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Jun, 01 2009

Who`ll be India`s McDonald`s?

Race to be the Indian McDonald`s has just begun as the tempo is rising with all the food

How about coffee tonight?

Your place or mine?

How about Café Coffee Day where everyone can join us?

Such is the common dialogue between the youths of today when it comes to chatting over a cup of coffee. Apart from the college canteen the latest hang out zone amongst today`s youth are cafes, fast food joints and food courts.

Remember the local chaiwalla`s shop where everyone meets in college and later again gathers after years of bonding at the same place. That`s the kind of environment food service joints are offering to today`s consumers. Whether it is a birthday party at one of these joints or delivering food to your home, they are all trying to be a part of your daily routine and making every day special. Counting the endless occasions to celebrate, each and everyday food company is gearing up fast, not to leave any moment to be a part of customer celebration and spending.

Lot of dough

Over the years the consumer expectations have risen and they do not settle for anything less than the best. Also a new class of decision makers has been introduced in Indian families – the kids. They not only influence the decision of their parents on which restaurant to go and which cuisine to order but are also gradually becoming a part of mainstream consumers.

Along with kids, youth also plays an important role. Today, more than half of the Indian population is under 25 while two third is under 35. With such a huge group, no chain can afford to ignore their tastes and preferences.

As the growth in the double income household increases and the lifestyle of dining out witnesses an upward trend there has been a constant rise in number of restaurant chains, both domestic and international to tickle the Indian palate.

As per Ernst & Young, the annual turnover of Indian food services market including full service restaurants, quick service restaurants (QSRs), fast food joints, cafes and bars, street stalls and home delivery caterers, is estimated to be over Rs 32,500 crore. Currently, this market is largely unorganized. In terms of value, the penetration of chained /organized players is at a mere 2.6 per cent.

Experts feel, there is a plenty of room for growth as there is a burgeoning population that is undergoing a vast socio-economic change. The number of working women is also on rise in India and by far, India can be seen showing an upward trend, as far as eating out is concerned. Industry players are excited about the burgeoning middle class and see this as a major growth driver for the food service and restaurant industry.

Formats and cuisines

In the dining out space, equations are changing on how the food is served which can be called the invention of the West and an inspiration for the East. While American cuisines basically thrive on the quick service restaurants (QSR) format, Indian cuisine is more popular through dine-in concept given the cultural heritage. The QSR format is possible because the kind of food served by American chains is fast to cook (so the name, fast food restaurants) and Indian meals are generally time involving, thereby requiring proper dine-in.

Indians like the food to be cooked fresh instead of opting for pre-cooked meals that can be served quickly. Though there is a blurring line between the two preferences, both are adopting each other`s formats. Indian traditional food is getting modernized. India`s young generation is giving way to the spread of QSRs to set their footprints, as today`s generation wants to be American fast A recent McKinsey & Co. report on US operations stated that QSR is giving way to emergence of casual dine in format which serves fresh products.

Fine dine restaurants followed by quick serve restaurants are the most franchised food segments in India. The Café and Juice bar culture is also on the rise because of the younger population. Casual eating from kiosks has also increased following rise in mall culture.

The Indian food sector serves variety of food giving rise to a number of Indian food chains, pizza chains, burger chains, coffee chains, ice cream chains, cakes and pastry chains, etc. Bakery, confectionary and ice-creams are some of the food items that are mostly sold through kiosks.

Brownie Cottage sells the products comprising brownie, brownie toffees and brownie shakes through kiosk module only. The company operates take-aways too, which form a very important part of its daily collection. At present, Brownie Cottage runs 10 outlets across India. One of the prominent advantages of operating through kiosk is no staffing problem.

Talking about the formats used most Ashish Nanda, Partner, Retail and Consumer Product Practice, Ernst & Young says, “Traditionally, standalone formats across full service restaurants, QSRs, cafes and bars were very popular. However, the trends are fast changing; players are expanding presence by venturing into food courts and formats with modified offerings.”

India is a land of diverse tastes and cultures owing to which various kind of cuisines find acceptance right under the sun. The choice of cuisines depends on the city we are going in and the tastes of the people. The kind of format one uses depends on the kind of products being offered.

