Feb 7, 2024 - Business

Fast-food companies eying global growth despite trouble in the Middle East

Illustration of a fast food sign with a dollar sign on top that reads "money!"

Illustration: Sarah Grillo/Axios

American fast-food companies are speeding ahead with global growth plans, but turmoil in the Middle East threatens to trip them up.

Why it matters: The U.S. market is saturated with fast-food competition, making foreign markets particularly enticing as growth targets.

The big picture: Yum Brands, McDonald's and Starbucks are among those rapidly expanding their global footprints:

  • Yum Brands is opening new locations at a rate of one new spot every two hours, it said Wednesday, having added 2,140 KFCs, 832 Pizza Huts and 346 Taco Bells in 2023. The company expects to pass 60,000 total restaurants by the end of 2024.
  • McDonald's, which currently has about 40,000 locations, said in December that it plans to add 10,000 worldwide by 2027.
  • Starbucks said in November that it plans to open 17,000 by 2030, which would bring its global store count to 55,000.

What they're saying: "We are very confident in the pace of development," Yum CEO David Gibbs told investors Wednesday on a conference call. "The pipeline has never looked better for us."

Yes, but: The conflict in the Middle East is beginning to undermine sales for Yum, McDonald's and Starbucks, according to executives for all three companies.

  • KFC gets about 6% of its sales from the Middle East, while Pizza Hut gets 5% there.
  • McDonald's CEO Chris Kempczinski said the chain was also seeing impacts in Muslim countries like Indonesia and Malaysia.

Between the lines: "Some consumers are shunning American brands because of the country's general support for Israel," GlobalData managing director Neil Saunders tells Axios in an email. "However, the truth is that for most brands the Middle East contributes a small slice of revenue and profit, so the impact on global numbers is not that pronounced."

What we're watching: Saunders notes that rising menu prices have deterred some international customers, raising the risk for global expansions if they collide with sluggish local economic growth.

  • Low consumer sentiment in China is also impacting the brands, executives have noted on calls.

What's next: Restaurant Brands International, whose restaurants include Burger King and Popeyes, releases its earnings Tuesday.

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