Why Gourmet Burger Brand Struggle to Scale and Expand

In a notable incident, the Maharashtra government made headlines by temporarily suspending the license of a Ahmednagar-based McDonald's outlet, operated by Westlife Foodworld. The suspension was a result of allegations that the outlet was misleading consumers by substituting genuine cheese with vegetable oil-based alternatives. This decision was later overturned on appeal, allowing Westlife to modify its menu by eliminating the term "cheese" from certain items. The saga took a positive turn when Westlife recently announced that the Food Safety and Standards Authority of India (FSSAI) has validated its use of real cheese in its products, enabling the reintroduction of "cheese" in the product names where it plays a crucial role.

This episode not only brought to light the strict regulatory environment surrounding food safety and standards in India but also cast a spotlight on the burgeoning gourmet burger market within the country. Gourmet burger brands in India are carving out a unique niche, distinguishing themselves through the unparalleled quality of their offerings rather than competitive pricing. These brands, focusing on delivering an exceptional taste experience, leverage high-quality ingredients and culinary innovation to captivate the palates of their customers. Despite the evident success and a growing base of dedicated patrons, these gourmet ventures encounter significant obstacles in expanding their presence.

“In Bangalore, before the advent of KFC, McDonald’s, and Burger King, one of the OG burger brand was Indiana Burgers (1st, Floor, St. Patrick's Complex, Shanthala Nagar, Ashok Nagar, Brigade Road, Bangalore) It is one of our all-time favourites. But more than the burger, it was Indiana's yummy mayo we were after!,” Anurag Mallik, food procurement manager from one of the star hotels in Bengaluru mentioned expressing that for taste people are preferring homegrown gurmet brands but for a quick snacking large QSRs still are the rescue.  

The challenge of scalability

The primary hurdle facing gourmet burger brands is not operational inefficiency but the intrinsic nature of their business model, which prioritizes quality and exclusivity over mass availability. This philosophy starkly contrasts with the strategies employed by quick-service restaurant (QSR) chains like McDonald's and Burger King, which excel in scaling their operations rapidly. The business models of QSR chains are designed to favor broad accessibility and efficiency, often at the expense of the artisanal qualities that gourmet brands hold dear. Consequently, while QSRs flourish and expand globally, gourmet burger outlets often remain confined to regional markets, striving to maintain their commitment to quality in the face of expansion pressures. 

However, few are still being able to master that gap. “We saw a white space in the premium category when we launched Nino Burgers in December 2020,” says co-founder Nishant Jhaveri. Nino’s menu, with an average price of about INR 420, has a fine selection of about 14 burgers neatly categorised for vegetarians and non-vegetarians. Now available in 60-plus cities, they aim to please the discerning foodie who can tell a portobello from a shiitake.

High Competition in the Fast-Food Sector

India's fast-food sector is fiercely competitive, with numerous international and domestic players vying for market share. The presence of established chains that offer burgers at competitive prices poses a significant challenge for gourmet burger brands. These brands often find it challenging to differentiate themselves in a market where price sensitivity remains a key consumer trait. The competition is not just about taste and quality but also about pricing strategies, location, and brand perception.

Supply Chain Complexities

The cornerstone of gourmet burger brands is their commitment to quality, often necessitating the sourcing of premium and sometimes imported ingredients. Establishing a reliable supply chain that can consistently deliver these high-quality ingredients across various locations in India is a formidable challenge. Issues such as import restrictions, fluctuating customs duties, and the lack of a robust cold chain infrastructure in certain areas can lead to operational inefficiencies and increased costs, thereby impacting scalability and growth.

Apart from the aesthetics, gourmet implies a focus on quality ingredients. The restaurateurs claim not to disappoint. Zorawar Kalra when launched Louis Burger, they announced that the brand uses Japanese mayo, which costs INR 1,600 a kilogram, black truffles from Italy, at INR 1 lakh a kilogram, and sources endive from farmers selected to grow it. It is this attention to detail which elevates the regular burger.

But with these gourmet burgers one of the biggest challenge is delivery. Mayank who has Burger Factory Outlets in Goa mentioned that while they are doing great in terms of their dining business, it is difficult in terms of such juicy and loaded burgers to wrap and send across for home delivery. “We infact insist people to come and dine and enjoy it fresh, for gourmet burgers the biggest problem we have faced is that since the patties are not dry, the sauces are in good quality, there is a leakage issue while getting it delivered,” he said. 

Real Estate and Operational Costs

Securing prime real estate in bustling urban centers or high-footfall areas is critical for the success of any food and beverage outlet. For gourmet burger brands, which aim to offer not just a meal but an experience, the location and ambience of the outlet are even more crucial. The high costs associated with leasing or buying such spaces, coupled with the significant investment in interiors and ambiance to create a premium dining experience, can be prohibitive, limiting rapid expansion.

Changing Consumer Behaviors

The Indian consumer is increasingly health-conscious and environmentally aware, influencing their dining choices. Gourmet burger brands must navigate these changing preferences by incorporating healthier, sustainable options without diluting their core value proposition. This often means investing in research and development to innovate recipes that are both appealing and align with the wellness trend, a process that can be time-consuming and resource-intensive.

To thrive, these brands must continue to innovate, not only in their culinary offerings but also their business models. Strategies such as localized sourcing to reduce supply chain costs, creative marketing to enhance brand visibility, and leveraging technology for better customer engagement can all play a pivotal role in overcoming scalability challenges. Moreover, adapting to the evolving consumer preferences for healthier and sustainable dining options can help these brands stay relevant and grow their customer base.

While the gourmet burger sector in India faces obstacles in expanding its footprint, the demand for quality and innovation presents a significant opportunity. By staying true to their core values of quality and culinary creativity, while strategically navigating the challenges of scalability and market competition, gourmet burger brands can carve out a successful niche in India's dynamic food landscape.