Burger, Pizza, and Fried Chicken Entrepreneurship in Iraq
Numerous knockoff Western-style burger, pizza, and fried chicken restaurants have opened in and around Baghdad in the past year. Business is booming despite continued security, infrastructure (especially electricity), and political challenges. So much so, that the Associated Press recently ran a story about the fast food boom in Iraq’s capital.
According to the World Bank, Iraq’s GDP increased 10% in 2011 and Iraq’s central bank forecasts continued 10% annual GDP growth over the next 3 years. Iraqi per capita GDP increased 7% in 2011 to $3900. Many Iraqis now have more disposable income to spend and Iraq’s entrepreneurs are successfully offering them new dining options – almost always blatant rip-offs of established Western brands.
The economic boom in Iraqi Kurdistan – the semiautonomous Federal Region in the North of the country (“Kurdistan”) — is even more pronounced. There, oil and gas development, foreign investment, and cross-border trade with Turkey are driving rapid GDP growth. A construction wave has completely changed the skylines of Erbil and Sulaimaniyah – Kurdistan’s two largest cities – as new apartment buildings, office complexes, hotels, and malls have come online. In 2011, per capita GDP in Kurdistan was estimated to be 40% higher than in the rest of Iraq — $5,500. So Kurds, have even more new-found income to spend.
Erbil’s Majidi Mall houses many upscale Western brands, as well as an array of authentic fast food franchises, including: Fatburger, Coffee Bean, and Chester’s Chicken. The arguably more popular Erbil Family Mall, houses Iraq’s first Carrefour supermarket and also an amusement park. I took the picture below in the Majidi Mall food court during a business trip to Erbil in late August:
Like in Baghdad, franchise knockoffs are abundant in Kurdistan and include the creatively (or not so creatively) named: PJ’s Pizza, Burger Queen, Costa Rica Coffee, among others. This author’s unscientific sampling of food items from such restaurants notes their similarity in taste to items offered at the real franchises they imitate, suggesting that these knockoffs may have found a way into those franchises’ supply chains in neighboring countries.
Kurdistan’s malls and restaurants not only cater to local residents but also visitors from other parts of the country (as well as neighboring countries like Iran). Iraqis from Baghdad, Basra, and other cities are visiting Kurdistan in droves – attracted by its security, near 24-hour electricity, and other comforts – and comprise the majority of the estimated 2.5 million visitors that Kurdistan will welcome in 2012.
Iraqi visitors must enter Kurdistan via the Erbil or Sulaimaniyah airports or other checkpoints administered by the Kurdistan Regional Government. During the recent Eid holiday, the wait to clear the Kirkuk checkpoint – the major land crossing into Kurdistan from Iraq – was six hours, according to friend of mine whose family members passed through it. In Erbil, there were not enough hotel rooms for the large number of Eid visitors and several hotels reportedly offered guests cots or mattresses to sleep in air-conditioned hallways for $40-$50 USD/per night (and even those sold out, too). So there is no shortage of demand and opportunities for local businesses.
Despite Iraq’s economic growth and entrepreneurial spirit, serious challenges remain. As the AP story rightly points out, many of the largest Western franchises, including KFC, Pizza Hut, Burger King, and MacDonald’s are not yet ready to enter Iraq. Many view the continued political dysfunction in Baghdad and recent deterioration in security in Arab Iraq as signs for concern. Smaller franchises, however, are increasingly entering Iraq – almost always through Kurdistan – because they have a higher risk tolerance and are willing to target first the more stable, albeit smaller Kurdish market (supplemented by numerous tourists), instead of the larger Arab Iraqi one. Until Erbil and Baghdad work through their disagreements and overcome the gridlock that has defined Iraqi politics for the past 18 months, signs like the following one (taken during my recent trip), will, unfortunately, remain commonplace.
Eli Sugarman is a Truman Security Fellow.