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The Halal Guys Once Drew Huge Crowds. Now It's Pivoting for a Socially Distant World. COVID-19 has forced the restaurant industry to rethink everything. No brand has seen a more dramatic shift than The Halal Guys, a food cart turned franchise where long lines and busy stores were part of the appeal. So how do you transform a hot spot into a safe, reliable meal?

By Clint Carter

This story appears in the October 2020 issue of Entrepreneur. Subscribe »

Courtesy of The Halal Guys

Patrick Mock used to fly across the country with takeout containers of chicken and gyro. "I'd smell up the whole cabin just so I could bring some platters back for my friends and family in California," he says.

He was picking up those platters at The Halal Guys, a food cart on the corner of 53rd Street and Sixth Avenue in Manhattan. Mock ate there regularly when he lived in New York and worked as a management consultant. Then he moved to California, and the cart became a rare treat. Whenever he was back in town, he'd visit the cart, put in a big order, and stuff it all into a carry-on bag before heading to the airport.

Mock's friends, many of whom he had personally introduced to the brand, knew he was a Halal Guys devotee. So in 2014, when news broke that the business was franchising, they started texting him messages of encouragement. "I was in a meeting, and I started getting pinged on my phone," he says. "It had never even crossed my mind to do a franchise."

But The Halal Guys wasn't a typical company, and it wouldn't be a typical franchise. To start, Mock was hardly the only person obsessed with it. The cart had become a beacon of culinary indulgence for street-cultured travelers and locals. It was dependable — closing only twice in its 30-year history — and wildly popular, especially at night, when people were spilling out of bars and clubs. The line was regularly down the block.

Related: How Many Franchise Locations Should You Own?

Mock saw the business opportunity, and not just because he was a fan. The food was delicious, replicable, and unlike anything else in the country. He figured The Halal Guys could do for halal food what Panda Express did for Chinese food, or Chipotle did for Mexican food. So a week later, he got on a plane to New York to meet with the brand — and then signed a multi-unit deal for 20 stores in Northern California. His first one opened on a sweltering summer day in 2016.

Even as The Halal Guys transitioned from a food cart into a franchise, it managed to maintain its hype. The industry publication Restaurant Business ranked it as the fastest-growing small concept in the country, and units started appearing around the U.S. as well as internationally, in cities like Toronto, Jakarta, and Seoul. Long lines, like the ones in Manhattan, were a regular feature — so much so that when a franchisee launched a Halal Guys Instagram channel in 2015, it posted a photo of a seemingly endless stretch of people at the cart. The caption read, "Tag your friends who have waited in this line for some delicious chicken and rice!"

That became the strategy: Capture the crowd and recycle the excitement.

But then, trouble. Sales slowed. The buzz died down. A few locations were forced to close. And just as The Halal Guys was fixing the problem, COVID-19 came along and forced it to reconsider everything. Because in a time of social distancing, how can you run a brand that's built on hype and crowds?

The Halal Guys has an answer: It's going to get a little boring. But that's a good thing.

From left: Founders Abdelbaset Elsayed, Ahmed Elsaka, and Mohamed Abouelenein.
Image Credit: Courtesy of The Halal Guys

The Halal Guys' origin story could fill a chapter in a book on the American dream. In 1990, three Egyptian immigrants—Mohamed Abouelenein, Abdelbaset Elsayed, and Ahmed Elsaka — ditched their kitchen and cabdriving gigs to run a food cart. At first they sold hot dogs, but soon after, they switched to halal food, which is prepared in accordance with Muslim law.

The partners recognized an underserved audience of Muslim cabbies, and as an homage, they decorated their cart taxicab yellow. But the audience turned out to be bigger than just drivers; it was also the passengers — hundreds of thousands of whom traveled by cab every day in New York City. If you were to ask your driver where to find a quick bite, there's a decent chance you'd hear about midtown's best chicken and gyro cart. "It's one of these viral moments before viral existed," says Greg Deligdisch, The Halal Guys' VP of marketing. "It's hard to imagine planning something like that."

The cart was popular for its food, but it grew legendary for its lines, which came to stretch late into the night. Sameer Sarmast first visited the cart in the late '90s as a teenager. "It wasn't even called Halal Guys back then," says Sarmast, now a financial planner. "It was just called the chicken-rice guy, or the platter guy."

Related: 5 Expert Tips For Launching a Food or Consumer Products Business During a Downturn

Sarmast was just old enough to drive, and he used his freedom to eat halal. He and his brother would sneak out after curfew for the 25-minute drive from their home in New Jersey. They'd put their parents' car in neutral, roll it down the driveway, and start the engine once they were out of earshot.
For Sarmast, the adventure was never just about food. "It was about experiencing the city lights," he says. "You'd park your car illegally and mingle with strangers. The line could be 60 people long, and everybody was in good spirits, or at least drunk." They'd all agree that the chicken-rice guys' secret white sauce was addictive — which is why every so often, someone would grab a bottle off the cart and sprint away.

