Your systems are going to come in number two. Making sure that you’re operationally sound in and out. Having different parts of your business in line to your FDD and how you want things done. Making sure that your vendors are in play. You have contracts in play with your vendors and they understand your growth strategy and where you’re going as well. So detail, detail, detail.
Jim Fitzpatrick:
Yeah.
Nour Rabai:
And lastly, I’ll leave on this. Only sign on owner operators. Our success is derived 100% on owner operators.
Jim Fitzpatrick:
Good point.
Nour Rabai:
I can’t stress the fact enough for everybody that’s listening. Owner operators will really, really be a great success to your business.
Jim Fitzpatrick:
That’s right.
Nour Rabai:
And they’re the ones that are actually going to care.
Jim Fitzpatrick:
Just ask Chick-fil-A, right?
Nour Rabai:
Absolutely.
Jim Fitzpatrick:
I think that’s been their special sauce, not to caption or grab onto a line there in the restaurant business. But I think it has been their special sauce. Everybody points to Chick-fil-A because the owner of that franchise is probably delivering you those waffle fries, right?
Nour Rabai:
Absolutely. Absolutely.
Jim Fitzpatrick:
And I think that’s great advice. Nour Rabai, CEO and founder of PITA Mediterranean Street Food. We’re showing all the information and the beautiful pictures here of the incredible food and locations that you’ve got. Congratulations on all your success. We’d love to do a follow up with you to see how things are moving along in your business. And man, you’re one of those entrepreneurs out there that sees an obstacle and says get out of my way. I’m doing this anyway. So congratulations.
Nour Rabai:
I really appreciate you having me on, and thank you so much.
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