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  • Fast-Food Industry Iran current status, opportunities and threats

    June 2016

    All statements of fact, opinion, or analysis expressed in ILIA white papers are those of the respective analysts.They do not necessarily reflect formal positions or views of ILIA. The information used and statements of factmade are not guarantees, warranties or representations as to their completeness or accuracy. ILIA assumes noliability for any short-term or long-term decision made by any reader based on analysis included in our whitepapers. Copyright restrictions (including those of third parties) are to be observed.

    Further Information: www.ilia-corporation.comPhoto by: Mahdieh Farahani

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    Table of Content

    5World Fast-Food Industry

    6Fast-Food Industry Iran

    11Fast Food Market Analysis

    12Conclusion & Outlook

    13About Us

    The global fast food market was valued at approximately 495 billion USD in2014 and is expected to reach 645 billion USD by 2020, growing at a CAGRof 4.5% between 2015 and 2020. Asia Pacific and North America dominatethe fast food market and together account for around 65% of totaldemand in 2014.

    Iranians love fast-food, not only for the cuisine itself, but as a leisureactivity and a means of socializing. 79 million Iranians (23.8 millionfamilies) are spending 6.3 billion USD annually eating at restaurantsaccording to official statistics in 2013. During the 8 years from 2005 to2012, Iranian spend on restaurants increased by 120% and in the comingyears this increase rate is forecast to be significantly higher.

    There is a large quality and efficiency differential between Global Fast-FoodChains and those found in Tehran, and also between those in Tehran andthe next four largest cities. Less than 5% of all Fast-Food businessescurrently operating in Iran would be classified as High Quality andReputable.

    Iran is an emerging and growing market, providing existing businesses withan exciting opportunity for expansion. Iran has favorable demographics (alarge and young population), rising rates of urbanization and a populationwho are increasingly turning to Fast-Food as a means of socializing.

    ILIA Corporation advises clients on market entry, strategy, and operations.We develop practical, customized insights that enable clients to act uponand transfer skills that are market specific. Founded in 2008, ILIA hasoffices in Iran, Germany, and China.

    ILIA Research Methodology

    Primary Sources

    Secondary Sources

    IRANFast Food

    Market Insight

    Consultant Analysis:

    Group thinking, conducting various analyses, deriving conclusions

    The applied methodology consists of three main pillars:

    1. Primary sources, such as field studies, interviews and phone

    conversations.

    2. Secondary sources, such as governmental documents, official

    statistics, company reports, news agencies, etc.

    3. ILIA own thoughts and analysis resulting from the information

    gathered and the conclusions derived thereafter.

  • What Global Organizations Say about Iran

    Iran is the second largest economy in the Middle East and North Africa(MENA) region after Saudi Arabia, with an estimated Gross DomesticProduct (GDP) in 2015 of US$393.7 billion. It also has the second largestpopulation of the region after Egypt, with an estimated 78.8 millionpeople in 2015. Irans economy is characterized by a large hydrocarbonsector, small scale agriculture and services sectors, and a noticeable statepresence in manufacturing and financial services. Iran ranks second in theworld in natural gas reserves and fourth in proven crude oil reserves.Economic activity and government revenues still depend to a large extenton oil revenues and therefore remain volatile.

    Due to the lift of the sanctions and a more business-orientedenvironment, real GDP growth is projected to reach 4.2 percent and 4.6percent in 2016 and 2017, respectively. On the production side, growthwill be mainly driven by higher hydrocarbon production. On theexpenditure side, consumption, investment and exports are expected tobe the main drivers. Notwithstanding the narrowing of the output gapover the coming years, inflation is forecast to remain moderate, by Iransstandard. The lifting of sanctions, and in particular the positive impact thiswill have on the banking system, will significantly reduce internationaltransaction costs. Strong capital inflows, including FDI and therepatriation of part of the frozen assets, could put upward pressure onthe Iranian rial which will help contain imported inflation. Fiscal policy, isprojected to be slightly contractionary with the deficit projected tonarrow to 1.8 and 1 percent in 2016 and 2017, respectively, mostly onaccount of improved oil revenues. Irans current account position isexpected to turn into a surplus in 2017, also primarily driven by rising oilexports. World Bank, April 2016

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    Iran Fast-Food Industry at a Glance

