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Jun, 01 2009

Business Focus : Texas Chicken

The fried chicken market in Indian food and beverages industry is getting spicier.

50-year-old legacy

Founded in 1952 by George W Church, Church`s Chicken (Aka Texas Chicken - the chain uses this brand name in Asian countries due to cultural regions) derives its name from its founder who developed a perfect blend that turned out to be the recipe of success for this chain of restaurants. Founded in San Antonio (Texas), Texas Chicken is a highly recognized brand name. Texas Chicken serves freshly prepared, high quality, flavorful chicken with signature sides hand-made from scratch biscuits at low prices, and differentiates from its competitors in care and attention given in preparation of food, and is positioned as the value leader in the chicken QSR category. The company`s standard flagship product is fried chicken, and in fact the company is known for its spicy fried chicken. It is the largest seller of spicy products and the largest seller of jalapeno peppers in the entire world.

Global penetration

With its global revenues reaching more than 1.2 billion, which in Indian terms is about 6,200 crore, Texas Chicken has spread its name in 22 countries and in five continents. Texas Chicken presently employs 35,000 employees.

Texas Chicken, the international brand of Atlanta-based Church`s Chicken opened its first restaurant in India in the city of Hyderabad on September 11, 2008 and second one a couple of months later. Very soon it will be opening the third one. At present, Texas runs 1640 restaurants globally.

The restaurant chain, although new to India, began expanding internationally in 1979. The company`s three best performing markets overseas are Portico, Mexico and Indonesia. All three have approximately 100 stores each and have significant market share. They actually outperform on unit basis or customer count basis of the US averages. Texas has already penetrated in most of the major cities in these countries.

Spicing up for India

Texas Chicken believes in selling the American label which it believes, makes it receptive in international market which is hungry for products made in the US. Harsha Agadi, CEO, Texas Chicken says, “If you start localizing your brand and diluting it, you are no longer an American company.” Owing to this strategy the company generally sticks to its menu. But one change it will make that is pertinent to India, will be to continue to foster its spice lovers. Agadi adds, “We will actually increase the level of spice in our products as we do in Trinidad, Middle East and Egypt.”

“We have spent a year researching and engineering our concept, positioning and menu developing, and are proud to bring a truly authentic Texas tradition with a touch of masala to India” said Agadi.

Texas is very much confident that when it enters the pan India market it will have the right flavour for the Indian population. It also believes in offering the highest value as the company is known for big pieces and low prices. The product is very unique in the way it is breaded, double–breaded and marinated, thereby giving it a crunchy outside and a juicy inside. Church has already outsourced its accounting and IT operations from India.

Its menu specialties include Southern-style fried chicken, fried okra, mashed potatoes with gravy, cole slaw, honey butter biscuits and jalapeno cheese bombers. New menu items are being introduced by the restaurant chain regularly to give a boost to sales. New menu items are launched with extensive research and testing. Texas spicy chicken has a universal flavour and is transportable across various demographic segments which is a huge success for the company. Internationally, the company is very much focused on opening stores in Japan, India and China. Texas Chicken`s menu is very simple comprising of fewer items, prepared well, which make the restaurants easy to operate. The company aims to grow to 2,500 stores by 2010; overseas foray is contributing a major share to its expansion.

Franchising - a right strategy

Even from the start the company made it a point not to open any company owned stores outside the US. Texas generally master franchises its concept for every nation, exception though being India. Each state in India is equivalent to a European country. Owing to this, instead of master franchising the entire country to one franchisee, Texas is master franchising in India by state. Texas has already awarded the master franchise rights in Andhra Pradesh to SH Group. “Going forward, we will look at state by state with a few exceptions of states or markets. If it`s small we might combine a few states. We believe this offers the best way of franchising because the major metroes in the state will be owned by the master franchisee, and the master franchisee will then sub-franchise in tier B, and tier C cities.” Agadi informs

Texas intends to sequentialise its process and growth by increasing penetration in one city followed by another city. As Agadi says, “My preference is to be a regional king.” Therefore, we will first scale Hyderabad before stepping into second and third city. In India, Texas is currently focused on identifying superior groups to notch the exclusive franchising opportunity for individual states in India.”

Criteria for selection of site

The highest consumption of chicken in India is held by two states – Andhra Pradesh and Punjab. Texas is targeting both these states vigorously as also metro markets of Mumbai, Delhi and Bengaluru. For retail locations Texas has shortlisted three types - the first, the high street locations, second, the malls and third the highways. National highways are the preferred zones, where Texas will offer great product with great service with great forms of relaxation.

Standardisation of product, services

Being in food business for past 57 years, standardization of product and basic nuances of quality competence are some of the areas Texas has already dealt with. Texas has been franchising for past 51 years having over 200 franchisees in over 20 countries. Talking about the critical factors of standardization Agadi says, “Supply chain is very critical as it standardizes the product quality. Logistics is very critical because the food has to be delivered just in time, but the third equally important point is that we should not forget operational standardization. The company is very qualitative at operational standards.” Every Texas chicken store is inspected every quarter with great care, with a score card that is followed internally. Talking about choosing the right partners in business, Agadi says, “The potential franchise partner must have the financial ability, however, more than money, it`s the mind set of the person. Our brand cannot be a hobby for somebody who is trying another idea, this has to be their main business.”

To support the franchisee through the business there are three areas. The first is, Texas will definitely assist handholds in planning marketing to achieve the best results, second, it will help train the entire staff, the crew, the managers, so that there is great depth in people`s skills. And the third area is, it will make sure that the stores are located suitably. In restaurant business, location is considered to be the most important aspect, and Texas will make sure, that it identifies the right location.

India a new found pasteur

A lot of American fast food companies have come to India making a lot of money for themselves. Kenneth A. Cutshaw, Executive Vice President & Chief Legal Officer, Texas Chicken states, “I think our goal is not just to make money but in addition to that deliver American entrepreneurship at its fullest in the Indian environment. We have individuals in our franchise domain who started as dish washers, and they are today the eminent franchisees with excess of 100 stores each.”

India is one of the most important countries where Texas wants to expand with the experience and history of the brand. The company seems to be stepping in the right direction. Launching the brand was the first step, establishing major presence in the Indian food retail market will make it take a giant leap.

Financial requirement would be typically a million dollar net and liquidity of 1,000 dollars. In Indian terms that would be about Rs 5 crore net worth and Rs one-and-a-half crore liquidity.

If we see the success of US companies operating in India the future of Church`s Chicken seems very bright. Food and beverages is already high on the radar of international companies who are planning to enter India, and lack of organized spicy chicken operators guarantees huge success for this concept.

The company is looking for entrepreneurs to spur growth. To partner with this fastest growing food chain.

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