Mideast welcomes Atlanta franchises

While a recession has slowed overall U.S. restaurant growth, Atlanta food franchises are finding ample room for expansion in the Middle East.

Several Atlanta-based restaurant groups, such as AFC Enterprises, Church’s Chicken and Focus Brands, continue to add outlets in the Middle East. Raving Brands and Petrus Brands, also based in Atlanta, see opportunity as they enter the region.

Although the United States has political tensions with some Mideast nations, the Atlanta franchises say their brands have been embraced by business partners and consumers.

U.S. fast-food chains —- known for consistently and quickly preparing meals —- are a good fit for the rapidly developing region, said Church’s Chicken President and CEO Harsha Agadi.

Church’s has 18 restaurants in four countries there. In 10 years, the chain could have 150 to 200 outlets in the region, Agadi said.

“What works in the Middle East is very easy: Be American,” Agadi said. “What you’re selling is ‘Made in the USA.’ The best thing America makes, in my opinion, is not cars, it’s not planes, it’s not computers. It’s fast food.”

Church’s does have ties to the region. It’s owned by Arcapita, a Bahrain investment bank that bought the brand in 2004 from Atlanta-based AFC Enterprises.

Church’s, though, is far from alone in opening outlets in the region. A global slowdown and drop in gas prices has affected the Middle East, but the long-term projections remain favorable and businesses are still trying to catch up to what has been a phenomenal pace of growth.

The franchising industry in the Gulf Cooperation Council, a six-nation group at the heart of the Middle East, is growing at 25 percent a year, according to International Expo Consultants, organizers of the Franchising Middle East Exhibition trade show in Dubai.

Franchising is booming because it offers a quick and efficient way for local entrepreneurs to set up businesses, said Abdul Rehman Falaknaz, president of International Expo Consults. U.S. brands are appealing because nations in the region, such as the United Arab Emirates, have attracted transplants.

“The Middle East is home to a large number of expatriates, many of whom are familiar with American brands,” Falaknaz said via e-mail. “Franchises such as Popeyes have instant appeal. Time is saved on establishing a brand identity and the business can expect to flourish once open.”

Several well-known Atlanta-based brands have seen their numbers grow quickly after setting up their first outlets in the region.

Cinnabon, makers of gooey cinnamon and pecan rolls, entered the Middle East in the late 1990s and has grown to 169 outlets, said Mike Shattuck, senior vice president of international operations for Focus Brands. Focus owns Cinnabon, Carvel, Schlotzsky’s and Moe’s Southwest Grill as well as rights for Seattle’s Best in some international markets.

Seattle’s Best has 79 outlets in the Middle East, Schlotzsky’s has 16 and Carvel has 13.

Focus bought Moe’s in 2007 and hopes to take it soon to the Middle East, Shattuck said. Focus has agreements for 274 additional units across its brands in the Middle East, he said.

Sales have slowed recently after several years of strong growth, but the region remains attractive, Shattuck said. Middle East companies continue to contact Focus about franchises, he said.

“We’ve seen no drop in interest in our brands,” Shattuck said.

AFC Enterprises, owner of the Popeyes Louisiana Kitchen brand, also sees growth in the Middle East, said Dave Smith, the company’s chief operating officer of international. It has 60 restaurants in the Middle East and plans to add 10 to 15 more in the next year.

Popeyes seasoning and spices appeal to customers in the region, Smith said, responding by e-mail.

“There is significant room for growth as we differentiate Popeyes as a better-quality, more flavorful option versus other international chicken quick-service restaurants,” Smith said.

Church’s also said its chicken resonated with customers. “They love spice,” Agadi said. “So our spicy chicken is the perfect meal for a Middle East family.”

Raving Brands and Petrus Brands are just getting started in the Middle East. Raving signed a deal last year with ATCO, a firm based in Saudi Arabia, for the development of 150 stores in a six-nation area in the Middle East.

ATCO recently opened outlets for Doc Green’s, Boneheads, Mama Fu’s and PJ’s Coffee in Saudi Arabia. Raving sold Mama Fu’s and PJ’s last year but retained rights in the Middle East.

ATCO also opened a Shane’s Rib Shack and Planet Smoothie, former Raving concepts now owned by Petrus Brands.

“What makes it an attractive market is that it’s new, it’s fresh,” said Raving President Daryl Dollinger.

The growth for Shane’s and Planet Smoothie could be slow in the next couple of years as ATCO learns how to set up the franchises, said Petrus CEO Chris Morocco. Initially, ATCO likely will own the stores and then move to granting franchises to other businesses or individuals.

“The growth will probably be very modest in the next year or two,” Morocco said. “But when they move from doing company-owned stores to franchising and serving as a master franchisor, we think the growth will accelerate.”

For most of the Atlanta-based franchises, the concepts needed only minor adjustments to transition to the Middle East.

The biggest difference is that the food must be halal, fit according to Islamic law. For Popeyes and Church’s, this means a change in how its chickens must be killed and prepared, but not a dramatic difference in its menu.

It did present a challenge for Shane’s Rib Shack because its leading item is pork, which is not allowed. Shane’s in Saudi Arabia uses beef instead.

The Atlanta-based companies did not cite political issues as a major concern. Agadi, Church’s president and CEO, said his company is monitoring conflict between Syria and Israel as it prepares to open a store in Syria. Church’s, though, does not worry about being a target because it’s a U.S. brand in the Middle East, he said.

A bigger concern for Church’s is getting access to the resources needed to expand, Agadi said. In some cases, electricity and water systems can’t be built fast enough to keep up with development, he said.

“You might have to use generators to run your stores until you get electricity connections, or you might have a delay in water supply,” Agadi said. “Those are things you typically don’t run into in the United States.”

CHURCH’S CHICKEN IN THE MIDEAST

> Texas Chicken restaurants are located in Kuwait, Saudi Arabia, Jordan and the United Arab Emirates.

> Church’s uses the Texas Chicken name outside of North and South America.

OTHER ATLANTA CHAINS IN THE MIDDLE EAST

AFC Enterprises

Popeyes: Bahrain, Kuwait, Saudi Arabia, United Arab Emirates, Jordan, Iraq (military bases), Qatar (military bases), Afghanistan (military bases), Turkey.

Focus Brands

Carvel: Egypt, Jordan, Saudi Arabia.

Cinnabon: Bahrain, Egypt, Iraq, Jordan, Kuwait, Oman, Qatar, Saudi Arabia, United Arab Emirates.

Schlotzsky’s: Turkey.

Seattle’s Best: Bahrain, Jordan, Kuwait, Oman, Qatar, Saudi Arabia, United Arab Emirates.

Raving Brands

Doc Green’s, Boneheads, Mama Fu’s and PJ’s Coffee: Saudi Arabia.

Petrus Brands

Planet Smoothie and Shane’s Rib Shack: Saudi Arabia.