As you like it

Whether it is the pizza becoming a staple diet of Indians or the coffee culture invasion, India has seen it all. Even the pizza is being served in its different variations. Apart from localization pizzas are being served in newer formats like pizza in a cone and pizza by slice.

Students spending time at coffee shops taking back home fond memories have all given rise to India born Café, Coffee Day and Barista apart from international chains like Coffee World, Costa Coffee, Gloria Jeans, etc.

In terms of food and beverage, Indian market has good number of international operators coming in as India features high on the radar of international brands expansion. International chains are focusing on a new set of customers by offering breakfast meals which has still not evolved much in India. People are willing to go out for a cup of coffee, dinner or lunch but breakfast segment is still very nascent. Fast food is turning out to be the favourite of the younger generation which can be gauzed by seeing the boom in sales in international pizza and burger chains in India.

Quick food, quick returns

The sector seems to be booming with more and more players wanting to make a quick entry into the market to cash in on the growing demand. In fact, QSRs have redefined the concept of eating out in India. QSRs are gaining momentum as also the consumer expectations for food worth the value, served in sterile, hygienic ambience with quality and standardization of taste. So a QSR format without making a big hole in your pocket will give you a good experience. QSRs combine the convenience of fast food restaurants with the quality of casual dining. In the wake of growing popularity of QSRs newer formats with more innovations are expected to descend soon. As per experts, the convenience of QSR chains is driving their growth in international market, like McDonald`s and Yum! Brands. Most of these international chains vouch by the franchise route to enter and operate in India.

The international chains have been received well in the emerging markets giving them the boost to continue operations in India. Given the affordability factor of QSRs they are doing well despite the downturn in the economy. Pizza, pasta and burger chains are making fast bucks by serving fast food in a clean and hygienic environment.

Adopting various formats of service by these food chains means to have as many ways of serving the customer as they can. The QSR model has adopted various formats like outlets, kiosks and take-away joints, which offer all the more opportunities for growth. The crown of QSR in India, is held by Nirula`s who started serving burgers in India, in 1970, but the QSR business caught up with the wave during the 90s when international QSR chains brought in their formats and better technologies to serve the Indian masses. In this race of QSR both, domestic and international chains are competing with each other to grab a share of the pie. In the 90s Domino`s made a mark on the Indian terrain by franchising its brand in India.

Nirula`s operates in different formats of QSR like Family Style Restaurant, Nirula`s Express, Fuel Station Units, Pastry Shop and Ice Cream Kiosks. All the formats are different in size, the biggest format is Family Style Restaurant (FSR) and the smallest is Express and Kiosk. The bigger FSR also have pastry shops as part of the outlets. The menu remains the same across the formats except that the tandoori products are not available in fuel station units as they are located in petrol pumps. The ice cream kiosks serve only ice creams and they are mostly located inside a mall.

Marrybrown was launched in India in the year 1999. As there was a dearth in good quality fast food restaurants, MGM Entertainments, the Master Franchisor opened the first chain of Marrybrown Family Restaurants in Chennai. Marrybrown distributes its products in all the formats, viz., Take-aways, Home-Delivery and Out-Door Catering. At present, there are 26 Marrybrown outlets in South of India, predominantly in Chennai.

Moevenpick Ice Creams were launched in India in 2001 as there were no luxury ice cream brands in India at that stage; a sizeable niche market was identified and hence the products were brought to India. Talking about the ice-cream industry in India, M.V.M.Rao, Consultant- South Asia, Nestle Super Premium S.A. says, “The ice cream market in India is very small in per capita terms compared to developed markets, however, with per capita income level going up slowly, the consumption patterns are also changing. The ice cream market in India today, is estimated at over 100 million liters per annum.”

The company makes its products available in two channels: Out of Home (OOH) and Retail. In the OOH channel it is present in some of the fine deluxe hotels in Mumbai, Hyderabad, Kovalam, Goa, Delhi and Kolkata. The products are also sold in dedicated Movenpick outlets in Chennai and Hyderabad.

