Brazils fast-food king: Habib's founder Alberto Saraiva is taking his Brazilian franchise to Mexico. After that, he hopes, the world

Latin CEO: Executive Strategies for the Americas, April, 2000 by Larry Luxner

HABIB'S, THE WORLD'S largest Arab fast-food chain, isn't a product of Egypt, Lebanon or Saudi Arabia -- but of Brazil, where the restaurant's famous logo is becoming as ubiquitous as dental-floss bikinis on Copacabana Beach.

At last count, there were 135 Habib's franchises throughout Brazil, making the chain second in size only to McDonald's (which has 384 restaurants) and far more numerous than Pizza Hut, Burger King or Wendy's. In March, Habib's became a true multinational with the inauguration of its first eatery in Mexico City.

The man behind Habib's isn't a real-life Mr. Habib, but Alberto Saraiva, a 46-year-old native of Portugal whose family moved to Sao Paulo when he was six months old. Saraiva grew up expecting to become a doctor. That changed after tragedy struck in 1973 -- when his father, a baker, was killed by robbers. Saraiva supported his family by running the bakery, and though he completed his medical training, he decided to stay in the food business.

"There was a restaurant that had closed, so we bought the equipment and opened a new restaurant in another location," Saraiva recalls. "We invested R$600,000 and sold it for R$1.7 million. With this money, we built a second restaurant, a luncheonette called Casa de Esfiha."

At that time, Sao Paulo had only two or three Arab restaurants, even though the city boasted one of the largest Arab immigrant communities in Latin America. Saraiva befriended a Lebanese chef, Paulo Abud, from whom he learned a variety of Middle Eastern recipes.

In addition to esfihas -- hot Arab pastries stuffed with ground beef or cheese, lemon, tomato, chopped onion and seasonings -- Saraiva's original menu featured kibbe, kafta, stuffed grape leaves, hummus and tabouli salad. Less adventurous diners could choose more predictable fare: hamburgers, chicken sandwiches, pizza, french fries and ice cream.

"I decided to create an Arab fast-food menu, aimed not only at the Arab immigrant colony but at the Brazilian palate, with one extra ingredient -- very low prices," says Saraiva, who has no Arab blood in him.

In 1988, Saraiva and his brother Belchior invested US$80,000 to open the first Habib's in the Sao Paulo neighborhood of Lapa. For 45 days, people had to stand in long lines to get in. Business was so good that the brothers quickly opened a second Habib's, then a third. After inaugurating its 16th restaurant, Habib's established a central kitchen in Sao Paulo so the chain could centralize its purchasing.

Today, Saraiva's 135 restaurants buy 1.2 million tons of products annually employ 7,000 people in more than a dozen cities and ring up annual sales of US$200 million, with profits of US$40 million. More than 220 million esfihas are prepared and served each year. Saraiva claims the market value of his company is roughly US$600 million.

Asked why Arab cuisine has proven so popular in Brazil, Saraiva says it's simple. "Since the first Habib's, we've applied the philosophy of very low prices," he says, noting that Middle Eastern food is cheap to produce, and therefore can be sold at rock-bottom prices. "Except for McDonald's, the chains have not done well in Brazil. KFC, Subway and Arby's have all gone kaput because they couldn't adapt."

Not content with selling Arab fast-food only to Brazilians, Saraiva now wants to make his chain international. At the end of March, Habib's inaugurated its first outlet in Mexico City, with a varied menu that features esfi-has for the equivalent of 19 cents each.

Saraiva's business plan: open 220 restaurants over the next six years in Mexico City, Monterrey and Guadalajara, the country's three most important metro areas. Franchisees, who put up US$250,000 to US$500,000 per outlet (depending on size and location), can expect to make their investment back within two years. "We'll have around 15 restaurants in the first year," says Saraiva. "This expansion in Mexico will be very important. Here we actually have a chance of being No. 1."

Saraiva says he and his director of expansion, Jose Mauro Magon, have already scouted out hundreds of potential locations, driving 400 kilometers a day, beginning at 8 a.m. and finishing at 11 p.m.

"Our final big objective is the United States, because in the US, even though there's fierce competition, everybody will want to be a franchisee," he says. "This has always been a dream of mine. If it were just for the money, I would have stopped a long time ago."