Académique Documents
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April 2014
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INTRODUCTION
GCC is a fertile ground for foodservice companies, particularly due to the regions
flourishing economy; urbanization; growth of its multicultural, young population; and
steady rise in per capita income. Consequently, international fast food and casual dining
restaurants are successfully making inroads into the GCC region through franchise
agreements, the preferred method of doing business in the region.
The strategy is also suitable for local partners, who appreciate being able to acquire their
foreign partners technical knowledge and experience in operating foodservice
businesses. International foodservice partners offer this expertise as well as assist with
management and training, in addition to providing the brand name. Moreover, the GCC
population is extremely brand conscious.
There are no precise estimates of the amount of business done by foodservice
companies in GCC.
1
Bahrain
2%
Oman
6%
Qatar
7%
Kuwait
10%
USD16.5
billion
Saudi
Arabia
47%
Cafes,
bakery
11%
Full
service
32%
USD16.5
billion
Fast
food
57%
UAE
28%
Saudi Arabia, with annual billings of USD4.2 billion in 2012, was the regions largest fast
food market. American fast food chains such as McDonalds, KFC, Burger King, Hardees,
and Domino's Pizza dominate the Kingdoms fast food market. The UAE and Kuwait are
the other two large fast food markets, with annual revenues of USD2.9 billion and USD1
billion, respectively.
This calculation does not consider the institutional food service market (which primarily includes
local catering companies that provide food services to the military, oil & petrochemical companies,
hospitals, universities, and schools) and the lounges and bars market.
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The full service restaurants (which includes fine and casual dining) market, estimated at
USD5.3 billion, was about 45% smaller than the QSR market. Brands in this segment
include Chilis, TGI Fridays, Carluccio's, La Petite Maison, BiCE, Nobu, and ZUMA.
Exhibit 2: GCC fast food and full service restaurant market (2012)
5.0
Values in USD bn
4.2
4.0
Saudi Arabia
3.0
2.9
UAE
2.7
Kuwait
Qatar
2.0
1.3
Oman
1.0
1.0
0.7 0.6
0.5
0.2
Bahrain
0.3 0.3
0.1
The cafes, tea bars, and bakery cafes segment was worth just USD1.8 billion; however,
the segment is exhibiting rapid growth.
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Fine Dining
Quick Service
Restaurants
Lounges and
Bars
Casual Dining
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beverages are paid for prior to consumption. Some quick service restaurants in GCC are
McDonalds, Dominos Pizza, Subway, Burger King, KFC, Papa Johns, and Wendys.
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53
44
39
39
32
Qatar
Kuwait
UAE
Oman
Saudi Arabia
Bahrain
105
48
43
26
24
24
20
in USD 000s
40
60
80
100
120
2.0
1.58
1.60
1.66
1.71
Bahrain
1.45
1.5
Oman
Kuwait
1.14
Qatar
1.0
UAE
Saudi Arabia
0.5
0
0.0
2010
2011
2012
2013E
2014E
2015E
2020E
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100
55-64
Over 65
All
17
80%
41
60%
40%
17
20%
10
0%
0-4
5-14
15-34
35-44
45-54
Age in years
According to estimates from the World Bank, GCCs population is likely to grow from
43.5 million in 2010 to 52.8 million in 2020.
Influx of tourists
The rising flow of tourists to GCC has also helped drive demand for the foodservice
sector. Tourist inflows account for a large and growing portion of demand, particularly in
Saudi Arabia and the UAE. On average, these two countries annually receive more than
25 million tourists to perform Hajj and Umrah at the holy city of Mecca and for
leisure/business.
According to the World Travel & Tourism Council, in 2013, 32.8 million international
tourists arrived in GCC for various religious and business purposes. Tourist arrivals for
the region are expected to reach 34.5 million in 2014, up 5.4%.
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UAE
Bahrain
Oman
Qatar
Kuwait
32.8
2013
2014E
34.5
10
15
20
25
30
35
40
Going forward, the rise in international tourist arrivals would drive the growth of GCCs
restaurant industry.
Rapid urbanization
Urbanization in GCC has risen substantially from the 35% level in the 1960s. Currently,
84% of the regions 47 million residents live in urban areas. Rapid urbanization in GCC is a
result of rural-to-urban migration for better job prospects, better standards of living, and
various other factors.
Exhibit 8: Rural-urban population in GCC
100%
80%
60%
Rural
Urban
40%
20%
0%
1960
1970
1980
1990
2000
2010
2011
2012
The rise in urbanization can generally be associated with increased eating out by
bachelors, working men/women, and a decline in average size of households.