    1,300 USDAnnual Spend

    Wealthiest 10%

    31 USDAnnual SpendPoorest 10%

    16m

    Tehran

    2.8m 2.0m1.5m 1.5m

    Mashhad Tabriz EsfahanShiraz

    79 millionIranians

    Addressable market

    ~37m Iranians between 10-35 years of age

    Target Market

    Market Sizes in the Iran cities

    20,000Fast-Foods branches in Iran

    2 billion USD Annual Spending on Fast food

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    1. World Fast-Food Industry

    The global fast food market was valued at approximately 495 billionUSD in 2014 and is expected to reach 645 billion USD by 2020,growing at a CAGR of 4.5% between 2015 and 2020 (Source:Transparency Market Research). In 2015, the fast-food sector reportedbrand value growth of 4% year on year.

    In the United States alone, the sector employed 3.7 million people,working out of of 232,000 branches (as of 2013).

    44.2% of global revenue share is estimated in North America, with40.0% of global revenue concentrated in the United States. Otherdeveloped regions also have a high concentration of industry revenue,including Europe at 17.0%, with a particularly high concentration inGermany (and France to a lesser extent) the powerhouse economy ofthe EU. Oceania also makes up 4.2% of global revenue, and includesAustralia, which has a strong affinity for fast food (Source: Global FastFood Restaurants Market Research Report [IBIS Worlds], Apr 2016).

    Asia Pacific and North America dominate the fast food market andtogether account for around 65% of total demand in 2014.

    Asia Pacific and North America dominate the fast food market and together account for ~65% of total

    demand in 2014.

    The Fast-Food industry is one where certain brands have a largeproportion of overall market share. This industry has a medium level ofcapital intensity and is in a mature lifecycle.

    2015 Global top brand fast-food brand value in billion USD (Source: Statista 2016)

    81.2

    McDonalds (US) Starbucks (US)

    29.3

    KFC (US)

    12.6

    Chipotle

    10.6

    Tim Hortons (Canada)

    4.6 3.8

    Dominos Pizza (US) Burger King (US)

    3.2

    Panera (US)

    2.9

    Pizza Hut (US)

    8.5

    Subway (US)

    22.6

    The fast food industry in the United States generated 191 billion USD in 2013. By 2018,

    this figure is forecast to exceed 210 billion USD. The

    chart to the right shows fast food market share in the United States as of 2013.

    21,70%

    8,10% 6,70% 5,50% 4,10%

    53,90%

    0,00%

    10,00%

    20,00%

    30,00%

    40,00%

    50,00%

    60,00%

    McDonalds Yum! BrandsInc.

    Doctor'sAssociates

    Inc.

    Wendys Company

    Burger King Others

    Revenue Share of US Fast Food Market

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    2. Fast-Food Industry Iran

    Iranians love Fast-Food, not only for the cuisine itself, but as a leisureactivity and a means of socializing.

    79 million Iranians (23.8 million families) are spending 6.3 billion USDannually eating at restaurants according to official statistics in 2013.

    During the 8 years from 2005 to 2012, Iranian spend on restaurantsincreased by 120% and in the coming years this increase rate isforecast to be significantly higher.

    It is estimated that one third of Iranian spending at restaurants isconcentrated on the Fast-Food sector with Iranian families currentlyspending 2 billion USD annually on Fast Food (~85 USD per family).

    Iranians love fast-food, not only for the cuisine itself, but as a leisure activity and a means of socializing.

    159,4178,1

    224,7248,2

    276,0292,5

    347,3 355,4

    265,5

    2005 2006 2007 2008 2009 2010 2011 2012 2013

    Average Spending by Iranian Families on Restaurants [USD]

    Wealthy Iranians (the tenth decile) spend on restaurants is 41 times more than the first decile.

    1,300 USD 31 USDspend annually spend annually

    41times

    High Income Low Income vs.

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    To obtain permits to open a Fast-Food business, four key governmentalorganizations must first be engaged: Police, Municipality, HealthIndustry and the Industry Union. Importantly, the role of the Policemust not be underestimated, as it is considered one of the redindustries by the police due to its social impacts.

    With regard to customers, the key focus for the industry is in Tehranand the other large cities of Iran.

    Stakeholder Map of Fast-Food in Iran

    Raw Material Providers

    HumanResources

    Distributors

    Other IraniansCitizens of

    Large Cities

    Tehranians

    IndustryUnion

    HealthMinistry

    Municipality

    Police

    Fast Food IndustryStakeholders

    Government

    Suppliers

    Custome