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2013-07-30

QSR Chains Eye India
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Despite slowdowns, quick service restaurants look to India.

Slowdown blues do not seem to have affected international quick service restaurant chains (QSR), with a couple of them making a beeline for India. From South Africa’s Debonairs Pizza to UK’s Yo Yo Noodle, the new entrants in the QSR category find the ‘large’ Indian market more appetizing compared with their shrinking markets back home.

Anuradha Makhija, master franchise and CEO, Yo Yo Noodle, said, “The Indian market is almost 13 times bigger than the UK market, and since there are not enough Chinese QSR brands in India, it is the right time to enter this market.” The 2-year-old QSR brand in the UK would be selling its Yo Yo Noodle in a box format, priced above Rs 200, with plans to launch 200 outlets across the country.

South Africa’s Famous Brands is also entering the India with its Debonairs Pizza. Emulating the doorstep free-home-delivery model of pizza chains such as Domino’s, Debonairs Pizza would localize its offerings to suit the Indian palate.

Meanwhile, American burger chain McDonald’s, which has been present in India for the past 17 years, also plans to step up its presence through its master franchise Hardcastle Restaurants, a subsidiary of listed company, Westlife Development.

Singapore based Investment firm Arisaig Partners will pick up 3.5 per cent stake in Westlife Development to help McDonald’s add 100 new stores in the next two years.

Amit Jatia, Vice-Chairman, Westlife Development, said, “The funds will be used to invest in the growth of our retail footprint and increasing our market share by building upon the foundation that we already have.”

Navroz Mahudawala, Managing Director, Candle Partners, a boutique advisory firm, says, “There is far less competition for international QSR chains in India compared with countries such as the US, UK and South Africa, where growth is also limited. The new QSR chains are attracted to the success of players such as Domino’s and McDonald’s in India and the format will also help them expand to tier 2 cities easily than fine dining formats.”

According to a report by Candle Partners, the quick service restaurant segment is witnessing the fastest growth rates in the food industry at 20-30 percent fueled by an increasing women workforce, high number of nuclear families and huge jump in the number of people eating out, as well as ordering at home.

Our Thoughts

Assuming QSR chains are able to tune their offerings to suit local taste, how will they go about their market planning? Which cities will they enter first, and where?

Definitely tough choices. Some combination of local expertise and a data-driven approach is going to be needed to maximize productivity, while minimizing risk.