Dining festivals
Dubais government, in its endeavor to make the country an ultimate tourist destination,
is constantly seeking creative ways to increase the number of visitors. Following the
success of the Dubai Shopping Festival, the government has started hosting the Dubai
Food Festival (DFF) to celebrate and enhance the countrys position as the regions
gastronomy capital.
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st
th
restaurants participating, presented the general public with a wide range of food-related
activities, tastings, offers, and events that showcased the emirates diverse food
offerings.
Exhibit 9: Dubai Food Festival
DFF included several events, entertainment activities, and attractions, including Taste of
Dubai, Gulfood, and The Big Grill.
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12%
4%
4%
16%
Year
1996
Year
2010
47%
37%
43%
37%
US
Gulf
Europe
Others
Source: Casual Dining in the UAE from Horizons, Foodservice Europe & Middle East
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emergence of the new polished dining concept emanates from the demand side as
diners currently expect offerings with better quality without the rigidity of formal dining.
During the last two years, several internationally acclaimed restaurant brands have
opened in GCC. These include La Porte des Indes, Fm, IHOP, PF Changs, Shake Shack,
Tim Hortons, The Cheesecake Factory, Texas Roadhouse, Tortuga, MOOYAH, Cielo Tapas
Bar & Sky Lounge, Clinton Street Baking Company, and GQ Bar.
Exhibit 12: A few new entrants in GCC
Interest in the foodservice business is so high that major franchise deals are being struck
with international brands almost every second week.
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Staffing issues
Labor shortage, leading to high levels of attrition, is a significant problem for foodservice
companies. Due to the large number restaurants being opened, junior chefs that would
typically remain in a position such as commis one/two tend to leave their existing
employment to move up the career ladder.
GCC governments emphasis on nationalization of jobs (Emiratization and Saudization,
among others) is also impacting the foodservice sector, which largely employs
expatriates as the local population is uninterested in restaurant jobs.
17.2
Bahrain
Qatar
Kuwait
UAE
11.0
Oman
Oman
2.2
Kuwait
Saudi
Arabia
1.6
Bahrain
1.1
Qatar
1.1
0
UAE
in USD bn
8
12
16
20
We estimate the regions food import bill to exceed USD50 billion in 2020, considering
population growth and changes in food prices as well as quantity of imports (refer to
AMCL MENA Food Security Report for further details).
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Socio-political unrest
During the Arab Spring of 201112, certain foodservice companies in GCC suffered
significant business losses. Bahrain, in particular, faced unrest in late 2011.
Consequently, there was a significant decline in the influx of tourists from other parts of
GCC (primarily Saudi Arabia), who would generally travel to Bahrain over the weekend.
According to an article by FT on February 2012, the manager of an Indian restaurant in
central Manama stated his restaurants business declined 60% since the previous year.
If such a wave of violence reappears in the region, foodservice companies may come
under pressure again.
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Year
Company
Country
Fund
Country
Category
2010
2010
2011
Intercat Hospitality
International Food Services
Alamar Foods
UAE
Saudi Arabia
Saudi Arabia
Qatar
UAE
UAE
2013
Hungry Bunny
Saudi Arabia
Bahrain
Fast Food
2013
Shakespeare and Co
UAE
QInvest Capital
Growthgate Capital
The Carlyle Group MENA Fund
International Investment Bank and
Tharawat Investment House
NBK Capital
Kuwait
CDR
In December 2011, the Carlyle Group MENA Fund acquired 42% stake in Saudi Arabiabased Alamar Foods, the master franchise of Dominos Pizza and Wendys for the
MENAP region (except for Wendys in Saudi Arabia). Alamar owns/operates 200
restaurants across 11 countries. The financial terms were not revealed.
In February 2013, International Investment Bank, together with Tharawat Investment
House, announced the acquisition of 49% stake in Hungry Bunny, a well-known Saudi
Arabian fast food restaurant chain. Hungry Bunny owns/operates 40 outlets in Saudi
Arabia, Bahrain, Kuwait, and Oman. The financial terms were not revealed.
In November 2013, NBK Capital revealed it acquired 49% stake in Shakespeare and
Company, a popular casual dining restaurant chain based in the UAE. Shakespeare and
Company, established in 2001 by the Saad Family, has 17 company-owned and operated
establishments in the UAE and one establishment in the US. It also has franchise
locations in Jordan, Lebanon, Qatar, Oman, Bahrain, and the US. The financial terms
were not revealed.
