McDonald’s is planning to expand its operations in India through a franchisee network. The company plans to invest INR4.0bn (US$89m) to set up more outlets across the country in the next three years. Bhavna Rathore reports.
McDonald’s in India has been operating through a complicated holding system until now, tying up with two joint venture partners for different parts of the country. While Hardcastle Restaurants promoted by Amit Jatia owns and manages McDonald’s restaurants in Mumbai, Pune, Ahmedabad and Vadodara; McDonald’s restaurants in Delhi, Jaipur and Mathura, Doraha-Punjab, Gurgaon and Faridabad, are owned and managed by Connaught Plaza Restaurants, owned by Vikram Bakshi.
This system ensured that all the restaurants were under McDonald’s direct control and all the premises either owned or on long-term lease by the company. At the same time, McDonald’s has not been able to expand at a faster pace in India even a decade after entering the Indian market. In fact in major areas of the country, the chain is not yet represented.
Now the company is planning to take the franchisee route for future growth. McDonald’s India (North) joint venture partner and managing director Vikram Bakshi reasoned: “The company did not franchise at all during its past decade in India as it first wanted to establish its brand across the country and understand the consumers.” He added: “Since the unit economics seems to be working, McDonald’s will operate through franchisees in the coming years.”
The company has already pumped in INR15bn into its Indian operations. But more importantly, with 70% of the menu developed entirely in India for Indians, the global major has now started exporting its Indian product innovations. Products like McVeggie, Aloo Tikki and Pizza McPuff are very well accepted in the Middle East.
Presently, McDonald’s Indian operations are the fifth-largest in the world, and it is possible that India will reach the number three position, behind the US and China, displacing Japan and Canada on the McDonald’s world map.
According to Bakshi, McDonald’s will first expand into areas within a 500km radius around Delhi, in order to meet supply chain and quality benchmarks. Looking forward, the company will expand into eastern India and establish outlets in non-metro cities like Amritsar, Greater Noida, Jhabli and Kolkata.
The company also has plans to expand the retail format in order to get a wider reach by adding up to 27 new restaurants to the chain across the country this year.
The company has further decided to target office and shopping complexes in partnership with real estate developers such as Unitech. McDonald’s also intends to foray into the retail sector by entering into a partnership with major retail chain outlet Big Bazaar to create a cross promotion campaign for the upper middle class. The retail industry in India has been growing at a very fast pace and McDonald’s partnership with a retail chain will help the company expand into areas where setting up an independent outlet may not be economical.
There are 56 McDonald’s restaurants in India employing around 2,000 Indians.
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