Middle East Seen As Hot Growth Market

Western foodservice brands large and small have been hitting international growth milestones in the Middle East and Gulf states recently, with many others looking to make inroads in this region that is increasingly receptive to restaurants.

Caribou Coffee, the 585-unit coffeehouse chain, opened its 100th international unit last month in Istanbul, Turkey. The location, operated by Turkish company Yildiz Holding in partnership with Caribou's master franchisee, Al Sayer Group, is the sixth unit of the coffeehouse chain to open in Turkey. Al Sayer operates 89 of the chain's international units in Turkey, Kuwait, the United Arab Emirates, Lebanon, Bahrain, Jordan, Oman and Saudi Arabia.

Caribou chief executive Mike Tattersfield said the Middle East and Gulf states would be a major piece of the company's international portfolio, which he hopes to grow to 350 units.

"The Middle East has a really strong coffee culture, which was very appealing to us," Tattersfield said. "So much business and interaction is done over cups of coffee."

The region also has robust consumer culture, said Jonathan Spiel, owner of Tea Lounge in Brooklyn, N.Y., whose first franchised agreement will cover not the United States but Kuwait.

"It's a very social culture, and going to malls and socializing is a big part of their day," Spiel said. "Because of that, the malls there are unbelievable: Every brand you can think of is there, and the locals want to develop something unique and cool."

Spiel added that the operator who will franchise Tea Lounge in the region recruited him, not the other way around, showing just how hungry for Western restaurant concepts consumers in the region really are. He and his franchise partner are scouting about four different large mall locations in Kuwait City.

'You need the wow factor'

Atlanta-based Wing Zone has nearly 100 restaurants, including four in Panama and one each in the Bahamas and Saudi Arabia. Another location is under construction in Abu Dhabi, United Arab Emirates.

Chief executive Matt Friedman said the 3,000-square-foot Wing Zone in Jeddah, Saudi Arabia, is the company's largest unit in the world and is "doing phenomenally."

"You definitely need the wow factor," he said. "When people walk in, they want to see this is an American brand. It incorporates a lot of our new prototype [from the United States], but we took it up a notch."

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The unit, which is twice the size of Wing Zone's typical footprint, has marble floors and large windows, and much more seating capacity to accommodate required separation of single diners from families.

The planned unit for Abu Dhabi will be a high-end food court location in a major mall, which Wing Zone plans to use to seed the United Arab Emirates market in the hopes of moving up to some freestanding restaurants, Friedman said. He added that other markets like Lebanon, Jordan or Israel likely would be ideal for a standard-footprint Wing Zone unit, depending on real estate costs.

The hot growth market

The Middle East and Gulf region will continue to see new brands enter the market over the next several years as chains such as Smashburger, Mooyah Burgers and Fries, Fatburger and Naked Pizza all have announced plans to put restaurants there in the near future.

Casual-dining brand Texas Roadhouse also reached an important milestone in the Middle East recently: international store No. 1. The chain opened last September in The Dubai Mall in Dubai, United Arab Emirates, with Kuwait-based M.H. Alshaya Co. as the area developer for the region.

Texas Roadhouse's agreement with Alshaya calls for 35 restaurants in the Middle East over the next 10 years. Alshaya also operates locations of P.F. Chang's, Pinkberry, Potbelly Sandwich Works, Shake Shack, Starbucks Coffee and other brands.

"In fact, we could see another couple of openings this year in the Middle East, which would be in addition to our planned 25 domestic company-owned openings," president Scott Colosi said during Texas Roadhouse Inc.'s first-quarter earnings call.

He mentioned in a separate interview with Nation's Restaurant News that Texas Roadhouse already has imported one operating lesson from the Dubai location. "[The Dubai] menu has a lot more food pictures on it, and we've sold more of those pictured items in that restaurant," Colosi said. Now, the brand's menus in the United States carry a flap with several food shots to encourage customers to purchase one of its higher-price, higher-margin items, such as a shrimp and sirloin combo.

Caribou Coffee CEO Tattersfield said the coffeehouse brand has the potential to fully build out the Middle East in the near future, as well as South Korea, where it also has a foothold.

"I think it's important to maximize our current geography," Tattersfield said. "You'll see a lot more development in Turkey, Saudi Arabia, the United Arab Emirates and Kuwait. Qatar has a big opportunity too, with all of its infrastructure developments for the 2022 World Cup."

Tattersfield said partnering with the few big players in Middle East franchising helped his brand enter the region and likely would ensure that it hits its growth targets reliably.

"Unless you have the real estate knowledge, you're better off going the master franchisee route," Tattersfield said. "We're working in very similar countries in terms of language and culture, but Al Sayer and Yildiz have the local knowledge and access to the right people, which have let us start the kind of growth that would be hard to get naturally."

Contact Mark Brandau at mark.brandau@penton.com.
Follow him on Twitter: @Mark_from_NRN