The story of the region encompassing the Middle East and Africa is largely centered on South Africa and the countries bordering the Persian Gulf, with both markets home to thriving eating-out cultures. That said, the two markets could not be more distinct, with South Africa focused on home-grown brands and the Middle East a heavy destination for international franchised operations.

South African consumers retain a strong preference for local brands, led by operator Famous Brands Ltd., which is second only to Yum! Brands Inc. in terms of a local presence and tallies nearly $600 million in sales. Years of international isolation produced a strong chain ecosystem in South Africa, with local brands such as chicken chain Nando’s and burger chain Spur still enjoying a strong local following. Nando’s, in fact, has become Africa’s first truly global quick-service chain, posting more than $1 billion in sales in 2012 across almost 30 global markets.

Effective segmentation is vital in South Africa, as in other emerging markets, especially as the country boasts one of the most diverse consumer bases in the world in terms of income, culture and language. Many restaurant chains have looked to location or unit segmentation as a means of serving a highly-varied consumer base, with small-footprint, limited-menu formats highly popular in lower-income rural and suburban areas, for example. Others, most notably Famous Brands, have looked to address market segmentation through brand acquisitions. As a result of a years-long acquisition spree, Famous Brands now operates multiple concepts in several of the fastest-growing segment categories in South African foodservice, from coffee shops and takeaway pizza to quick-service hamburgers. This strategy makes it possible to target a wide array of price points and consumer groups.

Data

• Chains by sales, growth
• Chains by worldwide units, growth
• Companies by sales, growth
• Chains by estimated sales per unit

The competitive environment in the Gulf States and the wider Middle East is quite different than in South Africa. Encompassing a huge population of expatriates from around the globe, markets like the United Arab Emirates, Qatar, Kuwait and Saudi Arabia have become expansion targets for restaurant chains from around the globe. Indeed, no other region draws as wide a variety of chain concepts. With Middle Eastern social culture heavily focused on shopping and eating out, consumer demand for novelty and quality is high. In addition, a large number of well-funded mall and retail operators offer ample opportunities for brand partnership, with a willingness to work with chains that offer an interesting brand promise, regardless of size. Indeed, even smaller chains from the United States — take 15-unit Shake Shack, for example — look to the Middle East as one of their first steps in overseas expansion.

That very same operating infrastructure has likely hindered the development of a large number of local chains within the Middle East, with many entrepreneurs choosing to go into business with a trusted, global brand rather than go it alone. The two largest local chains — hamburger chain Herfy in Saudi Arabia and Aroma Espresso Bar in Israel — are both handily overtaken in size by an array of foreign chains. Meanwhile, the very largest foodservice businesses in the Middle East are franchisees such as Kuwait’s Americana Group or MH Alshaya Group, both of which operate large numbers of foreign brands, many of them across the region’s hundreds of shopping malls. Gulf States, in particular, will remain fertile ground for foreign operators for the foreseeable future.

By the numbers

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