Sarmast was a superfan, and he and his brother published the cart's menu and hours on a fan website they called 53rdand6th.com. In 2006, The New York Times gave the site partial credit for the long lines. When the founders finally branded themselves as The Halal Guys, they included 53rdand6th.com on their T-shirts and to-go bags. It was the official unofficial website.

By 2013, The Halal Guys had grown to three carts and a food-prep commissary in Queens. It was a culinary staple of New York. That's when Dan Rowe, CEO of Fransmart, took notice.

Fransmart is the franchise development company responsible for growing brands like Five Guys and Qdoba, and having spent a fair amount of time establishing U.S. brands in the Middle East, Rowe had started to wonder why there wasn't a prominent Middle Eastern concept in the U.S. He'd approached a few brands in Dubai, but to no avail. Then it hit him: The Halal Guys. He'd walked past the carts for years but never stopped. "The lines were really long," he says. "I couldn't be bothered." But the thing that had turned him away was drawing other people in.

When Rowe finally faced the line, he discovered that the food wasn't technically Middle Eastern. He saw it as vaguely Greek, with yellow rice, a creamy, mayo-based sauce, and loads of seasoning. (The cart's owners agreed with that; chicken gyros aren't exactly Egyptian. "Our food is American halal, born in New York City," says Ahmed Abouelenein, Mohamed's son, who is now CEO.) Still, it was delicious and original. Rowe reached out to 53rdand6th.com, and Sarmast put him in touch with the company's operations manager. That kicked off a year of meetings.

"It took a while to get them comfortable with me," Rowe says. The Halal Guys' founders had never considered growing beyond New York City and were concerned about compromising the quality of the food. But Rowe was persistent, and in time he convinced the founders to make the leap.

Related: The Top Food Franchises of 2020

Abouelenein moved from executive manager to CEO, and Fransmart began recruiting, focusing on multi-unit franchisees. Bigger investors would be harder to recruit, but in theory, they'd be easier to manage.

"With something like Subway, you're selling 1,000 stores and you have to babysit 1,000 people," says Paul Tran, who was a Fransmart senior consultant at the time. "That requires a big infrastructure." The multi-unit model would instead allow the company to grow without building a massive corporate office.

In shaping its brick-and-mortar concept, The Halal Guys modeled itself as the Chipotle of halal food, with counter service that lets patrons participate in the assembly process. Stainless steel counters would replicate the street-cart facade, and the signage would continue as taxicab yellow, now accented with more red.

Two brick-and-mortar shops opened in Manhattan — and as a big sign of faith, Tran, the Fransmart consultant, decided to become a Halal Guys franchisee himself. He put together a team of partners to join him in a 30-unit development deal in Southern California. "I kind of double-dipped and did a bit of legal insider trading," he says. "But I've always had a personal love for The Halal Guys."

In 2015, as Tran was preparing to open one of the company's earliest franchise locations in Costa Mesa, Calif., excited fans started sharing photos of his branded building on social media. On opening day, Tran's line stretched six hours long. A picture was posted to Instagram: "Get in line now to eat at The Halal Guys in Costa Mesa later."

With just 1,440 feet of real estate, Tran's store did $14,000 in opening-day sales, a number that increased slightly over the next month. As a Fransmart protégé, Tran knew what to do next. He and his partners rolled the profits back into the system to keep building stores while delivering returns to their investors.

Not all early franchisees were as disciplined. Some franchisees saw the lines and expected to make easy money; they'd buy up inferior locations and resist proven advice. "We even had guys who, if they opened soft, wanted to put other stuff on the menu, which is the kiss of death in the restaurant business," says Rowe. "They were not acknowledging that they were the reason it was slow."

This took a toll. Sales at some restaurants started to slump. So in 2017, even though The Halal Guys was expanding rapidly, it effectively put a freeze on franchise recruitment. "We started to be very selective," says Abouelenein. The company also studied its best and worst performers to figure out what was working and what wasn't. It terminated agreements with franchisees who weren't up to par, and it closed underperforming stores.

The brand was solving what felt like its biggest crisis — but the trouble was actually just beginning.

Image Credit: Courtesy of The Halal Guys

The first law of thermo­dynamics explains that energy is never created or destroyed. That's why gas loses heat as it expands: All those excited molecules spread out over a bigger area. And as The Halal Guys expanded, it experienced its own version of that. The energy was still there, but it was no longer contained to a space the size of a food cart.

"As you expand that quickly, you might lose a little traction with same-store sales," says Aaron Allen, a Chicago-based restaurant consultant. "That would be one of the first things that happens as the irrational exuberance starts to fade."

The Halal Guys doesn't share its unit financials, but estimates from Allen's firm put average sales, just prior to COVID-19, at $970,000 — down about 20 percent from the $1.2 million it hit in 2016. So the brand was cooling off even before COVID-19 hit it like a gale-force Arctic wind, driving sales down an additional 60 to 70 percent.

