When Pizza Hut decided to offer a deep pan pizza unbelievably ringed by mini cheeseburgers this past April, it didn’t sell it anywhere in the U.S. Instead, the "Crown Crust Pizza" made its debut in Dubai. Americans took notice, and the caloric monstrosity became the butt of jokes on late night talk shows. One American flew in from New York just to have the pizza. (He couldn’t finish it.) Others, though, wondered why such a fantasy fast food concoction was being sold only in the Middle East.

What few Americans know is that the Arab World’s love for Western-branded fast food is seemingly bottomless, to the extent that in the region’s wealthiest oil exporting countries, high-end fast food restaurants offering $US40 hamburgers and French fries can find a willing clientele. Even ubiquitous brands such as McDonald’s and Burger King can sell their meals at 5 to 10% markups from their cost in the U.S.

Recently, the Gulf has seen the launch of several Western niche fast food brands, including Danny Meyer’s Shake Snack from New York City, South St. Burger from Canada, Denver-based Smashburger, and New Zealand-based Burgerfuel. Now that the violence is over in Libya, it has been targeted by fast food franchises: its first Cinnabon opened in July, which also happened to be the first U.S. franchise of any kind to open in the country. Johnny Rockets will soon follow, having signed franchise rights there.

Many of these fast food brands see Middle East expansion as a way to make up for softness in Western markets. The prize is Saudi Arabia, which analyst firm Euromonitor expects to develop into a US$4.5 billion fast food market in the next three years. But doing business in the region means having to join a local partner, who invests and executes on the ground, tweaking products to suit regional taste and a largely Muslim customer base, and maintaining a novelty factor to stand out in an increasingly crowded market.

"As companies look for growth in sales, it is natural for them to look to new markets," says Wharton marketing professor Barbara Kahn. "Some retail products are more universal than others, and the ones that are, are more likely to go global. Also, if they have some kind of differential advantage relative to the local competition, you’ll see more global outreach. In this case, American cuisine is presumably the draw."

Chicken and Oil

Western fast food restaurants found their footing in the Gulf with the discovery of oil and the influx of foreign workers into the region. One of the first brands to open in the United Arab Emirates was Kentucky Fried Chicken. Being in the UAE for over 20 years now, it enjoys the largest revenues of all fast food outlets in a market worth US$2.72 billion in 2011, according to Euromonitor.

Lifestyle changes in the region have also contributed to the popularity of fast food. In a generation, most Gulf societies have been transformed by oil wealth, and social life revolves around the region’s massive, air-conditioned shopping malls. Affluent locals spend many of their evenings out, even during the workweek. According to a survey by MasterCard, Gulf consumers were the top three spenders on restaurants — UAE diners spent an average of US$229 per month, Qataris averaged US$211 per month, and Kuwaitis spent US$196 per month. The same survey found that 88% of respondents said they dined in shopping mall food courts.

Still, most Western fast food and restaurant chains didn’t start making their way into the Middle East until the late 1990s, establishing themselves first in Gulf countries, before expanding to the rest of the region. Now, directly across the Great Sphinx and the Pyramids in Giza, a Pizza Hut provides a perfect view of the monuments. In the hotels ringing the Ka’aba in Mecca, one can eat a Whopper while watching pilgrims perform the Hajj.

But it’s only been the last few years that the region has experienced a wave of popular but traditionally U.S.-centric franchises announcing their entry into the market. California-based Baja Fresh and Fatburger both decided to open in the UAE with the opening of the mammoth Dubai Mall, which sits at the base of the Burj Khalifa tower.

It’s been a shrewd move for Fatburger — reported average unit volumes for its restaurants there were three times as much as in the U.S. "Despite the recent downturn in the domestic economy, the international market is on fire," said Andy Wiederhorn, Fatburger chairman, in a statement. "The Middle East and Asia Pacific are becoming exciting territories for us. Our current locations in these regions have been extremely well received." The burger chain plans to open 17 restaurants in Saudi Arabia, five in Kuwait, operate eight in the UAE and signed deals for 30 stores in Qatar, Egypt, Lebanon, Jordan, Syria and Oman.

