McDonald's in the Middle East: Meal deals

McDonald’s has become one of the region’s biggest success stories, with a staggering 900,000 customers a day eating at its 369 restaurants across the GCC bringing in annual revenues of $750m
By Anil Bhoyrul
Sun 03 Mar 2013 09:56 AM

Fancy a hamburger? With fries? Go large? Chances are you probably do. Whichever way you look at the numbers, they are nothing short of astonishing: 69 million people a day eat from one of McDonald’s 34,000 restaurants across 119 countries, with 1.7 million employees. That’s about the entire population of Abu Dhabi. Little wonder its global income is close to $28bn a year.

The company may have become a focus for debates on obesity, corporate ethics and consumer habits, but when it comes to a business success story, there are few better ones to be found. It was Ray Kroc, who in 1954 discovered a small burger restaurant in California that was at the time owned by brothers Dick and Mac McDonald. He turned it into McDonald’s, and 59 years later it is a global phenomenon. Nowhere is that more visible than in the GCC where 369 outlets can be found, a figure that will rise to 585 by 2015.

Surprised? You shouldn’t be — after all, 900,000 people a day in the GCC seem to fancy a bite, and punters are liking their Big Macs in increasing numbers. But as far as this region is concerned, the best is yet to come.

“We need to sharpen our saws and we need to work harder and more aggressively to attain our goals,” says Yousif Abdulghani, managing director of McDonald’s Middle East Development Company.

Abdulghani already has plenty on his plate. Since opening the company’s first GCC restaurant in Riyadh in 1993, it has evolved into seven separate partner organisations that are 100 percent locally owned and operated (two in Saudi Arabia). They each own development licences, with McDonald’s acting as the business facilitator. Total sales, when the Middle East and Africa region is included, came in at $1.5bn last year, with the GCC accounting for around $750m.

He explains: “McDonald’s is well known to be the biggest franchiser across the world, and when you look at our ownership model across the system we have different models. Of course, the Middle East is a bit unique because we had a lot of people who were interested in the brand, in bringing the franchise to the region. Yet they were not really willing to dedicate [their] full time and best efforts to the business.”

Abdulghani adds: “So we moved into [a] new ownership structure called development licensees… So these investors basically own their assets in the markets here. We provided them with all the support and know-how that is needed to run the business, but the day-to-day activities are managed, really, by the partners.”

It’s clearly working. Last year’s revenues were “a record year in the sense that we have been growing, growing at the rate of fifteen to 20 percent on revenues,” he says.

Big numbers, but then again, these are big names entrusted with the GCC franchises: HH Prince Mishaal Bin Khalid Al Saud, president of Riyadh International Catering Company, runs the Central, Eastern and Northern Regions in Saudi Arabia. The country’s Western and Southern Regions are looked after by Abdulrahman Alireza, general manager of Reza Food Services. Emirates Fast Food Company, led by Rafic Fakih, has the UAE, and the formidable Kamal Saleh Al Mana, managing director of Al Mana Restaurants & Food Company oversees Qatar (see box for full profiles on partners).

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The UAE already has 108 outlets, but that figure is heading to 150 by 2015. Saudi Arabia is another “big market”, accounting for 136 restaurants. But again, Abdulghani isn’t satisfied, targeting 240 restaurants by 2015. Between these two countries, McDonald’s has 6,000 staff on the books. There is also likely to be considerable growth in other GCC countries, where currently McDonald’s has 120 restaurants between Kuwait, Qatar, Bahrain and Oman.

Abdulghani says: “We have strong fundamentals here; I think our presence attests for itself. The model that we have started working with has been successful. I think our strategies and business plans that we put together are very much relevant to the marketplace. Despite all the challenges and headwinds that any business will face, 2012 was again a challenging year. I wouldn’t say it was complete [plain] sailing, you know everything was not rosy. Despite all these challenges, we managed to exceed our targets.”

He adds: “Our relationship with our franchisees is based on partnership so they understand the marketplace more than us. So when we sit down every year in our business planning meetings, we agree mutually on what the potential is and what will be the acceptable growth rate of the market. So it’s really mutual, they come across with their projections and we look at also to our research and all the intelligence that we gather of what the potential should be. In the end you know it is a joint understanding by both parties.”

One of the keys to the company’s success is managing its suppliers. It may all sound very simple, given that 900,000 people a day are walking into McDonald’s restaurants in the GCC and mostly paying cash. But ensuring food hygiene and safety, including using only halal meat, is crucial.

He explains: “We spend a lot of energy and time to make sure we have the right suppliers for the business. Now, as you know, [we are] a global company working with global suppliers that have been developed over many decades. Despite this, we try to also develop regional and local suppliers as much as possible, provided they meet a number of criteria including food quality, food safety, farm biosecurity, employee working conditions and animal welfare.”

Abdulghani adds: “We set our own standards for local suppliers, we upgraded also their capabilities, technical know-how, by giving them all the expertise and knowledge that they needed and the work that [we have] done with them has paid off. Today we have got some good, I would say reputable, suppliers in the region, whether it’s in Saudi Arabia, the UAE, Kuwait, Jordan and Egypt.”

Another cornerstone of the operation is what Abdulghani describes as “Business Unusual” — it’s about continually challenging the norm to do better. Most people would be more than happy with 900,000 customers a day. Around $2m a day flows through the tills, and there appears to be no slowdown. Given the company has been relatively insulated from the recession with customers becoming more thrifty in their buying decisions, you could argue that Abdulghani doesn’t have to do much more than count the money.

But that’s what makes him — and the operation he runs — different. “People are used to conducting business as usual. But this year we said fine. We’ve been doing good all along and we need to move from good to great. And to move from good to great, you need to challenge yourself. You need to challenge the status quo. Therefore, it is business unusual in that respect. Unusual in the sense that we need to be more aggressive. We need to be more passionate about what we do and do it right,” he says.