For a potential food eatery operator, both, QSR and dine-in restaurants can become interesting options to consider. Both serve the purpose at different times and occasions and both are adopting different means to attract consumer. However, in terms of expansion, the spread of QSRs is much more than dine-in, owing to difference in investment and complexity of operations. QSR is easier to operate as the operations are simple and easier to define, making it easier for a franchisee to get started.

Though there has been an increase in the number of global QSR chains entering India, Indian fine dining restaurants are also getting exported overseas as internationally, it is being accepted as a part of Indian culture and cuisine.

Internationally, Bikanervala is running one outlet in New Zealand, and very soon it will start operations in Australia and Sharjah. It is also running two outlets in Dubai and four outlets in Kathmandu.

Internationally, there is a tremendous opportunity for Indian players.

Standardization – quintessential for franchise network

Simpler the menu, easier it is to operate and easier it is to franchise. Speciality Restaurants has laid down strict guidelines to be followed by the franchisee, Anjan Chatterjee, CMD, Speciality Restaurants says, “We have a set of standard guidelines based on our experience. Some of these have to do with the promoters of the franchisee entity while the rest deal with the space format and specific brands.” The company also has contracts in place with select vendors in each category. It is on line with its units and vendors to exercise effective control and time bound supply chain management. Gaurav Jain, Director, RTC Restaurants states, “A lot of our products are developed and introduced in a commissary. We have a very large commissary in the NCR market which caters to all restaurants and vendors. We have refrigerated trucks which deliver products everyday to our restaurants. I think by putting it centrally and controlling quality from one point, we are able to ensure consistency.”

On achieving standardization, BJN`s Nichani says, “Thorough planning and years of experience have resulted into optimizing resources. A centralized distribution system has added to our advantage.” BJN has under its umbrella, 19 fine dining restaurants and pubs and 40 plus outlets pan-India, namely, Bangalore, Hyderabad, Mumbai, Gurgaon and Jaipur. Beginning from Chinese, Thai, Malay, North Indian, Continental, Tex-Mex and American culinary delights, BJN offers a wide range of cuisines to tantalize different taste buds. The group plans to reach 100 outlets over next two years.

Talking about ensuring quality, Hari, MGM Entertainment says, “We have a Standard operating procedure which is followed at all the outlets and we buy our products from one common reputed supplier who specifically manufactures for Marrybrown.”

Encore Hotels flagship brand `Khandani Rajdhani` operates through various formats, viz., Dine In, Take Away, QSR, Home Delivery and Catering. At present, the company has 30 outlets in India and one in the Middle East. On ensuring quality in all its outlets, Ajit Nair, General Manager, Corporate Operations, Encore Hotels, says, “The menu is planned centrally; chefs are trained in the Corporate outlet before being deployed. The team of quality cell regularly visits the units. Also random audits are conducted through external agencies.”

On achieving the same taste everywhere, Dasondi says, “The whole idea of franchising would be a waste if we were not able to standardize our offerings. Our chefs have created easy to follow recipes and the key ingredients are supplied to all our franchisees. Except for local dairy and perishables, all other items are supplied through our central commissary. We have national tie-ups with key suppliers, hence, ensuring consistency in key products.”

Impresario Entertainment & Hospitality Pvt. Ltd, essentially, has three variable formats namely, franchise model, company owned stores and management joint ventures. Besides Mocha, the other brands under IEHPL`s umbrella are Salt Water Café Mumbai, Smoke House Grill Delhi, Stone Water Grill Pune, Delitalia Mumbai, The Tasting Room Mumbai, Prithvi Café Mumbai, Mocha Bar and Mocha Mojo Mumbai.

Rise of Indian fast food operators

Today, the F&B industry is very significant as large number of small entrepreneurs and start up enterprises are aspiring to create niche for themselves. Franchising has always been a preferred route for business development of food companies. We have today, 17 per cent share in food and beverages industry coming from franchise entrepreneurs.

Experts say that with the increase in brand visibility and assured quality food products, franchise chains can better perform in terms of competition with individual operators.

