The journey from one to 300 McDonald’s quick service restaurants (QSR) in the West and South India markets took the company 22 years to accomplish. Enjoying 90% share in the burger market, the master franchisee’s next phase of growth will see it reach 400 restaurants and almost a similar number of McCafe outlets by 2022. Smita Jatia, managing director, Hardcastle Restaurant Pvt Ltd, speaks with Ashish K Tiwari about the business, industry, policies and more.
Over two decades and 300 restaurants. How do you see this journey of your QSR business?
Absolutely! It’s a very proud and exciting milestone for us. What we see around in our restaurants every day is a very strong evidence of our successful journey. Our focus has always been on consumers, providing them convenience, the right experience and obviously the food we’ve got. So, that’s been a very simplistic way of looking at our business. Additionally, we’ve also had our focus on sustainability. While we have talked about it in the past by way of our supply chain stories, our business practices have always been environmentally friendly. This approach, we feel will always be beneficial from a long-term point of view. We now have scale and I think both sustainability and more importantly the technology to aid sustainability and our scale can really help us grow our business more sustainably as well as profitably. I think we’re in the right path again in our next growth phase to differentiate where we are going.
The McCafe section in some of your restaurants is very small, a counter of sorts…
That’s because we’re now using technology for the consumer. Maybe not you and me so much, but the millennials are doing everything through their phone or through digital and that aspect is taken care of by our self-ordering kiosks in the restaurant. The consumer feedback earlier was that they didn’t like coming to McDonald’s because there are long queues, they have to stand and there are no tables etc. All that is past now. Consumers don’t even come to the counter, they order, come and take a table. We use a tracker technology, it’s not a buzzer and consumers don’t have to go and collect their food, our people get the food on the table. Every table also has air chargers so consumers can charge their mobile phones/ tablets while having the food.
So, will you adopt the same approach for all McCafé outlets going forward?
Depending on the size of the restaurant sometimes, we will be able to give it more prominence. However, in the case of smaller stores, we would want to give more seats to our customers, hence it’s a little more subtle. You’ll have the counter approach for McCafe across all the 30-odd Experience Of The Future (EOTF) outlets. Having said that, McCafé will always be a part of McDonald’s. And by 2022, our goal is to have 400 restaurants and pretty much every McDonald’s will have a McCafé. We currently have 190 McCafé outlets and 25 to 30 EOTFs. Also, if an EOTF restaurant is big, McCafé may get more space. Digital elements and McCafé will always be there in an EOTF restaurant. Because that’s our new way of serving customers.
Last few quarters witnessed a slowdown in the consumer sector, but the QSR space has not been impacted though?
We’ve given positive same-store sales over the last 15 quarters, that’s almost four years and that’s a long period. Our economy has gone through many ups and downs in these years. Many macro changes, demonetisation, Goods and Services Tax (GST), change of government in the first term. It’s a testimony to our strategy and QSR category will continue to grow. We’ve always said that western fast food (WFF) is 1% of eating out and the good news is that people are not going to stop eating out. In fact, eating out is only going to increase because lifestyle is changing, nuclear families are happening, dual incomes are happening, domestic help is getting more difficult.
Whether anybody likes it or not, WFF will grow and people are going to get better hygienic and safer options at affordable prices. So, WFF is going to grow for sure. How much it grows depends on what the economy is. Will it grow and will it continue to grow, I am sure it will.
Would your next phase of growth get faster, or are you comfortable with the current pace?
I think in our territory between West and South, opening 25 to 30 stores is a good pace of work. That’s because we don’t have to then close stores. During the last downturn, so many of our competitors closed restaurants and we’ve been consistently opening 25 to 30 stores every year in the last 4 to 5 years. Yes, we have closed a couple of stores because there have been trading area changes. When there is trading area changes or malls shut down, there is no option but to close the store. We have not shut stores because we over penetrated in the area. We’ve always said running the business in India is about running a marathon; if you sprint you will fall on your face. But if you run a steady pace you will be able to reach your goal post at a much better rate compared to the competitor. Even when we were just eight years in the business, our competitors who’d just entered were opening three times the number of stores we were opening. Today, if I look at it, we are in a much better position versus our competitors. In the end, you have to see the finish line. It is not about who is ahead and who is behind, it is about who gets to the finish line first and that’s where the name of the game begins.
Now that issues with other McDonald’s master franchisee is more or less sorted, will you look to expand in the North and East India markets?
We see huge potential in the West and South. We have a lot of opportunities here and we are focused. We have enough and more to serve our customers in this part of the territory.
There was a time when Burger King was following McDonald’s everywhere. Is that happening still?
That’s their model so I cannot comment on it. The good news is we are focussed on our goal and we have customer evidence that these are the ways of achieving our goal. We are working on our journey. Competitors may follow us but we feel happy that we are doing something good and leaders are being followed. Seeing our strategies we will be the leader. It’s not being arrogant but we are confident. Seeing the global numbers, McDonald’s is the only non-tech brand that features in the top 10 brands in the world and we’ll continue to be there. We are very proud to be a brand for around 60 years and surviving the recession. There are many brands that died during the recession but we stood strong all this while.
You may soon have to compete with Coca-Cola that’s reportedly in talks to acquire Cafe Coffe Day…
I can’t comment on that. The coffee space is witnessing traction and I can tell you that our coffee business has grown 600%. However, a lot of coffee players have come in the market in the past and have also shut operations. It all depends on what the business model is. We are here to stay for sure, our business is doing very well.
If the upcoming budget gives restaurants an option of 12% GST with an input tax credit, would you take it?
We will have to re-visit and have to see what changes and what’s its impact will be. Input tax credits are beneficial for us, so we will look at it and take a decision. We will be in a position to share a concrete view only after it gets announced in the budget.
Online delivery is getting bigger by the day…
We’ve been in the delivery business since 2004, but we did a call centre model then. The way food tech companies like Swiggy and Zomato have grown, our delivery app has grown too. Not only from our own channels and assets that’s our web and mobile app but nowadays customers want to order different items and the aggregator has given an opportunity to order different things in one order.
Are the aggregators overtaking your delivery app?
It depends on consumers. If a consumer just wants to order McDonald’s they use our assets. However, in Indian families, everyone has a different taste and aggregators help them do that effortlessly.
But McDonald’s also offers that variety with its breakfast, lunch and snacking menu…
It all depends on the consumer, but we are continuously growing our assets and there are strategies to grow more in the future. Our new app has daily cashback offers for the customers too. It gives updates on McDonald’s first then customised the offers. There is a link to our delivery site for added information and also a feedback section for the users.
What kind of feedback you get?
Lots of feedback. Customers love our new offerings, McCafé and EOTF stores. Sometimes, we make mistakes and we don’t deny that. We are all humans at the end of the day and we may not get your food completely right. I think it’s fine as long as we accept the feedback. We are aware and are continuously striving to improve on the basis of feedback received.