The Indian quick service restaurant (QSR) industry is a $15.7 billion market. Of this, the western quick service segment (McDonald's, Dominos etc) is a $1 billion market. This category has been growing at 14 per cent annually, although business at QSR chains such as Dominos and McDonald's has remained flat in the past few quarters. This, however, hasn't dampened the spirits of Amit Jatia, Vice Chairman, Hardcastle Restaurants, the master franchise of McDonald's in western and southern India. In 2012, Jatia bought the 50 per cent share of McDonald's in Hardcastle Restaurants and merged it with Westlife Enterprise, thereby becoming a licence partner of McDonald's for India in southern and western regions. In an interview with Ajita Shashidhar, Jatia says the buyout has enabled greater operational freedom. Excerpts from the interview:
Q. Why have QSR chains such as McDonald's and Dominos been experiencing a drop in profits?
A. In 2003, Indians were eating out roughly three times a month. In 2013, the number went up to 8.5 times. During this period, GDP was also growing between six and nine per cent, which led to an increase in purchasing power. The footfalls went up and all of us were growing well. When GDP growth dropped to 4.5 per cent, consumption took a beating. The decision to go to a QSR is invariably impulse driven. You step out for shopping, you feel hungry and decide to walk into a McDonald's. When GDP growth dropped, fewer people stepped out for shopping and, consequently, we lost footfalls.
Q. Is the QSR market getting saturated?
A. Not at all. This is a temporary blip and we will come out of it the moment the mood of the economy improves. In fact, during this period when revenues haven't been too good, we haven't stopped opening restaurants. We opened over 30 stores last year. Currently, we have 190 stores in the West and South, and in the next few years we will have at least 250 stores. We are looking at Tier 2 and Tier 3 markets. The QSR market is still quite nascent and there is immense scope for growth.
Q. You have rolled out McCafe last year. What's going to be your strategy for McCafe?
A. We have nine McCafes in Mumbai and the biggest advantage it has brought to the table is that we have been able to get McDonald's in the consideration set when it comes to coffee. It is bringing us customers at different parts of the day, apart from lunch and dinner.
Q. How has been the experience with your breakfast menu?
A. We have introduced the breakfast menu in over 100 restaurants, the familiarisation is still happening. It took us 10 years to establish burgers in the minds of consumers. Our breakfast menu will also soon be a part of everyday life of consumers.
Q. There seems to be lot of competition emerging for McDonald's burgers. KFC is expanding its vegetarian offerings, Dunkin' Donuts has been advertising its burgers more than donuts. Even Burger King is coming soon. Is it a concern?
A. It's difficult to challenge McDonald's burger leadership anywhere in the world. Coming to India, as I told you earlier, the QSR market is still very nascent. There is ample space for more and more brands to come in and coexist.
Q. You ended your 50:50 JV with McDonald's sometime back and you are now their licence partner for western and southern India. Has it changed life in anyway?
A. It's business as usual. The one big advantage is that it has given us freedom to take quicker decisions. During the JV days, we used to open around 20 stores a year, now we are opening 30-40 stores a year. In fact, this is the McDonald's approach the world over. Wherever they go, they first handhold the new partner and when they are confident, they allow the local partner to become a licensee. Almost 80 per cent of McDonald's global business is franchise driven.
Q. McDonald's has perfected the art of offering great burgers at value-for-money pricing. Do you plan to premiumise?
A. We do have premium products, but we don't call them premium. Our Spicy Chicken Burgers priced at Rs 100 or McChicken Royale also priced at Rs 100 are our premium offerings. Our premium offerings sell as much as our value offerings do. We have a holistic menu and the plan to is grow both ends.