Food service industry is continuously evolving and offers an incredible area of opportunity for prospective franchisees. Organized food & beverages market has been showing a tremendous growth with the international brands foraying in India; brand awareness has increased, and along with have increased franchising opportunities.

Talking about strategies to capture more market share Goel avers, “We are trying to run our current outlets in a good, profitable way so that people when they come across our outlets, approach us for our franchisee.”

One thing common in all of them is their aim to spread operations via franchising. If we compare franchising in the International market where food is the highly franchised sector there are variations in the Indian franchising scenario and typically in food - the helm of the franchise business. The Indian food chains still have to deal of inconsistency of producs which might lead to a failure of food franchise.

While comparing Western counterparts of Indian food chains, Chatterjee avers, “These chains bring with them newer definitions and standards of operational excellence, hygiene and training techniques. They also bring with them a huge amount of expertise in supply chain management and vendor development for specific areas of operations. They also get with them the new sales strategies and methods hereto unheard of in India.”

However, Chaterjee believes, in the end, the Indian chains will emerge as winners owing to their strong understanding of Indian consumers and ability to adapt quickly.

At the end he concludes, “The Indian market today is an exciting place to be in. It not only features Indian players but also international players bringing about a huge variety of offerings to Indian consumers. There are new learnings and old lessons to be had for each and every operator. In spite of the slowdown, every one seems to be doing well.”

Indian players` focus is the menu and the personalized service element. Also absorption of latest technological initiatives whether in terms of cooking equipment or by way of operating systems seems to be an inhibiting factor due to the large capital costs involved.

In a typical Indian organization it is the menu and the people delivering that seem to be driving the process whereas in the case of international players it`s the process that drives the menu. Many of the Indian food chains are keen on adopting the QSR formats to serve the Indian masses who are quickly changing domains towards westernised concept. However, in the long term both have an ability to co-exist and serve different masses and classes by their niche of providing personalised services.”

To this, Nanda says, “A large majority of international players have entered the QSR and casual dining which is growing between 18-21 per cent and have successfully captured lion`s share of the organized market.”

However, the contribution of the organized market in this space is still very limited and contributes to approx 5 per cent of the QSR and casual dining space.

He adds, “The key take away is that even though foreign players are expanding, the overall size of the pie is also increasing at a healthy growth rate, which is adding the required stability to the market. Another positive take away is that Indian players have developed better processes and systems in response to competition from foreign players.”

On the franchise format, Satyen Dasondi, Executive Director, Impresario Entertainment and Hospitality, says, “The F&B industry is not glossy and rosy as the ads make it out to be – there is a lot of hard work, time investment, patience and nurturing required for the fruits to be borne. The risk in franchising is as much a risk as in an arranged marriage – both parties must accept each other in totality and unconditionally. The minute one starts doubting the integrity of other party, the bond cracks.”

The market is big enough to accommodate all the players.

Snacking in

A lot of companies in the organized sector are already eyeing the QSR segment serving fast food of western style. The Indian food market however, doesn`t boast of many national level players who can serve food of mass interest.

In snacks category the leading name appears of Mx Foods on its Mx Chaat Street who operate through kiosk model. Mx Corn and Chaat Street are two brands of the company.

Bikanervala, the famous ethnic food retailer, recently launched its Bikano Chaat Café. In Chaat Café you can get only selected items, just like samosa, kachori and chaat - it would be like a cart concept.

The emergence of Bikanervala has been instrumental in giving an organized way to Indian ethnic food. Deepta Gupta, Vice President, Bikanervala, says, “The kind of format we have is totally a gap in the market. We are offering all kinds of foods - from breakfast to lunch - to dinner - to snacks - we serve everything. The QSR category is entirely different, but in our format we are offering food that can be served all day long.”

Bikanervala will open 10-15 outlets in the next two years - a mix of both, company owned and franchised. At present, out of the 30 operational outlets of Bikanervala, which are restaurant-cum-sweet shops, 16 are franchised and 14 are company operated. On managing the supply chain, Gupta says, “Supply chain is managed through vendor system. We are fixing the vendors on contract and they would supply throughout India.”

