When I went to interview Yousif Abdulghani last week, I told the McDonald’s Middle East boss a quick family story: given the opportunity, I would eat a Big Mac three times a day, 365 days a year. I love the place. But my wife, even if she was penniless and hungry, would never touch their food. So how does he go about converting people like her to eat in restaurants like his?
I realised by the end of the interview that converting my wife is the least of his priorities. He has enough on his plate (pardon the pun) just coping with existing demand. As we detail in this week’s cover story, the financial success of the company in the GCC is nothing short of staggering. Right now, 900,000 people a day eat in McDonald’s across the region. The annual revenues come in at $750m, meaning that the GCC population is spending around $2m a day eating in one of the 369 outlets.
You want growth? Abdulghani has that too, having seen the numbers rise by up to 20 percent in the past year. And plenty more is to come: his expansion plans will see the number of GCC outlets rise to 585 by 2013, with the market share in his sector getting close to 50 percent. Here in the UAE, the number of outlets is rising from 108 to 150 by 2013, while in Saudi Arabia it will nearly double to 240.
You might wonder how this is possible. Isn’t everyone always going on about diabetes? Aren’t there loads of really fashionable health food shops and cafes springing up everywhere?
I think the reasons for the success are threefold. Firstly, the health issues: everyone likes to give the company a good kicking but it’s often forgotten that McDonald’s was the first company in the Quick Service Restaurants (QSR) sector to print the nutritional information on all its mats. Its Open Door programme was also revolutionary, and McDonald’s is going to be the first QSR in this region to put nutritional labelling on all its packaging. Most of what we eat isn’t great in any restaurant — at least with McDonald’s punters know exactly what they are getting.
Secondly, and I’ll be blunt about this, the vast majority of “health food” shops and cafes are complete rip-offs. It might be trendy to go there once, even twice, but products are ridiculously overpriced. Customers are voting with their feet. People have realised that walking down Jumeirah Beach Residence, carrying an organic banana you paid $10 for, doesn’t make you cool anymore.
Thirdly — and most important — is the ownership structure. McDonald’s has always prided itself on being the world’s biggest franchiser. But interestingly, it operates completely different models in different countries. Abdulghani told me that back in 1993 when McDonald’s first came to the region, there was no shortage of people willing to take on the franchise. “Yet most of them were not really willing to dedicate [their] full time and best efforts to the business,” he said.
So what McDonald’s did was create development licences, whereby each of its master franchisers have 100 percent ownership of the assets in their territory. They fully own and operate the restaurants, meaning it is their business, their livelihood, and their future. This has created seven very successful owners in the GCC (two in Saudi Arabia) who have every reason to succeed, and full flexibility to adapt the style of the business to their markets. It sounds a cliché to say “everyone’s a winner”, but that is what has happened.
Now I know there will be the usual band of health freaks that will write in and tell me how appalling it is that I am giving such gushing praise to a company that sells millions of hamburgers. Well, we can argue about the food forever, but you can’t argue with the numbers.
Anil Bhoyrul is the Editorial Director of Arabian Business.