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Year
Target company
Target country
Acquirer company
Acquirer country
2011
2012
2013
2013
2013
2013
2013
800 Pizza
Model Restaurants Co
Galadari Brothers Group
Marco Pierre White Grill Stake
Little Chef
South West Coffee
Gourmet Gulf
UAE
Jordan
UAE
United Kingdom
United Kingdom
United Kingdom
UAE
Belhasa Hospitality
Jemball Holding Co
Dunkin' Brands Group
Rmal Hospitality
Kout Food Group
Kout Food Group
MAF Ventures
UAE
Bahrain
United States
UAE
Kuwait
Kuwait
UAE
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17
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Major Shareholders
Public
Kuwait
1964
2.50
1,005.0
55,000
391.2
66.8%
33.2%
2.50
2.25
2.00
1.75
1.50
1.25
1.00
Mar-13
May-13
Jul-13
Sep-13
Nov-13
Jan-14
Mar-14
Source: Zawya
Business description
Kuwait Food Company (Americana Group), established in 1964, operates restaurants as
well as manufactures and markets consumer foods. Americana Group has a network of
more than 1,300 outlets, making it one of the largest operators of restaurant chains in
the MENA region. The groups portfolio includes leading international brands such as
KFC, Pizza Hut (in the UAE, Egypt, Bahrain, Jordan, and Kazakhstan), Hardees, TGI
Fridays, Sbarro (in Kuwait), Costa Coffee (in Egypt, Jordan, Lebanon, and Kazakhstan),
Krispy Kreme, Baskin Robbins (in Kuwait, Egypt, and Lebanon), Signor Sassi, Red Lobster,
Olive Garden, and Longhorn Steakhouse.
Key financials
Exhibit 17: Income statement (in KWD mn)
Total Revenue
Gross Profit
Gross profit margin
Operating Income
Net Income Before Taxes
Net Income
Net profit margin
2010
680.7
120.2
18%
58.1
60.8
46.2
6.8%
2011
720.8
126.0
17%
60.9
60.8
48.0
6.7%
2012
809.6
142.8
18%
73.2
58.5
45.9
5.7%
2013
866.9
162.1
19%
82.8
66.1
50.6
5.8%
CAGR (2010-13)
8.4%
10.5%
12.5%
2.8%
3.1%
Source: Zawya
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Major Shareholders
Public
Kuwait
1998
0.78
57.1
4,672
73.2
22.4%
17.6%
16.3%
10.2%
33.6%
0.8
0.7
0.6
0.5
0.4
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Source: Zawya
Business description
Kout Food Group, established in 1998, is engaged in the hospitality services business,
including establishing, managing, and operating restaurants. The company also provides
catering services and import and export of food stuffs. Kout Food Group holds the
franchise rights in Kuwait to Burger King, Pizza Hut, Applebees, and Taco Bell. The
company also operates Kabab-ji, Burj Al-Hamam, Boost Juice Bar, and SevenSeas. In
August 2013, Kout Food Group acquired Little Chef and South West Coffee.
Kout Food Group has operations in Kuwait, Iraq, and the UK.
Key financials
Exhibit 19: Income statement (in KWD mn)
Total Revenue
Gross Profit
Gross profit margin
Operating Income
Net Income Before Taxes
Net Income
Net profit margin
2010
68.8
13.7
20%
4.9
4.5
5.0
7.3%
2011
68.4
13.8
20%
5.2
4.2
4.1
6.0%
2012
73.2
14.9
20%
5.6
5.5
4.4
6.0%
2013
87.3
20.2
23%
5.9
5.8
5.4
6.2%
CAGR (2010-13)
8.3%
13.7%
6.4%
9.0%
2.3%
Source: Zawya
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Major Shareholders
Public
Kuwait
1992
0.295
9.83
950
33.1
49.8%
9.6%
9.1%
8.1%
23.5%
0.32
0.30
0.28
0.26
0.24
0.22
0.20
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Source: Zawya
Business description
Kuwait-based United Foodstuff Industries Group, established in 1992, operates retail,
restaurants, and catering businesses. The company hosts famous brands such as Sable
Sweets, Roche Sweets, Planet Donuts, Pellini Cafe, and Home Style.
United Foodstuff Industries Group was previously known as Sable General Trading
Company.