Vouching on the role of technology, he adds, “If technology is there, definitely the process and development will become fast.”

An emerging start-up is Crepeteria. Buying the concept from the international market, the crepes are served in a smaller format like kiosk and are also sold on high streets, institutional areas and malls. Adith Podhar, Director, Altius Enterprises, who started the concept last year, has seven outlets operational. The company is targeting to open 24 outlets in the next one year.

The food industry has given rise to many players. Economic slowdown not withstanding, fast food chains are witnessing revenue increases from 20-100 per cent.

In a major diversification move, Ahmedabad based soft drink concentrate major, Rasna, has made a resounding impact on the beverage market with introduction of `Devil`s Workshop` – an exclusive chain of outlets retailing fast food and beverages conceptualized and dsigned by the National Institute of Designs. Rasna has successfully launched four of the five models, namely High Street Shop, Shop-in-Shop, Kiosk, Floor Dispenser and Tabletop / Tray. The outlets are currently serving Devil`s delicacies like Donuts, puffs, burgers, hot dogs, sandwiches, chole kulche, health breads, cookies, brownies, cakes pastries, croissants as well as hot and cold beverages including slushes, smoothies, milkshakes, etc.

Expanding further

Presently Nirula`s has 64 outlets across Delhi, Uttar Pradesh, Uttaranchal, Haryana, Punjab and Rajasthan. Nirula`s intends to have 20 – 25 new outlets in the coming fiscal year. Kuckreja informs, “We will soon be entering new territories like Mumbai, Kolkata and other cities. Along with metros, the focus will also be on tier-II and tier-III cities like Pathankot, Moradabad, Ludhiana, Amritsar, Agra. We are launching a Potpourri in Lucknow and FSR in Pathankot in the coming month.

Talking about the USP of his concept A.G.Puttaraj, President, Coffee Day Xpress, says, “CDX is designed as the `convenience café` format. It offers all the goodness and quality of a café experience with speed and affordability. The USP of our franchisee model is that no working capital is required, low risk factors, low investment and flexibility in addition to a well established bandwidth.”

The company plans to take the numbers to 1200 outlets from its present 895 outlets and add another 300 franchisees on board. The target areas will remain the same with the existing cities, like: Delhi NCR, Chandigarh, Jaipur, Kolkata, Mumbai, Pune, Nagpur, Ahmedabad, Surat, Bangalore, Chennai, Hyderabad and Mysore.

Summing up the USP of Club City, Grover says, “Club City is an array of cuisine brands like, Dosa Plaza (South Indian), Masala Country (North Indian), Shanghai Post (Chinese), Pizza & Co. (Continental), that offer to customer a whole variety of food to choose from (under one roof), which can be accommodated in both - the food courts as well as the restaurant formats.”

Encore Hotels is entering into Tier-II cities, by adopting flexible pricing strategies, QSR formats, Meal Box and Deliveries and Strong Promotions.

Talking about Marrybrown`s expansion plan, Hari says, “At Marrybrown we are in the process of mass expansion plan wherein the projection is that we open one outlet per month which is a combination of company owned as well as franchised outlets.

For Movenpick, plans are underway to open additional outlets in Mumbai, Hydrabad, Chennai and Kolkata. Rao says, “As it is a gourmet product aimed at the urban elite, we plan to focus on top 6 cities in India with business expansion aimed at improving availability to the target audience in these cities through flagship stores, kiosks and scooping stations.”

At present the company`s franchise concept is under development. Movenpick has three operational outlets in India with plans to add 6 more by the year-end. In the South Asian region, we have 11 operational outlets at the moment.

Devils workshop is ready to appoint Master Franchisees, as it is fully geared and motivated to go pan-India. The company has targeted revenues of nearly Rs 1,000 crore from the F & B industry in the coming five years.

"We plan to target all the metros, mini metros and a dozen tier-II cities including Pune and Chandigarh for the fast food business by taking the franchisee route”. We found that the biggest growth in the food retail segment is coming from ready-to-serve foods due to changing lifestyles and onset of modern retail." informs, Rajendra Gandhi, spokesperson, Rasna International.

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