There may have been a time when picking a high-potential foreign market required little more from a U.S. restaurant brand than tossing a dart at a map. Not anymore, as Outback Steakhouse and Chili’s attested in their recent financial filings. Outbacks in Brazil saw a 6% second-quarter decline in same-store sales. Chili’s international stores posted a 2.9% slide in comps for roughly the same period.
Today, domestic chains looking abroad can tap hardcore statistical data and the experiences of other concepts when deciding where to look for local partners. Here, based on a combination of anecdotal input from operators and research from Technomic, are some of the locations getting attention.
In the race to plant a flag in much-ballyhooed overseas markets such as China and India, the United States’ neighbor to the North was often overlooked. Yet as Subway (3,200 franchised stores in Canada) and Starbucks (1,400 Canadian units) have wagered, that may have been a rash move.
Besides the obvious benefit of shorter airplane rides, Canada offers the advantage for U.S. chains of mirroring American consumer preferences and dining-out behavior, according to Technomic data. It also notes that Canada’s consumers wield considerable spending power, with per capita GDP of more than $42,000, second only to the U.S. and Australia. Yet it ranks close to the bottom in terms of number of restaurants, with Technomic ranking it fourth.
Factoring in social criteria, the researcher rates Canada as the globe’s fifth best restaurant market overall.
2. The Philippines
Discussion of Asia’s potential has for decades focused on China, and Japan before that. But the Philippines is no longer being overlooked. Technomic notes that the archipelago, once a U.S. protectorate, is notably accepting of American culture, though is just average in its alignment with the homeland dining trends of U.S. brands.
Still, the researcher rates it higher than Russia in its potential for U.S. foodservice companies. It clocked the nation’s nominal foodservice sales growth last year at 9.8%.
Technomic also reports that the percentage of Filipinos who visit a quick-service restaurant at least once a month is higher than the level of any other nation it tracks. The pattern holds true for full-service places as well. Four out of five Filipinos (80%) visit a sit-down place at least once a month, compared with a rate of 72% for the world as a whole, according to Technomic.
Even after decades of development by U.S. chains, the superpower remains a promising frontier for imported brands. Local foodservice operators and incoming U.S. operations say the outside world tends to equate China with Hong Kong, Shanghai, Beijing and areas near the coast. Yet it has 160 cities with at least a million residents, according to the World Population Review, a website that lists census figures. And foodservice sales are continuing to grow in double-digit leaps. Last year’s surge was clocked by Technomic at 10.9%.
The market’s appeal might have temporarily been tarnished by the high-profile economic and food safety problems that prompted McDonald’s and Yum Brands to spin off their China operations into freestanding companies in recent years, a move intended to appease worried investors. But a middle class continues to emerge, and wages have shown improvement. In Technomic’s statistical model, it ranks as the world’s second best restaurant market, behind the United States.
But Technomic has also reported that the communist nation already sports more restaurants than the U.S.
Among the chains that see ample room left for growth is Chili’s. The bulk of the 30 units it intends to open there during fiscal 2019 with a local partner will be concentrated in China and Vietnam, the chain’s parent, Brinker International, told investors.
With last year’s Mexican restaurant and bar sales computed by Technomic at $17.9 billion, or roughly what U.S. outlets collectively generate in eight days, the Mexican market is still in its adolescence. Yet the research firm pegged Mexico’s 2017 sales growth at 7.6%, one of the highest rates in Latin America.
The supply situation isn’t as favorable. Mexico sports about 464,000 places to eat or drink—less than half the number of places in its neighbor to the north, but the national sales figure suggests low volumes are a fact.
Technomic’s data suggests that dining out is firmly interwoven into life in Kuwait. Limited funds are cited by only 42% of residents as a brake on dining out more often, the lowest incidence of any Middle Eastern market studied by the researcher, and only about a third of diners (36%) view a restaurant visit as something to reserve for a special occasion.
Like their counterparts in other Middle Eastern nations, Kuwaitis show a preference for full-service places over grab-and-go outlets, though usage of both is among the highest in the world.