UAE diners eat local as global fast food faces boycott

Reuters

• Switch prompted by Israel-Gaza conflict
• Giving homegrown brands ‘a chance’
• Sales drop at McDonalds and KFC

Homegrown restaurants in the UAE are reporting a lift in sales since the start of the Israel-Gaza conflict, as diners opt for local brands over international fast-food outlets.

Steve Flawith, founder of UAE-based Yolk Brands that operates the Pickl and BonBird chains, said its sales have increased by 15 to 20 percent since the start of the war in October.

“We’ve been hearing from more and more guests who say they’ve been trying our brands for the first time because they’re choosing to support local,” Flawith said.

“From speaking to first-time guests, we know a large part of that is wanting to give homegrown brands a chance, rather than international imports.” 

• Americana 2023 revenue rises on 300 new store openings
• KFC Mena franchisee’s H1 profit rises 19% to $145m
• Millennial ‘co-living’ concept gains momentum in Gulf

Drip Burgers, which has two branches in Dubai, is another local eatery that has seen business climb. 

Its founder Nadia Shah said: “We have seen an increased desire from customers to support brands like ours because we are homegrown and have a purpose.

“In our case we stand for Palestine and conscious living. Our efforts in these areas are turning more towards us.” 

Consumers are being encouraged by an online campaign to boycott international brands with any links to Israel.

In February, McDonald’s reported its first quarterly sales miss in nearly four years. In a social media post its CEO Chris Kempczinski said: “Several markets in the Middle East and some outside the region are experiencing a meaningful business impact due to the war and associated misinformation that is affecting brands like McDonald’s. This is disheartening and ill-founded.”

Some consumers had shunned the brand after its Israel franchisee said it supplied food to Israeli soldiers. Franchise owners in the UAE and across the Gulf moved to disassociate themselves from the Israeli unit.

On Thursday Americana Restaurants International, which runs 2,435 outlets across the region covering international brands including KFC, Hardee’s, Pizza Hut, TGI Friday’s and Krispy Kreme, reported that revenue in 2023 was up 1.5 percent to $2.4 billion.

However, an analysis of quarterly results showed that in reality revenue fell 15 percent year on year in the last three months of last year, with profit across the same period down by nearly half.

Americana’s financial report shows that KFC, which represents about two thirds of its total revenue, saw 9 percent growth in the first nine months of 2023, but an 18 percent year-on-year slump in Q4, which dragged its yearly growth for the year down to 2 percent.

Pizza Hut sales were up 12 percent, but a 10 percent year-on-year drop in Q4 halved its yearly revenue growth for 2023. There was a similar picture for Krispy Kreme and Hardee’s.

Harsh Bansal, the company's CFO, said in an earnings call on Thursday: "Our full-year like-for-like revenue growth was negative, due to the notable impact on business performance in the fourth quarter driven by the regional geopolitical situation, which has impacted the majority of international brands, including ours."

Americana announced a one-time special dividend of $50 million on Thursday, as well as a $130 million ordinary dividend for 2023, resulting in its Abu Dhabi-listed shares rising almost 15 percent.

While the Abu Dhabi share prices are up about 5 percent this year to date, they are down by a fifth since early October.

Calls for a boycott of KFC and Pizza Hut have come because Yum! Brands, the chains’ US-based partner company, has invested in Israeli startups.

Yum!’s CEO, David Gibbs, attributed the group’s fall in sales in Q4 to the tensions in the Middle East. He said the company expressed “continued concern for those impacted by the ongoing conflict in the Middle East."

Naim Maadad, chief executive of Gates Hospitality, which launched in 2010 and has six restaurants across the UAE, including Aria and Bistro des Arts, said the dent in quarterly results for fast-food brands will affect their expansion in 2024.

“These brands usually have a very strong and aggressive pipeline, with defined new openings per region, and if they do not reach contractually agreed new openings and number of units, they risk hefty penalties from the master franchisor,” he said.

Drip Burgers’ Shah and Yolk Brands’ Flawith both agreed the shift towards local brands was unlikely to be short term.

“I believe what everyone has learnt from all of this is how much power each individual truly has to affect change,” Shah said. 

“While the conflicts were a major reason for people to change their habits, I believe people have learnt and understood the benefits of changing those habits.”