When going out for a burger, latte or veggie wrap, have you ever wondered who’s behind this fast food franchise frenzy? Frenetic it is, for Gulf News estimated the food service market on the whole “to be worth more than $31 billion a year”.
According to some recent estimates, the Middle East is a growing franchise destination with annual growth of 27 per cent, valued at around 14 billion USD. Fast food accounts for 40 per cent of this, meaning there are more franchise businesses and outlets opening up in the region than you could ever possibly count.
The players are numerous, with the usual recognised names such as McDonalds, KFC and Starbucks, along with a whirl of less famous chains in the area such as Coldstone Creamery, zpizza and Bubba Gump Shrimp. And behind each foreign name lies a local franchise partner that covers several Arab countries if not the whole region.
The UAE in particular is attracting more fast food restaurants than ever, mostly due to its strong economic growth and rapidly increasing population. In fact, figures show that total spending by tourists in the UAE will reach 7.6 billion USD in 2009, with Dubai by itself targeting a whopping 10 million tourists in 2010.
Some other factors that contribute to the popularity of fast food include the high proportion of hard-working individuals, with high purchasing power, whether single or married who have no time or desire to cook at home. In addition the apparent westernization of food preferences and trends, particularly in the Gulf, is fuelling demand for more fast food. And another significant factor is the limited social opportunities and recreation in some of these countries.
Whatever the case franchising in the region has been exhibiting solid double digit year-on-year growth for the last five years, with the local quick service restaurant business “currently valued at over 1 billion USD with 11 per cent growth in the food services market”, according to Arabian Business Furthermore there is much room for growth. Market research company IMES also reported on the huge growth recently in the GGC countries, revealing that the ten largest restaurant chains alone operate more than one thousand nine hundred restaurants across the region.
Take McDonald’s, for instance, that sells an average of twenty four million sandwiches a year in the UAE according to franchisee Rafic Fakih, managing director of the Emirates Fast Food Company. Fakih recently announced that there will be at least ten new McDonald’s outlets, a substantial increase over the current fifty two in existence. "In the next 5 years, if the regional economic growth continues, we will open between one hundred to one hundred fifty new restaurants in the country," Fakih added.
Nevertheless it is the chicken chains that are managing to win over the hearts of Middle Eastern fast food lovers. KFC, Al Tazaj and Al Baik – the last two being locally created chains - account for around 27 per cent of the market value according to IMES. Lighter concepts such as coffee, donuts and ice cream come next, with 21 percent, followed by burger and pizza chains. Most of the franchise action is taking place in Saudi Arabia and the UAE, which together account for 74 per cent of total consumption.
There is some home-grown activity within all of this, such as the popular chicken chains Al Tazaj and Al Baik that emanate from Saudi Arabia. Another strong exporter of restaurant concepts to the rest of the Middle East is Lebanon. It has introduced coffee shops and hip mid-market restaurants such as Lina’s, Casper & Gambini’s, Dip n’ Crunch, Café Najjar and much more, with many new concepts that are up for grabs in the rest of the Arab world.
Yet the general dependency remains on importing the already successful American chains. For example, US ice cream retailer Cold Stone Creamery appointed the UAE’s Apparel Group as a Master Franchisee for the Middle East. Last year it opened its first three stores in Dubai which generated a swarm of ice-cream loving customers and it now plans to open more than forty locations over the next five years in Bahrain, Jordan, Kuwait, Oman, Qatar, Saudi Arabia and the UAE.
Another emerging success is zpizza, considered the fastest growing gourmet pizza chain in the United States. They recently signed a master franchise agreement with Saudi company Bohoor International and will open the first outlet in Riyadh later this year. They plan on opening a further thirty four restaurants across the region.
Also in February, the Bubba Gump Shrimp Company granted exclusive Middle East franchise rights to Mubarak Al-Hassawi Restaurant Development Group. The deal, which stipulates a minimum of twelve outlets by 2020, should net at least 50 million USD in revenue. Al-Hassawi’s territory covers the UAE, Saudi Arabia, Kuwait, Qatar, Egypt, Jordan, Oman and Lebanon. The first outlet should open in Dubai by the end of 2008.
Overall, market studies have clearly shown that demand for fast food is nowhere near saturation, with more room available in local and regional markets for many global brands. This growth is expected despite the recent price hikes that have hit fast food restaurants. In March, Gulf News reported that fast food chains in the UAE have hiked prices by up to 30 per cent in recent months, with an average rise of 14 per cent overall. To illustrate, chains such as KFC, Pizza Hut and Hardees all registered an increase of around 10 per cent in February, while Burger King increased prices between 15-30 per cent. Still, demand grows.
There is an ominous side to all this for consumers, as the sedentary lifestyle of the Arabs, the quest for convenience and the abandonment of traditional home-cooked meals are contributing to obesity and health problems. Many consumers see fast food as a culprit even while the sector tries to adapt. Bohoor, for example, says that its new zpizza chain offers healthy alternatives that will appeal to younger consumers, while Burger King in the region plans to become the leader in “providing a menu offering that focuses on fresh ingredients.”
The future of fast food over the next few years seems promising, with a lighter twist to it. Healthier options that benefit from local production facilities, freshly produced, less processed, containing less preservatives, will undoubtedly help the industry grow continuously.
