Downturn is boom time for fast-food chains

Budget-friendly outlets are pushing ahead with expansion plans after posting strong sales growth in the Emirates last year.

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Budget-friendly fast-food chains are pushing ahead with expansion plans after posting strong sales growth in the Emirates last year. Baskin Robbins, the ice-cream seller, plans to open 15 stores in the Emirates this year, while Dunkin' Donuts aims to spend Dh3 million (US$11m) to add at least 12 stores, bringing its total to 60 outlets. It is a stark contrast to higher-end retailers such as Starbucks, which plans to close 300 outlets globally and cut 6,700 jobs after a slide in fourth-quarter profits.

"So far, we haven't seen any kind of downturn on our business," said Manoj Loya, the general manager for the Galadari Ice Cream company, which owns the Baskin Robbins franchise for the GCC. "It's surprising to many, but we're pretty happy about it." Last year, sales at Baskin Robbins's shops in the Emirates saw growth of 26 per cent compared with 2007, he said. In the fourth quarter, when the effects of the global economic slowdown began to be felt, the ice-cream chain saw similar growth. Baskin Robbins had sales of $100m in the GCC last year, up from $80m the year before, Mr Loya added.

"We have a very clear plan in place to open 45 stores next year in the region, the majority in Saudi Arabia, followed by the UAE and Qatar," he said. Dunkin' Donuts last year saw same-store sales growth in the Emirates of 22 per cent and total sales of about Dh40m, said David Rodgers, the national general manager for the baked goods and coffee chain. In 2007, same-store sales growth hit 23 per cent and sales reached about Dh31m.

Last year, the company opened a Dh20m factory in Sharjah, which was capable of producing 50,000 doughnuts a day, he said. "We are expanding, there are no plans to close any store or cut any people," he said. "It is the reverse - we are opening more stores and adding people to the organisation. But we have to accept that our rate of growth is much smaller than we have achieved in the past few years."

Mr Rodgers said the economic crisis had presented opportunities for the brand. He hopes the economic woes will bring down shop rents and reduce the competition for key locations. Rafic Fakih, the managing director of Emirates Fast Food Company, the franchise holder for McDonald's, said sales in the UAE held steady last year. "Sales did not go down because of the economic situation," he said. "The only factor that could affect sales is the influx of people."

If there continue to be job cuts, such as those in the UAE's property and financial sectors, the food sector will feel the pinch, said Piyush Mathur, the regional managing director for Nielsen in the Middle East, North Africa and Pakistan. "When there are job losses here, people leave the country," he said. Lyndsey Anderson, the head of food and drink research at Business Monitor International, an industry information firm, said weakened consumer confidence would raise demand for lower-priced items and cheaper restaurants, but it would be brief.

"This is particularly true in the UAE, where a strong emphasis is placed on food quality," she said. The research firm expects per capita food consumption to grow by 18.8 per cent to 2013, driven by greater quantities and higher value. * with agencies Starbucks posts loss, b12