One firm estimates that in the UAE, American brands comprise almost half of all food and beverage outlets in Dubai malls. "Americans are good at producing formulaic food and are adept at franchising," said Stefan Breg, founder of Tribe Restaurant Creators in Abu Dhabi, in an interview with Hotelier Middle East. He added that in the next 10 years, another 250 U.S.-based chain stores are expected to open across the region.

Fry Or Fly

Such growth has opened the door for even lesser known U.S. franchises to plan entry into the region, with ambitious expansion plans in hand. This past month, two smaller U.S. fast food franchises announced they would be opening stores in Dubai — Steak Escape, a Philly cheesesteak franchise, and North Carolina-based Hwy 55 Burgers, Shakes and Fries. But success isn’t guaranteed. Both will enter a market where bigger direct competitors from the U.S. already have established themselves — Charley’s Grilled Subs, and Johnny Rockets.

The market is also rapidly opening up to Western franchises offering quick but casual dining options, which have undercut growth of fast food in the U.S. In July, Florida-based Darden Restaurants opened its first Red Lobster restaurant in Dubai Mall, and will open at least 60 more Red Lobster, Olive Garden and LongHorn Steakhouse restaurants in the Middle East over the next five years. Currently, the biggest dining buzz in Dubai is over the region’s first The Cheesecake Factory, which opened at the end of Ramadan. Newspapers have reported customers flying in from around the region just to have a meal there.

One element that U.S. businesses coming to the region have to consider is that they must pair up with a local partner. Wharton’s Kahn says that comes with the usual considerations for managing a product through such an agreement. "Licensing a brand always faces these issues," she notes. "The licensor needs to build strong trusting relationships with local partners to make sure that they deliver to the values, quality and attributes that are associated with a brand."

Meyer’s Shake Snack franchise found a good partner in Kuwait’s M. H. Alshaya Co. The region’s biggest retailer, with brand partnerships including H&M and Starbucks Coffee, said it plans to open eight of Meyer’s restaurants across the region by the end of the year. The firm, chaired by Wharton ’84 graduate Mohammed AlShaya, is also partnered with The Cheesecake Factory and IHOP. His firm plans to open 22 Cheesecake Factory restaurants in the region, and 40 IHOP restaurants.

Despite the boom in the Middle East, Kahn advises caution regarding zealous openings. "Over-expansion that dilutes or undermines the value of a global brand is always a risk," she notes.

"The brand must stay global — which means the brand meanings, brand associations, brand emotions, etcetera, are global and central to the brand DNA," Kahn says. "However, implementation of the product should follow local tastes, values and attitudes. Changes in the product to follow local tastes, of course, make sense. One would also expect to see changes in distribution, pricing and promotion strategies as needed."

There are also the Cheeseburger Pizzas to contend with. In such a fluid, growing market, novelty is an asset. Without sustaining attention or positive word of mouth, a franchise can quickly evaporate in the Middle East’s fast food industry mix of ever-growing competition, rapid employee turnover and expenses for operations — regional food costs are invariably higher due to import costs. California-based Sizzler Steakhouse opened to fanfare with a restaurant on Dubai’s popular Beach Road in 2010, but it has since been shuttered. Steak fans in Dubai didn’t notice much — a Texas Roadhouse restaurant opened last year.

"This is an issue wherever a new brand, product or service opens," Kahn says. ‘There are two stages — trial — which can benefit from "newness," "curiosity," and then repeat — which keeps the customers coming back.

"For repeat, the product or service has to provide a real benefit over and above the other possibilities. Even if consumers want to seek variety in meals, a good restaurant will offer enough quality and value that people will eventually return. If the new restaurant doesn’t meet consumer expectations, high trial may not eventually lead to high repeat."