Hamburghini, anyone? Huge US firms inspire Saudi success stories

The topic of businesses in Saudi Arabia prompts most people to think of prosaic oil extraction companies and the state-owned oil giant Aramco, estimated to be the world’s most valuable firm.

What is less well known is that the kingdom has a vibrant entrepreneurial culture - particularly in the lucrative fast food industry.

It all started when Ahmed Bin Hamad al-Said returned to Saudi Arabia after studying in the United States. It was 1981 and McDonalds was busy conquering America while other fast food restaurants were popping up around the rest of the world. The entrepreneur-in-the-making soon saw a gap in the market. “Why not in Saudi Arabia?” he thought.

That same year, Said co-founded Herfy, a Saudi fast food chain offering burgers, fried chicken, and milkshakes. Herfy has since grown to over 300 restaurants in the last thirty years - including outlets in the UAE, Bahrain and Kuwait - and is now opening more than 30 new restaurants each year.

Herfy has been trading on the Saudi stock market since 2010, after an IPO of 30 percent of its shares.

A few years after Herfy was founded Kudu entered the scene in 1988. The company has since become one of the largest restaurant chain in Saudi Arabia with over 290 stores throughout the country.

Although its menu includes hamburgers - the Saudi favorite - Kudu’s specialty is a selection of sandwiches. In 2015, Kudu was valued at $400 million when the private equity firms TPG and Abraaj bought a majority stake in the company. That same year Kudu appointed the former senior vice president of Burger King to become its new chief executive.

Together, the two chains are the titans of the kingdom’s homegrown burger franchise business.

Fast food outlets are never far away while driving through the capital Riyadh's palm-lined streets.

“Herfy is one of the best known fast food chains in the country and it is everywhere, but there are a lot of new places to go to nowadays,” said Talal, a twenty-something who works in IT and says he enjoys the occasional Herfy burger.

“I have begun calling the city burger capital.”

Burgers and books

Eating burgers is a national pastime in the kingdom, and the names given to the different fast food restaurants are often more creative than their American counterparts.

Downtown, the witty name Hamburghini is splashed in orange over a storefront, while a few streets away, the fast food store iBurger tries to attract customers familiar with a company known for making their chips out of silicon instead of potatoes.

Locals in the Saudi capital are particularly fond of Hamburghini. “This place has the best burgers in Riyadh,” said Nawaf, a Saudi teenager who says he eats fast food several times a week. “It’s always busy here.”

But Hamburgini and iBurger are still small businesses with a relatively minimal presence.

Unfortunately, like the United States on which it has modeled its fast food industry, Saudi Arabia struggles with a high level of obesity and diabetes. The government’s plans in the new “Vision 2030” even includes the goal to increase the ratio of Saudis exercising.

Fast food is not the only sector where Saudi entrepreneurs have used an American model as a blueprint for success. Mohammad al-Aqeel, the founder of Jarir Bookstore, first thought of his business idea while he was in book-loving New York.

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The company has grown considerably since it was founded in 1979, with a market capitalization of close to $3 billion and a presence in 14 Saudi cities as well as in Qatar, Kuwait, and the United Arab Emirates.

Jarir resembles the American bookstore giant Barnes & Noble which sells books and a variety of other products. Its slogan is “Jarir... not just a bookstore.” This means that in addition to a large collection of Arabic and English books, customers at Jarir can find the latest Nikon cameras, smart watches, laptops, and videogames in the store.

Like Barnes & Noble, Jarir is often located in large retail outlets which usually have two floors: one for books and one for electronics and office supplies. In addition to the brick and mortar bookstores, Jarir also has a strong online presence which it hopes to maintain amid a local e-commerce boom. Online sales in Saudi are expected to almost double to $11 billion by 2020, with consumer electronics one of the key drivers.

Many of the largest Saudi companies today were founded in the late 70s and early 80s. As the country now looks to wean its economy off oil, entrepreneurial, globalized young Saudis can perhaps take inspiration from its foreign-flavored, yet homegrown success stories.