An appetite for more outlets

The Indian food service sector seems to be gradually overcoming the initial shock of market slowdown to continue with its expansion plan. There’s a market revival with retailers across various categories showing marginal 7-8 per cent growth in sales in May 2009 compared to April 2009 apart from a surge of average bill value (ABV) and footfalls. Particularly in food service sector, the advantage is that the footfalls generally translate into sales, however, it is the total ABV that matters and when it’s not satisfactory, it pinches.

A spree of expansion plan

While opening the first ever stand-alone outlet of McDonald’s in Chennai, Mr Ranjit Paliath, Director-South, McDonald’s India comments, “We plan to open 10 more restaurants in the Southern region by the end of the year and plan to open 5-7 restaurants in Chennai by 2010, as part of a concerted growth strategy.”  The US-based Dixy Chicken has entered India setting up its express format in Mumbai. Another one is soon to come up in Lokhandwala. The plan is there to set up six other Dixy Chicken outlets this year. Khandani Rajdhani of Encore Hotels has launched its new restaurant in Mumbai bringing its total number of restaurants in the city to eight. United Spirits (USL), of the UB Group is going to open a wine bar through a large format lifestyle outlet covering an area of 2,000-4,000 sq ft. The sector seems lucrative enough for the company from other verticals.

For example, the Rs 700-crore FMCG major CavinKare has entered the restaurant business with the launching of Foodstaurant in Pondicherry. A series of expansion plans are declared from every kind of retail format in the sector. The Singapore-based Manchester United Food & Beverage (Asia) Pte, a holding company, which owns exclusive rights for operating franchise and developing a chain of Manchester United restaurants and bars in Asia, has forged a tie with Gurgaon-based Billionaire Sports for providing the licence to own and operate Manchester United Restaurant and Bar across the country. The first restaurant is going to open in Mumbai.

Madhura Beverages India Pvt Ltd introduces Italian coffee giant by opening its first outlet ‘Caffe Pascucci Shop’ in Bengaluru. Wadhawan Hospitality Private Limited (WHPL) owns the master franchisee to introduce Cinnabon bakeries in India of the US-based Focus brands. This joint venture has the mission of introducing 150 outlets pan India in another 10 years. Lifestyle entrepreneur Fazle Naqvi-owned Brand Calculus is planning a massive expansion of the Canadian juice brand “Booster Juice” through the franchise route. Brand Calculus is the master franchisee Booster Juice in India.

Earlier KFC declared its expansion plan for this year and an important announcement came from Yum! Restaurant which is going to unveil Mexican food retail format Taco Bell in India. KFC is going to set up 25 joints by end of 2009 with an investment of Rs 40-50 crore. Jumboking has massive plans of taking its present total touch points from 52 to 300 within three years, disclosed Mr Dheeraj Gupta, co-founder and MD of Jumboking.

Franchising a possible route for expansion

According to “Food Franchising Report 2009” by FICCI-CIFTI (Confederation of Indian Food Trade and Industry) and Franchising India Holdings Ltd the Indian food service providers are coming up with massive expansion plan which is going to boost up the growth at 48 per cent in the next two years. The projected rate is obvious since 51 per cent of wallet share is spent on food. The report has also revealed that the 30 per cent of the new food outlets are set up through franchise business model. Highlighting the significance of franchising, Mr Naqvi of Brand Calculus comments that the business model has played a crucial role for its growth plans. After establishing set standard for business operation through company-owned outlets, franchising was the chosen vehicle for rapid expansion.

Incentive for cold storage

The recent announcement of incentive to cold storage and refrigeration companies in the Budget 2009 is another impetus for the sector which will eventually encourage the development of the cold storage infrastructure for agricultural produce, the area a restaurant chain largely depends on. Generally 5-7 per cent of the total operational cost is spent on cold storage management. Abhijit Upadhye, Director- Supply Chain and Menu Management, McDonald’s India (North-East) hopes that the decision by the finance minister will promote faster growth in the segment thereby ensuing better transportation, product handling and quality assurance.