Saudi Arabian chain Herfy outlines growth plans

Prince Alwaleed Bin Talal Alsaud, whose Saudi Arabia-based Kingdom Holding Company has sizable investments in Apple, Citigroup, Four Seasons Hotels and even Twitter, is ranked No. 29 on Forbes magazine’s 2012 list of billionaires and No. 1 in Saudi Arabia.

Although his vast wealth means he can dine wherever he’d like, speaking from behind his desk in the regally appointed 66th-floor office of his sleekKingdom Centre skyscraper in Riyadh, he admitted his family has a fondness for fast food, especially the homegrown Herfy chain.

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“I still order from Herfy,” said the prince, who in the mid-1990s served as de facto chairman of Herfy Food Services Company through an investment in the Panda supermarket chain. “Every two weeks at my home we have ‘fast-food day,’ and we order fast food from Herfy. We order everything from them: the chicken, the hamburgers, everything. It all comes from Herfy. No other brands are permitted.”

The prince, who is vegetarian, doesn’t partake.

“On that day, they make for me a special vegetable burger and a  burger without the bread.”

But on the prince’s fast-food day, it’s about the family.

“On that day, my son and daughter and granddaughterscome,” Alwaleed said. “This has been happening many years. It’s ‘Herfy day.’”

Such loyalty to the Herfy brand extends well outside the kingdom’s royal family and is one of the many challenges awaiting U.S. brands as they look to grow in the Middle East. Others include cultural and dietary customs that demand men and women dine separately, and the practice of eating only halal meat.

Since its founding in 1981 by Ahmed Hamad Al Saeed, who remains the company’s chief executive, the now-194-unit Riyadh-based Herfy chain has woven itself into the fabric of the Gulf kingdom as well as several other Middle Eastern countries with its signature Super Herfy hamburger, its Super Chili Chicken and its even more popular spicy Chicken Tortilla wraps.

“Herfy has one of the best earnings growth visibilities — 11 percent compound annual growth rate — free-cash-flow generation capabilities and balance sheets” of Saudi Arabian food companies, wrote analyst Nada Amin of EFG-Hermes, an investment bank based in Cairo, in September. “Store yields have been rising at well over 5 percent since [first quarter 2011] despite no price increases, which indicates higher footfall as the store maturity cycle improves.”

Saeed’s Herfy rivals such fastfood burger players as Jollibee in the Philippines and Quick in Belgium for its regional power. According to data from Euromonitor International, Herfy is the fourth largest chain in the Middle East-Africa region in terms of systemwide sales and number of units. Its parent company, Savola Group, is the fifth largest in terms of systemwide sales.