Johnny Rockets shuts down flagship store as heat rises

Unable to sustain ‘white elephant’; COO says expansion still in offing

KARACHI:

Johnny Rockets’ flagship store at Karachi’s Dolmen Mall now wears a deserted look. What was once among the first few outlets visitors saw as they stepped inside the city’s largest shopping mall through the corner entrance is not open for service anymore.

The California-based burger joint closed this branch last week. It has already shut down what was its largest restaurant worldwide in Lahore’s upscale neighbourhood of DHA - they are now operating at MM Alam Road.



Back-to-back closures of its prime locations made Johnny Rockets talk of the town. Sources familiar with the development say the company’s Islamabad branch may close any time as well as the overall business is struggling. There are even talks over its exit from the Pakistan market.

While background interviews with industry sources point towards its failure to sustain operations, the company says it is “restructuring the business module” and even planning nation-wide expansion - rubbishing speculations that it is shutting down.

“It is better to cut your finger than chop off the entire hand,” Chief Operating Officer Adnan Qazi said of its flagship outlet. The company is relocating the troubled branches to attract better visibility.



Qazi said the aforesaid outlet had been bleeding money and putting pressure on other branches. “It was a mistake that needed correction,” he said, adding that the outlet was located in the corner of the mall, which hardly attracts 10% of the total traffic. Besides, he said there were other operational costs that made it difficult to sustain that [Dolmen, Clifton] branch.

The company is relocating the said branch to Saba Commercial, DHA Phase V in mid-December, which, the COO says, would give them more visibility.

Johnny Rockets entered the Pakistani market in December, 2013 after Hamdan International, a subsidiary of Bandhani Group, bought its master franchise and opened the first outlet in Karachi. The burger joint - which serves made-to-order burgers, crispy American fries, hand-spun shakes and classic sandwiches - soon opened an outlet each in Lahore and Islamabad. It currently operates four branches including two in Karachi.

A premium brand with arguably the most expensive burgers in town, Johnny Rockets was well received initially. It soon faced intense competition from rivals, such as McDonald’s and Burger King, forcing the company to reduce prices from Rs1,200-1,500 (the range at launch) to Rs600-800. However, the reduction in prices did not seem to work.



The business had been in hot waters for quite some time, but problems exaggerated during the last six months and reached tipping point recently, an official close to the developments said. The management has changed three times in two years; the entire supply chain team was fired (some resigned); the head of the supply chain operations resigned just last week and they have shut down their warehouse as well.

The terms and conditions on which they signed for the franchise were difficult to meet. They made a big capital investment to start with, the official said, referring to the now-closed outlets as ‘white elephants’.

From royalty to imported raw material, they got a hit everywhere, the official said - the company uses fresh material and imports half of it from the US. They developed an expensive model but failed to grow volumes, which led to liquidity issues.

As opposed to market talk about its management failure, Qazi, the COO, says the overall business is doing well and they are planning five new branches in 2016 including two in Karachi. However, those with direct knowledge of recent developments at Johnny Rockets seem to think otherwise.

“With no supply chain department or operational head, I don’t know how they are going to run the business, which is bleeding money,” an official said.

Published in The Express Tribune, December 11^th,  2015.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.