Key financials
Exhibit 21: Income statement (in KWD mn)
Total Revenue
Gross Profit
Gross profit margin
Operating Income
Net Income Before Taxes
Net Income
Net profit margin
2010
8.9
2.9
32%
(0.9)
(0.0)
(0.0)
NM
2011
10.1
3.4
34%
0.2
(0.0)
(0.0)
NM
2012
9.3
3.1
33%
0.2
0.3
0.3
2.7%
9M 2013
8.8
3.2
36%
0.2
2.3%
CAGR (2010-12)
2.3%
4.5%
NM
NM
NM
Source: Zawya
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Major Shareholders
Public
Kuwait
1972
0.087
24.3
1,000
282.7
37.3%
62.7%
0.12
0.08
0.04
0.00
Mar-13
May-13
Jul-13
Sep-13
Nov-13
Jan-14
Mar-14
Source: Zawya
Business description
Danah Al Safat Foodstuff Company, established in 1972 as a subsidiary of Al Safwa
Group, is primarily engaged in the fishing and catering business. The company manages
and operates the fast food outlets Shrimy Restaurants, Black & White Restaurants, and
ShrimpyGrill Restaurants.
Danah Al Safat has 12 subsidiaries operating across the Middle East, Asia, and Africa.
Key financials
Exhibit 23: Income Statement (in KWD mn)
Total Revenue
Gross Profit
Gross profit margin
Operating Income
Net Income Before Taxes
Net Income
Net profit margin
2010
11.6
5.4
46%
(1.3)
2.4
2.3
20%
2011
23.6
5.8
25%
(2.1)
(1.6)
(1.6)
NM
2012
27.8
7.1
26%
(8.4)
(7.8)
(7.7)
NM
9M 2013
23.0
6.2
27%
0.8
1.0
1.0
4.1%
CAGR (2010-12)
54.9%
15.2%
NM
NM
NM
Source: Zawya
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Major Shareholders
Public
Saudi Arabia
1981
133.5
4,405.5
NA
33.0
47.6%
20.3%
32.1%
140
130
120
110
100
90
80
Mar-13
May-13
Jul-13
Sep-13
Nov-13
Jan-14
Mar-14
Source: Zawya
Business description
Saudi Arabia-based Herfy Food Services Company, established in 1981, owns and
operates fast food restaurants under the brand name HERFY and also engages in
catering services and manufacturing and selling of meat and bakery products. In
addition, Herfy runs multiple bakery and chocolate showrooms. Furthermore, the
company owns and manages warehouses and refrigerators for food preservation.
Herfy has a network of more than 170 fast food restaurants across Saudi Arabia. The
company also has business interests in Bahrain, Kuwait, and the UAE.
Key financials
Exhibit 25: Income statement (in SAR mn)
Total Revenue
Gross Profit
Gross profit margin
Operating Income
Net Income Before Taxes
Net Income
Net profit margin
2010
579.9
192.9
33%
123.7
127.7
124.3
21%
2011
708.6
226.2
32%
148.3
150.3
146.7
21%
2012
842.0
266.4
32%
180.6
185.8
181.2
22%
2013
848.7
273.2
32%
187.8
196.6
191.4
23%
CAGR (2010-13)
13.5%
12.3%
14.9%
15.5%
15.5%
Source: Zawya
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Major Shareholders
Public
Bahrain
1994
0.112
4.48
150
40.0
25.2%
74.8%
0.10
0.09
0.08
0.07
0.06
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Source: Zawya
Business description
Bahrain Family Leisure Company, established in 1994, is involved in the hospitality
business. The company operates franchise restaurants under brands such as Ponderosa
Steakhouse, Bennigans, and Cucina Italiana as well as provides entertainment services
through investment in and development of amusement parks.
The company also supplies amusement-related equipment.
Key financials
Exhibit 27: Income statement (in BHD mn)
Total Revenue
Operating Income
Net Income Before Taxes
Net Income
Net profit margin
2010
0.9
0.1
0.5
0.5
54%
2011
0.8
(0.0)
(0.1)
(0.1)
NM
2012
1.4
(0.0)
0.7
0.4
29%
2013
1.4
0.1
1.2
1.2
82%
CAGR (2010-13)
15.0%
31.4%
31.5%
31.5%
Source: Zawya
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Al Khaja Group
UAE-based Al Khaja Group, established in 1986, is engaged in the hospitality,
consultancy, information technology, real estate, and retail businesses. Al Khaja Group
owns and operates several fine dining restaurants, premium coffee outlets, fast food
lounges, and ice cream parlors, including AL-Safeer, Esfahan, Hatam, Al Baiq, and Dajen.
The group also holds the franchise rights to global brands such as Hediard Caf and
Gloria Jeans Coffees (in the UAE).
Alamar Foods
Saudi Arabia-based Alamar Foods is the master franchise of Dominos Pizza and Wendys
for the MENAP region (except for Wendys in Saudi Arabia). The company
owns/operates 200 restaurants across 11 countries. The Carlyle Group owns 42% stake
in Alamar Foods.