But what about his partners? How do they feel about stepping up a gear? He says: “When we shared those numbers, with our partners we didn’t see much resistance. On the contrary, I think they realise, because they've seen their business growing year on year. And they’ve seen the profits growing. It was a no-brainer. They all endorsed the strategies and they are now fully committed to make sure that we make that happen.”

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No matter what Abdulghani does, there is of course always going to be an element of sniping over health issues. Given the numbers, some of that may well be jealousy. But then again, according to the International Diabetes Federation (IDF), five of the ten countries with the worst rates of diabetes anywhere on the planet are right here in the GCC. The IDF figures show that 21.1 percent of people in Kuwait are diabetes sufferers, the rest of the GCC hovering around the 20 percent mark. McDonald’s has of course added many healthy options to its menu, though everyone knows — and will always know — the company for its hamburgers.

Abdulghani says: “We see our role really as part of the solution not really the problem. I think we’ve showed that through [our] actions. We source our products from the best supplier that we have within the system; they uphold high standards, we continuously check their quality. Not only ourselves, we have our own team of specialists that do that, at the same time we rely on third parties to audit the quality standards and manufacturing processes.”

He adds: “We’re very sure about the way we prepare our food in our restaurants, so we are very high on food safety and food hygiene. I invite you or anyone who likes to visit at any of our restaurants to see it for yourself. In fact, since 2006 we started what we call the “Open Door” programme here in the UAE. And this programme is about welcoming customers who want to understand what happens behind the scenes. They can go inside the kitchen, he can go check our freezers, he can see how we prepare our food and how we serve the food.”

Again, it’s a policy that is working. Right now, McDonald’s market share in the GCC’s quick-service restaurant sector is a staggering 35 percent, and with the ambitious expansion plans over the next three years, that figure could touch the 50 percent mark.

And there could be no better man at the helm than Abdulghani, very much a veteran of the industry. He started his career with McDonald’s in Bahrain in 1994 as a managing partner before moving to McDonald's Corporation in late 2000. In January 2001, he took on the position of deputy managing director in McDonald’s Egypt, where he was in charge of restaurant operations and development. After his success in growing the McDonald’s business in Egypt, he was offered the position of managing director in Malaysia in 2004, where he played an influential role in building the brand and growing the business in the south-east Asian nation. Two years later, he returned as a managing director for the McDonald’s regional office in Dubai, where his office is responsible for all McDonald’s operations in the Middle East and Africa, and provides support to McDonald’s master franchisees in seventeen different markets in the region.

He says: “It’s the love and the passion for the place that you’re working that keeps you going. And I think, after 20 years for me, I see myself in another 20 years in McDonald’s.”

That can only be a good thing for the company.

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Abdulghani on giving the customer informed choices

One of the screens that we used to gauge any activity, any initiative that we do, is what we call “Brand Ambition.” And one of the components of brand ambition is “Good Food.” And by that we mean food that tastes great. Food that has real ingredients. And food that we can offer. We started I would say even before anybody else from competitors in this region. In 2002, we decided to print nutritional information of our products on our tray mats and on our flyers. If you follow our advertising, we've been very high on focusing on food quality and food safety.

Then we came in 2006 with the “Open Door” program. Last year, we even went further. We added more nutritional information to our website. So any customer can go to our website and can get any information that he wants about our food. Furthermore, we offer a variety of choices to our customers including salads, fresh apple bites, and 100% natural juices & milk with our kids’ happy meals. We have undertaken a program to reduce sodium content in our food by 15%, as well as reduce saturated fat through reformulation of our cooking oil. Very soon we are going to go even one step further. And that really is driven by our belief in transparency. We want to keep our customers well informed about the food they consume so they make informed choices. We are going to be the first QSR in this region to put nutritional labeling on all our packaging. So if you buy any products you'll see the nutritional facts of the food that you're going to eat on the packaging itself.

So we are so proud of our food and we don't shy away from telling people of what they eat.

McDonald’s community initiatives

Localisation

McDonald’s believes that localisation plays a key role in enhancing the GCC workforce, and is committed to working closely with the Gulf national population to develop valuable, educational and worthwhile careers for its young people. An ongoing Saudisation initiative has resulted in the employment of more than 1,000 Saudi nationals across the country, with a goal of increasing this number to more than 2,000 by 2015. Similar efforts are also taking place in the remaining GCC countries.

McDonald’s is also involved in a number of graduate and employment programmes, and works closely with recent graduates to support their career advancement initiatives.

Charitable Support

McDonald’s in the GCC is actively involved in continuously giving back to the communities where it operates by supporting in local charities and youth sports including the World Cup Player Escort Programme. McDonald’s in the GCC works with more than 20 registered charitable organisations, working closely with children with special needs, the visually impaired, cancer patients, and orphans.

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The super seven

In the region, all McDonald’s business decisions are locally made, and revenues are reinvested in the local economy. McDonald’s restaurants are 100 percent locally owned and operated by:

Saudi Arabia

Central, Eastern and Northern Regions (Riyadh): HH Prince Mishaal Bin Khalid Al Saud, president of Riyadh International Catering Company.

Saudi Arabia

Western and Southern Regions (Jeddah): Abdulrahman Alireza, general manager of Reza Food Services.

UAE

Rafic Fakih, managing director of Emirates Fast Food Company.

Kuwait

Saqer Al Maousherji general manager of Al Maousherji Catering Company.

Qatar

Kamal Saleh Al Mana, managing director of Al Mana Restaurants & Food Co.

Bahrain

Adel Fakhro, chairman of Fakhro Restaurants Company WLL.

Oman

Ali K Daud, president of Al Daud Restaurants LLC.

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