It’s 2004. I’m working on a new campaign for the struggling A&W brand. Sales have been poor for some time, due to a number of factors from operations to supply chain, and so naturally everyone in the company is questioning marketing. My team is therefore tasked with finding a new brand direction…or else. Fortunately, head office has been working on a new theme that suits the brand’s pioneering status, and has a recommendation: nostalgia. “We need to go to ’50s America,” they tell us, “vintage cars, babes, Elvis, jukeboxes and checkered tablecloths.”
The problem is that I am sitting in Riyadh and my Saudi colleagues, to whom I present these mood boards, are met with blank stares. No matter how hard I try, I simply cannot convey the pain they must feel at the sight of a past, joyful youth, and not just because most of them were born two or three decades later.
I had these persistently tested in consumer focus groups because of HQ.
What we hear in these groups is surprising. Nostalgia is very important to Saudis, and QSRs are a big part of that, just not in the 1950s American sense. Group participants fondly recall growing up with American chains like Pizza Hut, KFC, Hardees and Wimpy. These were hangouts for their weekend family outings, their birthday parties, their school reunions and even their graduation and wedding dinners. A week without visiting an American brand or having a delivery from an American brand is unthinkable.
Love is real.
Today, two decades later.
What started out as a simple love story has become a real love triangle: on one side, a fast-food-loving customer, on the other, an American QSR, and on the third side, a new entrant, a local Saudi restaurant chain.
According to Mingora Food Panel 2024 data on the top 30 QSRs in Saudi Arabia, Saudi brands outnumber American ones by 15 times. Outside the top 30, local brands dominate the Saudi fast food market, which is worth 66.6 billion Saudi riyals ($17.7 billion).
In 2004, only five or six Saudi chains appeared in the top 30. Major Saudi chains such as Maestro Pizza, Burgerizzr, Shawarmer and Sultan Delight Burger either did not exist at that time or had hardly any branches.
This pattern is expected to continue.
Many of the largest American chains are facing steadily declining sales and customer churn. They suffer from lower customer satisfaction scores compared to the category average in the attributes food, value for money, service and atmosphere (Mingora Food Panel KSA 2024). In addition, some American brands are disproportionately affected by consumer boycotts due to the Gaza blockade (Circana-Mingora SalesTrack 2024).
So have the Saudis lost their enthusiasm for American QSR?
As with all good love stories, the answer is a clear “maybe.”
First of all, the 13 American brands in the Saudi Top 30 list have a total annual turnover of over 6 billion riyals ($1.7 billion), 10 percent more than their Saudi counterparts in the list. The five largest American chains also have a turnover of over $100 million and over 140 outlets. The largest chain in Saudi Arabia, McDonald’s, is as American as its famous apple pie. It is 30 percent larger than the next largest chain in the category, has the highest number of outlets (over 410), the fastest development rate and the highest customer satisfaction of any QSR company.
Some other traditional US chains such as Dominos, Subway and KFC are also seeing significant sales and store openings. Another US chain, Wendy’s, has returned to the Saudi market for the second time and is finding great acceptance among consumers.
The problem facing many U.S. brands in Saudi Arabia is this: While in the past, being “American” was almost a guarantee of brand success, especially in the absence of local and international competition, this is no longer the case. In fact, affinity for local brands is higher than ever, as Mingora’s February 24 trust survey shows.
The battleground in the Saudi QSR sector is overwhelmingly “offer” – the brands with the best offer win, regardless of their origin. In this respect, many American chains are having to compete harder than ever with local, established alternatives, be it QSR chicken, burgers, pizza or sandwiches. For every Burger King or Hardee’s, there is a Herfy, a Burgerizzr or a Sultan Delight Burger. For every Pizza Hut and Little Caesar’s, there is a Maestro. For every Popeyes and Texas Chicken, there is an Albaik or an Al Tazaj. For every Subway, there is a Kudu. And that’s not even counting the hundreds of flashy new entrants, some of which are enjoying huge success, like Sign Burger, I’m Hungry and others.
The same applies to other segments such as casual dining and coffee.
Why are many American chains no longer competitive?
One place to start is to look at performance in the home market. If a chain is struggling in the US, chances are it will struggle in most of its international markets as well. Many US brands have experienced significant difficulties in the US market over the past decade and have had to undergo multiple restructurings. When that happens, the international business suffers disproportionately, lacking focus, resources and even brand clarity.
The food that made these chains stand out in the past is also a reason for their current struggles. Saudi consumers will no longer accept frozen, ready-to-fry meatballs with ketchup and mayo at high prices when better-tasting, fresher local alternatives are plentiful. Their society is one of entrepreneurship. Every other day there is a new local brand in town offering a higher-quality version of traditional QSR dishes, complete with a touch of local flavors. Major Saudi chains like Al Baik, Kudu and Shawarmer also constantly innovate and have a higher success rate than many international chains.
International brands are disproportionately dependent on their local franchisees to operate great restaurants. This requires consistently high investments in people, assets and marketing to stay ahead of the competition. Struggling American chains have either already made two or three franchisee changes in the last few years or are at their wits’ end with their franchisees due to conflicting priorities. This means their operations, pace of development, supply chains, digitization and marketing efforts cannot keep up. Solving these problems while sitting far away requires patience and does not always work.
Saudi society is in the grip of unprecedented social, cultural and economic changes, the likes of which have probably not been seen in any other country since the fall of the Iron Curtain. The country is young, digitally savvy, globally oriented and has demanding aspirations. Many international headquarters located thousands of miles away cannot comprehend the magnitude of the changes taking place in the country. Old ways of doing business are simply no longer applicable.
The only way to rekindle love is to become desirable again.
Epilogue: A&W was closed in Saudi Arabia in 2006. The chemistry just wasn’t right.
Muhammad Ali Syed is the founder and CEO of Mingora Technologies based in London and UAE. Mingora is the Chief Data Officer of the foodservice sector in the EMEA region. The company works with leading restaurant, retail, foodservice, real estate, strategy consulting and private equity groups in the restaurant space. Ali is a former head of marketing for Fortune 250 restaurant brands such as KFC and Pizza Hut at Yum! MENA, Long John Silver’s at Yum! US and Wendy’s Asia-Pacific and EMEA.
