Transforming Fast Food & Services in KSA: A Sector Analysis

Market Overview 

Saudi Arabia’s food industry is rapidly developing and benefitting from favorable trade agreements, lifestyle changes, tourism, population growth, economic development, and state assistance. The region has seen a surge in global businesses entering the market, driven by increased demand for fast foods & globalization. 

Saudi Arabia has one of the largest fast food & service industries in the GCC. According to U.S. Department of Agriculture (USDA), the Saudi food service market, with a total estimated value of USD 25 billion in 2023 is expected to grow at an approximate rate of 10% annually over the next couple of years.  The catering market, out of the food service market is estimated to be worth USD 5 billion annually. The institutional subsector, which primarily depends on imports, serves millions of meals every day.

Key Cities and Establishments & Market Potential

Riyadh and Jeddah are emerging as hubs for different kinds of food and beverage restaurants such as – Lounge, Fine Dining, Ready-to-Eat, Fast Food, Refuel & Relax and so on. Several internationally renowned fine dining establishments, such as Zuma, Loris and Catch, have launched in the region exploring the potential of the Saudi market. A wide range of foreign restaurants, including Cheesecake Factory, Hakkasan, and Cipriani, have also opened in Riyadh, offering fine dining and casual dining experiences. Permanent Michelin-starred restaurants are emerging across the Kingdom, such as Rasoy, an Indian restaurant in Jeddah. New specialist smoke houses, such as The Warehouse, Chefs, and The Smoke House, are becoming more common in Jeddah and other places.

The Saudi market has become appealing to brands such as Coya, Nobu, Gaia. Many others have started establishing a presence in the country to tap into the rapidly growing market which is witnessing the opening up of restaurants and fast-food chains at a really fast pace. 

Additionally, Saudi Arabia’s Vision 2030 initiative aims to increase the number of cafes from the current 258 per million people to 1,000 per million people. The Kingdom offers a promising opportunity for hospitality businesses to capitalize on market potential in the coming years.

According to the General Authority for Statistics (Saudi Arabia) & Marmore MENA Intelligence research, there are 84,596 aggregate food outlets in Saudi Arabia as of 2023. 

Many global brands such Pizza Hut, McDonald’s, KFC, Subway, and Burger King, have multiple outlets in Saudi Arabia. Local or Regional brands, including Al Baik, Shawarmer, Herfy, Maestro Pizza, Americana Restaurants, Al Hokair Restaurants and Cafes, Alshaya Group (Starbucks, Shake Shack, Texas Roadhouse and so on), Alamar Foods Company (Dominos), Galadari Ice Cream Co.LLC, also operate in the country.

Amongst the fast-food chains, Herfy has the most extensive network of stores in Saudi Arabia, with over 393 branches. Herfy also has franchises in Kuwait, Nigeria and Bangladesh. The food chain is majorly known to serve meat, ice creams and shakes. As a diversified yet integrated business, Herfy also runs a network of pastry shops throughout Saudi Arabia and generates value from its meat processing, cake, rusk, and bakery operations. Herfy’s leap in 2023 profit is attributed to lower general and administrative expenses and a decrease in financing expenditure.

Al Baik is another well-known brand in the Kingdom of Saudi Arabia. Renowned for its mouthwatering fried chicken and seafood dishes, accompanied by a variety of sauces, Al Baik is a fast-food restaurant chain with over 100 locations nationwide. The brand has established a strong presence and has become a popular choice among both Saudis and foreigners. The chain’s devoted clientele and widespread appeal can be attributed to its reliable quality, reasonably priced goods, and effective customer service. Its manufacturing and marketing expertise, as well as its financial strength, have grown through last couple of years. 

Fawaz Abdulaziz AlHokair Company planned to open 45–50 new branches, primarily focusing on Cinnabon and Mamma Bunz. It is anticipated to increase the reach of its in-house creation, “Shawarma Al Muhalhel.” In addition, the business intends to use a sub-franchise model to accelerate the growth of its shop network for current brands, including Cinnabon, Mamma Bunz, Crepe Affaire, and Shawarma Al Muhalhel.

The fastest-growing new restaurant chains are expanding in segments like chicken and coffee & snacks. With the addition of a new location in Riyadh in March 2024, Costa Coffee and its licensee Alghanim Industries have achieved 100 locations in Saudi Arabia. The expansion of various midsize coffee shop operators, such as Manto Rose, Half Million, and 8oz Coffee, as well as Riyadh-based Address Café, which also achieved the 100-store milestone in the same month, is what is driving the rise of outlets. Similarly, drive-thru coffee chain Barn’s has reached 700 stores across Saudi Arabia with a new site in Jeddah in April 2024. 

Factors Influencing the Growth of Fast Food and Quick Service Industry in KSA

Increasing Population & Growing Disposable incomes- Rapidly changing demographics present many opportunities for developing the Food & Beverage industry in Saudi Arabia. With a population approaching 36 million, Saudi is the largest domestic F&B market in the GCC. More relevant than the overall size of the population, is the relatively young age demographic with 53% between the ages of 15-44. This age group has a higher propensity to spend on F&B and is more open and exposed to the changing consumer trends being experienced globally. 

Growing Tourism and Entertainment Industry – Saudi Arabia’s culinary traditions have mostly been taken from those of its neighboring countries, so visitors can enjoy a wide variety of regional and international cuisines. The government has been actively pushing tourism, bringing in more foreign visitors and seeing the shift towards more environment friendly and nutrient-dense meals.  

These elements have raised consumer demand for foodservice facilities that can accommodate travelers’ varying dietary needs and tastes, opening doors for new eateries and culinary adventures. Saudi Arabia’s tourism sector is undergoing a significant transformation because of efforts by the public and private sectors to broaden the range of visitors and their reasons for visiting the Kingdom.  

According to the World Travel & Tourism Council’s (WTTC) 2024 Economic Impact Research (EIR) the tourism sector in Saudi Arabia grew by more than 32% to contribute a record-breaking SAR 444.3 billion to Saudi’s GDP, representing 11.5% of the entire economy in 2023. With a 56% rise in international tourist visits over 2019, Saudi Arabia also topped the UN Tourism ranking for large destinations for the growth of international tourist arrivals in 2023 compared to 2019 as reported by Ministry of Tourism, Saudi Arabia. 

Over time, this is anticipated to bring about a substantial change in the retail and food and beverage environment in the Kingdom as a component of the government’s modernization and economic diversification initiatives. The caliber and variety of F&B concepts in the Kingdom will be significantly impacted by planned expenditures in the entertainment industry.

 It is anticipated that the growth of the movie business alone will open doors for retail and food and beverage establishments. The foodservice industry will benefit from the anticipated growth in the quantity and caliber of athletic events and concerts. 

Food trucks and other mobile food and beverage businesses are already proliferating because of this. 

This expansion will extend beyond the two largest cities in Saudi Arabia, Riyadh and Jeddah. Known for being the location of Saudi Arabia’s first UNESCO World Heritage site, Al Ula in the Kingdom’s northwest launched a series of musical events in 2019 under the title “Winter at Tantora.” A variety of transient food trucks and a handful of upscale pop-up restaurants, such as Anabelle’s, Sass Café, and La Cantine, provide catering for this event.

Rising Food Delivery and Online Kitchens– Online meal delivery services are on the rise in Saudi Arabia, as they have in many other regions of the world. With the rise in popularity of services like Talabat, Uber Eats, and HungerStation, customers can now easily order meals from a variety of restaurants and cuisines.

Exhibit 1: Average Revenue per User for Meal Delivery in Saudi Arabia, USD