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Jan, 16 2010

US & Indian food industry

Restaurants are small businesses with a very large impact on a nation’s economy. The US has a very well developed restaurant industry with close to over 70 billion meal and snack occasions in 2009. On a typical day in America in 2009, more than 130 milli

Restaurants are small businesses with a very large impact on a nation’s economy. The US has a very well developed restaurant industry with close to over 70 billion meal and snack occasions in 2009.  On a typical day in America in 2009, more than 130 million individuals become foodservice patrons with sales equal to $ 1.5 billion. Also, 68 per cent of the adults surveyed said that their favorite restaurant foods provide flavor and taste sensations which cannot easily be duplicated in their home kitchen. The food and drink sales have gone from $ 42.8 billion in 1970 to projected $ 565.9 billion in 2009.  Restaurant industry share of the food dollar was 25 per cent in 1955 and it is at 48 per cent currently.  The purpose of the above statistics published by the National Restaurant Association is to show how fast the restaurant industry in the US has grown and to show the potential of the food industry in a nation’s economy.  Although not all of the restaurants in the US are franchised, restaurants are the largest segment in the franchising business. Franchising has played a key role in taking the food joints to every nook and cranny and certainly given an impetus to the growth of F&B industry. Certain practices and teaching from the US F&B industry can be taken up in India too to make the Indian F&B industry more prosperous.

Economic growth & franchising

The growth of franchising business in the US can be traced back to the economic development and the building of highways that took place in early nineties.  In order to facilitate movement from one corner of the country to another, highways were built with odd number ones going north to south and even numbered ones going east to west.  The stretch of highways and cars/trucks travelling on these roads helped in mushrooming of restaurants and motel businesses, almost all of them now being franchised businesses.  Drawing parallel to Indian situation, highways are being developed to connect different states, and this is the prime time to get into hospitality franchising.  There is always a ‘first-mover’ advantage, and the prospective entrepreneurs should see that they utilize the opportunities wherever they may emerge.

Technological development

The tremendous growth in technology is having a very big impact on the way businesses are done.  From the consumer point of view, one has to understand that today’s consumers are much different than those even a decade ago. The benefits that technology has brought have created a lot of stress among consumers.  People complain when they are booting computers that it is taking a long time. When it takes a couple of minutes to come up on the screen, they send e-mail/SMS and expect response within hours, while we used to wait for days to get responses by mail.  This has resulted in consumers demanding quick results.  Therefore, when they go to any restaurant, they demand quick service – which is helping the growth of restaurants, commonly known as fast food joints.  The popularity of fast foods is evident in the US and we see the same trend in India.  Food delivery is gaining popularity since people are working overtime; more than one family member is working, and a variety of food can be ordered.  The technological advancement such as mobile phone, faxes, GPS, take-out services, etc. are facilitating home or office delivery of foods.  Again, most of these are and can be franchises and a careful development of concepts is urgently needed in India to meet the current demand.  Once a consumer base is solidified, it will be hard to change.  Moreover, it will not be easy to beat a competition once the business gets firmly entrenched.

Food habits

Restaurant franchises have changed the way Americans used to select, prefer, and eat food.  Hamburgers, French fries, Pizza and Colas were not the native Americans’ meal constituents. Because of the convenience, quality, and experience, people developed the habit of eating foods which were different; easy to purchase; easy to reheat, quick to eat; and that can be delivered without much hassle. Children are often the initiators of demand and are at age when food habits are being formed. Much of the marketing and promotion in the US is directed toward children. Similarly, Indian children are now exposed to unprecedented advertising and promotion on TVs and other technological devices, which can be utilised by franchises to attract this market segment.

QVSC

The success of restaurant franchises in the US is not based on food alone. It is a unique combination of Quality, Value, Service, and Convenience.  It has been proven that the global customers are looking for QVSC.  Franchises in India should consider these very essential aspects.  Quality of food can be organo-leptic (taste, odor, feel, appearance, etc.), nutritional, physical, chemical, as well as microbiological. In addition, consumers are looking for service and convenience. A blend of these characteristics will make a restaurant franchise very successful. Thus, the consumer needs are changing, and that should be taken into consideration. This will also be an appropriate time to develop new concepts that will blend all the tangible and non tangible components.

Location

The success of a restaurant franchise operation is based on location. In the US, franchises have mushroomed wherever development took place. In fast developing urban centres in India, this again is a prime time to find a suitable location. In franchising, the trend is for co-branding or non-traditional branding. Combining with other complementary brands is found to be very profitable. Getting into food courts at appropriate locations is also possible. Non-traditional franchise location should be explored to find unique combinations. For example, tea or coffee houses and libraries, restaurants in educational institutions, gas stations, departmental stores, health facilities, convention centres, sports arenas, religious places, theme parks and entertainment facilities, and other such locations should be explored for establishing franchises.  Other such locations would be high rise apartment complexes, gated communities and corporate headquarters, where you have ‘captured clientele.’

Concept development

Concept is the core of any franchise success. If the concept is not developed properly, it is bound to fail. Major mistakes have been made by carelessly developing concepts. An independent restaurant which is highly successful does not guarantee that it will be a profitable franchise. The core elements of replicability, simplicity, manageability, trainability, and other aspects of franchising have to be carefully woven into the concept in order to make a viable franchise. As an example there are dozens of hamburger chains in the US, but we still see new burger concepts coming into the market. A point which needs very strong emphasis, is that, in western countries there are limited basic choices for food concepts, whereas, India is rich with an endless variety of food items which vary from region to region. It will be pathetic if the richness of these varieties is lost in the glamour of imported concepts. It is a challenge to the entrepreneurs to develop concepts which originate from traditional dishes. This will complement what is being offered by franchises coming from overseas.

Summing up, these are some points which need consideration for developing food franchises for Indian market.  The population growth, urban development, and increasing marketing segments, all point to the potential of franchising growth in India. The potential for development is endless; there are several entrepreneurs who can make it successful. Whether getting a franchise from overseas, or developing your own concept, this is the prime time to get into the franchising business.

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