McDonald's continues to shrug off the competition and the naysayers to enjoy strong growth across the Emirates
Fast food giant McDonald's just keeps growing
The big yellow arches are synonymous with hamburgers throughout the world. But nowhere more so than in the UAE, where Emirati teenagers recently voted McDonald's their favourite brand.
Underpinning the sheer size of the global fast-food chain, McDonald's last month announced worldwide profits of US$1.41 billion (Dh5.17bn) for the second quarter, a 14.6 per cent increase compared with the same period last year.
Sales growth in stores across the world increased at a rate of 5.1 per cent last month. Europe performed strongly, up 5.3 per cent, while Asia, Africa and the Middle East posted figures of 4 per cent.
The UAE did even better, with sales growth this year of 7 to 8 per cent, according to Rafic Fakih, the managing director for Emirates Fast Food, which runs and owns McDonald's outlets in the UAE.
He explains how the burger giant is trying to offer customers a range of healthy food and why residents across the Emirates continue to flock to the brand.
Given the high rate of obesity in the UAE, how do you marry selling fast food and being responsible in the community?
We offer people choice. We have salads, fruit, milk, soft drinks, fruit juices and we let people decide for themselves.
So it is all about choice.
Yes, we offer people anything they eat at home - bread, potatoes, meat, chicken and salad. You need a balanced diet. You have to walk and go out to exercise. We are not here to decide what people do.
Do you also help customers understand what they eat?
Absolutely, we inform the customer what they eat when they buy. On each tray mat they have all the information on the food, the ingredients, the fat and sugar content. People have to decide, they are educated and informed.
What about children?
Their mother has to decide. We advertise for the mother, not for the children. The Happy Meal is orange juice, or a drink, they can choose between cheeseburger, nuggets, hamburger, or veggie burger and fruit or fries. We don't show the Happy Meal, we don't show the product. If we do show any of the product, it is the orange juice and the fruit.
Which are the best-selling items on the menu here in the UAE?
The McChicken sells well. Chicken is more popular than meat here. In the Far East they like fish and Europe it's meat. We also have introduced the McArabia Chicken and Kofta, which are also popular here.
Which is your favourite item?
I normally eat a plain cheeseburger.
McDonald's menu seems to taste the same anywhere in the world. How can a global company achieve such consistency?
It's a huge logistical process. We have approved suppliers worldwide, and normally the volume of the system is so big because suppliers are only willing to work for you. One of the differences you might taste is the flour in the bread, it changes in each country and area of the world. Everything else, sauces and meat, it's the same.
Why do you think McDonald's is currently more popular in the UAE than elsewhere?
McDonald's is popular everywhere, but the penetration here helps. The more restaurants you have, the more people know your food. They get to know your quality, role in the community and service. It's a lot of things that people notice slowly when using us. The UAE is also a young country that has a high number of tourists compared to the population.
What sales growth are you seeing at the moment?
Before 2009 we saw double-digit growth in our stores, but since then it has been single digit. In that time, we were growing stores and if you grow like we did, at between 12 to 14 stores each year, it has an effect on the same-store growth.
So sales growth fell because your customers were spread out over more stores?
Yes. But in June this year we again saw double-digit growth in our stores, as more tourists and visitors came to the country. There was also an effect from people shopping more during Dubai Summer Surprises.
Many tourists have switched to the UAE this year because of unrest elsewhere in the region, so is this double-digit growth likely to be a one-off?
If the trend of visitors continues to be high, we will continue to see double digits. There is no reason why Dubai can't become more and more appealing. When a commercial road changes, it is very difficult to bring it back like before.
Which type of stores perform well here in the Emirates?
Malls are selling well and residential areas with drive-throughs are also doing well, especially when people are coming back from work.
Subway recently overtook McDonald's as the biggest food chain in the world and the brand is also expanding rapidly here. Is Subway a threat to McDonald's dominance?
We don't count Subway as a competitor. They offer a different product to a different customer. It's not hot food, it's more convenience. McDonald's has always been a place where young adults and families like to go.
What about the growth in gourmet burger restaurants?
The price is about three times our price. It's not the same category. People use McDonald's more frequently and it's more family oriented. There's not a big difference between our burger and a gourmet burger, but theirs is more expensive.
You recently signed a deal with The Neutral Group to convert your vegetable oil into biodiesel to fuel your lorries. How much money is this going to save you?
It will not save us money. We will pay the same price for the diesel we buy from them and we will sell them our used oil for the same price we used to sell to a third party company.
So it will not cost you anything then?
It doesn't cost us anything. It costs us a little in effort and logistics. But at the end you are using a sustainable product. We have always been looking at ways to give back to the community. If we have the same result by using a biodiesel product, then all the better.
How much is the contract with Neutral Group?
You know the American Midwest thinking - to be more honest with your partners. You don't make problems, this is the contract. There is an understanding, they sell, we buy from them for five years and it is an open book. If they do too much profit we will split from them, they have to take profit.
What is the profit margin that Neutral expects?
There is an agreement with them. This process will cost them in investment, which will have to be returned, plus they have to have a return on their investment when everything is set and clear after two years. We have to make it work, they should be profitable and we should not pay more than we are paying now. Normally in business you see how much you invest in a plant, you have to cover your costs, plus a return on investment. A good investment is 12 to 15 per cent. Above 15 per cent and questions will be asked.