Al Baik
Al Baik, established in 1974, operates a chain of fast food restaurants in Saudi Arabia. Al
Baik has more than 50 branches in the KSA and is widely popular for its fried chicken.
Alshaya Group
Kuwait-based Alshaya Group, established in 1890, is a leading international retail
franchiser, operating more than 55 of the most recognized retail brands globally,
including Starbucks, The Cheesecake Factory, P.F. Changs, H&M, Mothercare,
Debenhams, American Eagle, Pottery Barn, Pottery Barn Kids, Office Depot, and Boots.
The company operates 2,200 stores across seven divisions: Fashion & Footwear, Health
& Beauty, Food Service, Optics, Pharmacy, Office Supplies, and Home Furnishings. In
addition to its retail operations, Alshaya Group is also active in real estate, automotive,
hotels, trading, and investments.
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Alshaya has operations in the MENA region, Russia, Turkey, and Europe. It has more than
28,000 employees.
BinHendi Enterprises
UAE-based BinHendi Enterprises, established in 1974, is engaged in fashion retailing,
watches and jewelry, furniture, hospitality, real estate, and construction.
BinHendis hospitality division has more than a dozen restaurants and coffee shops,
including Caf Havana, Mini Chinese Restaurant, China Times Restaurant, Japengo Caf,
Sammach, Bella Donna Restaurant, Inferno Grill, La Brioche Caf, Business Caf, Ruby
Tuesday, Burj Al Hamam, NOW Caf, and Duck King.
Caesars Group
Kuwait-based Caesars Group, established in 1973, has business interests in restaurants
and confectioneries; trading in foodstuff, industrial equipment, spares, tools, hardware,
and safety products; IT solutions; travelling and tourism; and manufacturing corrugated
cartons and paper products.
The companys restaurants and confectioneries are spread across Kuwait, Bahrain, and
the UAE.
Cravia Incorporation
UAE-based Cravia Incorporation, established in 2001, holds the franchise rights to
Cinnabon, Seattles Best Coffee, Zaatar w Zeit, Roadster Diner, and the companys own
signature brand The Steak Bar.
Cravia Incorporation was previously known as United Restaurant Development Group.
Gourmet Gulf
UAE-based Gourmet Gulf, established in 2003, holds development and franchise rights in
several Middle East markets to international foodservice brands such as California Pizza
Kitchen, Morellis Gelato, YO! Sushi, and Hummingbird Bakery. It also partly owns
regional outlets of Hard Rock Caf, Trader Vics, and Pinkberry.
Gourmet Gulf is owned by Daud Investments and Majid Al Futtaim Ventures.
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Jumeirah Restaurants
Jumeirah Restaurants is the branded restaurant division of the Dubai-based luxury
hotelier Jumeirah Group. The company has developed and licensed several successful
restaurant concepts globally.
The Noodle House, the groups flagship restaurant, operates across the UAE, Oman,
Qatar, Saudi Arabia, Kuwait, Cyprus, and Pakistan. Jumeirah Restaurants also owns
several other restaurants, including Sana Bonta, BYTES, AllFreshCo, Rice & Spice, and The
Flaming Revolution. The company holds the regional rights to distribute and develop
brands such as the Rivington Grill, THE IVY, Scotts, Annabels, Harrys Bar, Daphnes,
Bambou, and Le Caprice.
Just Falafel
UAE-based Just Falafel, established in 2007, runs a chain of vegetarian fast food joints
across nine countries. Earlier this year, Just Falafel signed five area franchise agreements
with different partners in New York City, New Jersey, Kentucky, and San Francisco in the
US and the Greater Toronto Area in Canada.
Falafel is a traditional Arabic food. It is a deep-fried patty made of ground chickpeas,
served in pita bread.
Kudu Corporation
Saudi Arabia-based Kudu, established in 1988, is a fast food chain that sells meals
including burgers, chicken & fries, and steak & eggs. Kudu has more than 200 outlets
across Saudi Arabia, Sudan, Jordan, and Yemen.
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Olayan Group
Saudi Arabia-based Olayan Group, established in 1947, is a private, multinational
enterprise with diverse commercial and industrial operations in the Middle East and an
actively managed portfolio of international investments. The group holds the franchise
rights to Burger King in Saudi Arabia and is the master franchise for the Arab Middle
East; it also holds the master franchise rights for Texas Chicken in Oman, Bahrain, and
Qatar and franchise rights in the UAE and Egypt. The Olayan Group owns/manages 300
Burger King outlets and 30 Texas Chicken restaurants.
The Olayan Group recently signed an agreement to open 22 Buffalo Wild Wings outlets
by 2018.
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Copyright 2014 Al Masah Capital Management Limited
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