The damage is roughly twice that experienced by the fast-food industry as a whole, according to the marketing firm Top Agency. Burger King was down just 25 percent for the second quarter of 2020, while its sister brand Popeyes actually saw a 24 percent spike. But those chains offer drive-through, which consumers likely viewed as less risky than The Halal Guys' in-store pickup.

"If you think about who [this pandemic will hurt] in particular, it's those whose brand equity doesn't sync with the current moment," says Jonah Berger, Ph.D., a University of Pennsylvania Wharton School professor who wrote about The Halal Guys in his 2013 book, Contagious. "The Halal Guys is a great example of using scarcity and exclusivity to drive interest and attention."

Scarcity and exclusivity synced well with 2016, but it definitely did not
sync with 2020.

On the heels of its franchisee cleanup effort, COVID-19 forced The Halal Guys to shut down more stores in Texas and Arizona, along with one ghost kitchen in California.

It also fundamentally changed the brand's message.

Related: Creative and Practical Steps for Franchises to Survive the COVID-19 Crisis

The brand planned on launching a series of excitement-­building limited-­time promotions and new menu items. But the pandemic made that impossible. The cool, gritty New York City brand had to tell the same careful, cautious story as everybody else: Wear face masks, wash hands, and socially distance. Its buzzy social media now promotes delivery and order-ahead options. It's experimenting with new store designs that limit guest interaction.

In interviews for this story, everybody at the company hammered the safety message. What they didn't mention was how the pivot is somewhat awkward for a brand that has historically inspired people to sneak out of their houses to park illegally and eat food on the sidewalk. The cart is many things, but few people visit for its strict adherence to protocol.

On a recent Sunday afternoon, I visited the original Halal Guys cart in Manhattan. Six employees shoveled steaming piles of chicken and meat across the grill; only one employee wore his mask properly, while the others had them pulled down below their noses or chins, and one was entirely mask-free.

Foot traffic is down in Manhattan, so the line was thinner than usual — but it never let up. There were always five to seven people waiting to order, with others eating merrily on benches. Whatever draws people to The Halal Guys, it isn't the expectation of safety. The brand's value proposition to date has been something far more social, epicurean, and perhaps hard to deliver in a world defined by COVID-19.

The pandemic has obviously impacted most businesses, but the outcome hasn't always been predictable. Sometimes, instead of killing a business, it simply shoved that business into the future — and that may be the case with The Halal Guys. It always knew the long lines couldn't last. Brands cool as they grow; it's a fundamental law of expansion. "We saw the same thing with Five Guys," says Rowe. "In the beginning, people would go crazy."

Dunkin', by comparison, isn't exactly a cult brand. Its global dominance stems from ubiquity and reliability, and that's what The Halal Guys now wants to deliver. Says Rowe: "So the restaurants open probably with less fanfare, but then they hold their sales longer."

Today, The Halal Guys has more than 90 franchised locations, and after clearing out the underperformers, it still has roughly 250 in development. It's recovering alongside the rest of the industry, reinforcing itself with a suite of initiatives like a new point-of-sale system and the introduction of family meals to feed those in quarantine. A sleek new website boasts a brand blog and an e-com store with hoodies and backpacks, and the restaurant is finally on track to start launching those new menu items that were put on pause earlier this year. (The details remain top secret.)

More critically, the brand has a new set of criteria engineered to weed out impatient investors. In 2015, a multi-unit franchise deal included an $80,000 payment to The Halal Guys' corporate office. Now that deal starts at $180,000. And the minimum sign-on includes five stores, according to franchise disclosure documents, rather than the previous three.

Related: From Phone To Fork: Why The Restaurant Industry Is Equipped To Rapidly Adapt To A Remote World

Mock opened his sixth location in September, and The Halal Guys plans to open 25 new stores by early 2021. It will cross the 100-store threshold just after its 30th anniversary. A new development agreement in Alberta, Canada, will bring its 37th franchisee into the system — and officially put the brand back in growth mode.

Tran's revenues in his California stores are up to 80 percent of where they were pre-pandemic, and he's starting to hunt for real estate bargains. It's a strategy he learned from watching his growth-minded Fransmart brands after the 2008 recession. "A lot of my clients were able to take over stores for half the price," he says. "I expect us to have that same type of harvest next year."

The Halal Guys may have stumbled, but it didn't fall. And its ambition certainly didn't waver. "We're still a brand-new concept," says Abouelenein. "And we're excited, because we believe there are going to be a lot of great opportunities in the next five to 10 years." In that time, he says, it will have 400 to 500 stores open globally. Most people will have a store nearby, so there will be no need to ever stand in line.

Clint Carter is a writer and editor based in New York City. In addition to Entrepreneur, his work appears in Men’s HealthMen’s Journal, Wall Street JournalRolling Stone, and New York magazine. He’s on Twitter and Instagram as @clintlcarter.

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