What started with the influx of foreign workers and now the expansion of the Middle East, the Arabian Gulf has launched several western niche fast-food brands. Franchises such as Shake Shack from New York City, South St. Burger from Canada, Denver’s Smashburger and New Zealand’s Burgerfuel are among the few new restaurants that are seen throughout the region. As one of the first brands to open in the UAE, Kentucky Fried Chicken had the largest revenue of all fast-food outlets in a US$2.72bn market in 2011.1
This trending consumption and development of Western fast-food chains are directly correlated to the lifestyle changes over a generation where oil wealth and social life revolves around the region’s huge shopping malls. Many locals spend much of their evenings out, even on weekdays, spending time in the shopping malls and dining in the mall food courts. According to a survey by MasterCard, Arabian Gulf consumers were the top three spenders on restaurants worldwide — UAE diners spent an average of $229 per month, Qataris averaged $211 per month and Kuwaitis spent $196 per month. They also discovered that 88% of the population dined in shopping mall food courts last year.
The rise of Western Quick-service-restaurant chains in the Middle East is also a result of the current economic situation in the US. Andy Wiederhorn, chairman of Fatburger, stated, “Despite the recent downturn in the domestic economy, the international market is on fire. The Middle East and Asia Pacific are becoming exciting territories for us. Our current locations in these regions have been extremely well received.” With this type of response, the burger chain plans to open 17 restaurants in Saudi Arabia, 5 in Kuwait, 8 in the UAE, and has signed deals for 30 stores in Qatar, Egypt, Lebanon, Jordan, Syria and Oman over the next couple of years.
Many of these fast-food brands see Middle East expansion as a way to make up for softness in Western markets. In Saudi Arabia alone, Euromonitor analysts expect to develop into a US$4.5 billion fast food market over the next three years. “As companies look for growth in sales, it is natural for them to look to new markets,” says Wharton marketing professor Barbara Kahn. “Some retail products are more universal than others, and the ones that are, are more likely to go global. Also, if they have some kind of differential advantage relative to the local competition, you’ll see more global outreach. In this case, American cuisine is presumably the draw.”
Not only U.S. fast-food chain stores but also U.S. packaged food and beverage brands are in high demand in the Middle East. These brand owners would also do well to implement a strategy for market entry and development in the fast-growing Middle East consumer markets.
1 Knowledge@Wharton (2013, February 25). Fast-food brands bite into the region. The National Business, p. 07.