Fast food firms across Middle East post record profits

Growing demand for cheaper foods and softening rents boost fast food business.
By Joanne Bladd
Thu 05 Mar 2009 05:35 PM

Fast food firms across the Middle East are posting record profits, as residents comfort eat their way through the economic downturn.

McDonald’s, the world’s largest food chain, posted a net profit of $4.3bn for 2008, up 80 percent on the previous year’s $2.3bn. Across the Middle East, the chain’s income spiked by 33 percent, with same-store sales up nine percent for the year.

Rafic Fakih, managing director of Emirates Fast Food Co, which runs 61 McDonald’s restaurants across the UAE, said the brand’s appeal is simple.

“People come here because they like the food. We have a known brand, and we please the customers so they come back.”

In light of the credit crunch, Fakih is predicting conservative growth this year.

“The number of tourists visiting has decreased, so that has an impact... we might not see the same growth this year.”

Dunkin’ Donuts has also bucked the economic trend, reporting profits of $11m for its UAE, Kuwait and Oman stores. The brand saw a 22 percent increase in same-store sales across the Emirates last year, and plans to open another 10 outlets this year.

Sales are down in 2009, said David Rodgers, the brand’s UAE general manager, but the chain still expects an annual five percent growth. “We’re not immune, but I think we offer value for money. Everyone is being more careful about what they spend.”

The Gulf’s biggest ice cream player, Baskin Robbins, generated $101m in sales last year and saw record footfall in January. Manoj Loya, general manager of Galadari Ice Cream, which holds the GCC franchise for the brand, is forecasting a minimum 22 percent growth this year.

“We’re very upbeat about the market,” he said. “I strongly feel [ice cream] is a very cheap form of treat when people don’t want to spend money.”

Despite the economic gloom, Loya plans to open 50 new stores this year and to roll out a new store concept, BR Café. The sit-down stores, the first of which has opened in Jeddah, will launch in the UAE later this year.

“We’ll aim to be a hangout zone with a slightly higher-end feel to it,” Loya said. “We’d like to try taking the brand to a different level.”

Traditionally, fast food has done well in slow times. The industry’s model – offering fast, filling food at a low cost – translates well to a pared-down economic climate. Value meals can be bought for AED14 ($3.8) and AED15 ($4) at McDonald’s and Burger King respectively, while Taco Bell offers beef tacos for AED3 ($0.8).

As large employers – McDonald’s has 1,000 staff in the UAE alone – fast food chains are also benefiting from the softer rents that have accompanied the downturn.

Walid Hajj, CEO of Cravia, which holds the UAE franchises for Cinnabon, Seattle’s Best Coffee, Zataar W Zeit and Roadster Diner, said staff rents have dropped around 40 percent in five months. The firm has 1,300 staff in the Emirates.

“2008 was a record year by top line, bottom line, number of stores, everything. So far, the only impact we’ve seen in positive. We’ve seen a drop in raw materials, our food prices.”

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