India Food Franchise Industry Primed for Massive Growth [inactive]
Posted by Kristin Martonik on Dec 20, 2011
Dale Tasharski, Deputy Commercial Counselor at the U.S. Embassy in New Delhi, reports that citizens under the age of 35 represent a staggering 71% of the population in India. This emerging Indian middle class is well educated, modern and social. They are the new peak earners in the booming India economy, and they love US food franchise brands. This presents an unprecedented opportunity for growth-minded US food franchises and well-capitalized entrepreneurs, investors, and restaurant operators in India to work together to profit from the growing gap between food franchise supply and demand.
Fransmart has been widely successful promoting high quality, socially responsible food franchises across the United States, Europe, Asia, and the Middle East. With sights now set on India, Fransmart's Paul Tran interviewed Arun Chanda – an 18-year veteran in the hospitality industry - for insights into the India food franchise market.
Tran: What kind of food franchise formats are thriving in India right now?
Chanda: QSR"s (quick-service food franchises), cafés (I"ve seen 50-60 new café chains pop up in the last 5 years), and casual dining franchise chains are being very well received; people want something fast and easy for breakfast and lunch. And at night, families and friends want to socialize with good food but not spend too much. With a few exceptions, fine dining isn"t doing too well here in India.
What is the appeal of international food franchises as compared to domestic brands?
Chanda: Indian investors, entrepreneurs, and food franchise operators still lean towards international brands – especially from the US. There are many India based concepts popping up around the country, but they are new and are still perceived as unproven in the face of US food franchise chains, who are credited to creating the food franchise business model and have the appeal of something new, exciting, and imported.
Maybe Indian food franchise concepts will mature to par with overseas brands – but that probably won"t happen for a while.
What are ingredients for success for an international food franchise to be mindful of when entering India?
Chanda: Successful international food franchises must focus on altering the menu so that 30-40% of the food offerings have a local Indian twist – whether it be soupy, spicy, and/or rich in flavor. It will show that you care about the culture, have done your homework, and it"s a bridge that you build between India and your culture, versus having a disruptive – cold "my way or the highway" – presence and creating a barrier to trial.
A food franchise must also be flexible. It"s an extension of what I mentioned above about localization of food. McDonald"s is the toughest food franchise when it comes to maintaining consistency and brand principles – but they had to change almost all of the ingredients in their offerings to cater to the market in India. I"m sure it was a hard decision for them, but their India ROI reflects their concession favorably.
Food franchises need to choose the right partner – not just a food franchise investment group with a ton of money. Just like recruiting franchisees in the US – finding someone with money but no passion for the brand, compatibility in working together, and willingness to follow the food franchise"s goals, will be disastrous to your brand. You need to find a food franchise partner in India that is well-capitalized, must accept that when they are growing a chain in India, making a profit the 1st year isn"t to be expected, and that they are in love with your concept and have a full understanding of what needs to be done.
A solid India supply chain… You need to be sure that your proposed menu items can be distributed to your food franchise partners" markets and stores predictably, consistently, and cost-effectively.
Training. Although food franchise labor is very inexpensive – which is a huge competitive advantage for India – training and support need to be top-notch. Potential franchisees will be calling your other franchisees to validate this. Most international food franchises like McDonald"s, KFC, and Domino"s are successful because they have regional training centers that go through brutal testing. They hire many, many workers because (1) labor is so easily available; and (2) it creates competition and motivation to do the best job, to be hired. Very important!
Name a few chains that you admire that have entered India successfully.
Chanda: Burger King, Starbucks, Quizno"s, and Dunkin" Donuts have already entered the market and I think they will do well; more established brands include McDonald"s, Taco Bell, KFC, Domino"s Pizza, Pizza Hut, Subway, Nando"s, Costa Costa, Café Coffee Day, Hard Rock Café, Papa John"s Pizza, Subway, Chili"s, Cinnabon, Gloria Jean"s Coffee, and The Mind Café. I think several brands in Fransmart"s portfolio, namely Freshii, Nature's Table Cafe, zpizza, Mazzio's, Flippin" Pizza, Glaze or Calexico, could thrive in India.
Do you have any advice to a Franchisor that"s looking to enter India for the 1st time, in terms of geography?
Chanda: The most successful food franchises have had a track record of entering Mumbai and Delhi 1st. Delhi is the capital of the country and Mumbai is the commercial capital of the country – so these provinces have the maximum number of workers that grant massive exposure, people in these provinces are wealthy investors and business people who are educated and most receptive to new brands, and they resemble American demographics the most. After you"ve successfully penetrated these areas, the next trajectory goes to Bangalore, Hyderabad, Chennai, Pune, Kolkata, and Chandigarh, and then the ripple continues.
There is a huge trend in the US and other parts of the world, like the extensive work we do in the Middle East, on eating healthier, using organic ingredients, and being more conscious about what one eats. How much of an impact does that movement make in India?
Chanda: There is a noticeable growth of people who are eating healthier in India – but it"s mainly for status, and the momentum isn"t enough to be excited about yet. Healthy-centric food franchises can thrive in India, but there are limited customers, and you"d have to be very, very, very picky on real estate. So the opportunities there aren"t as abundant and chances for profitability and success are a little trickier.
The reason why is because the Indian population has been raised on very flavorful, rich, oily, and spicy foods. I do see the health trend catching up to us as it has to the US and Middle East, but not for a little while. But if you are a chain that is nimble in the face of change – as I mentioned earlier with flexibility as an ingredient to success here – then you can capitalize, no matter what stage in your growth.
Arun Chanda is the founder of Delhi, India based Mint Hotels & Restaurants Consultancy – a 360-degree, full-service firm that manages profitability for all aspects of the hospitality industry – including, but not limited to, concept development, multi-unit management, sourcing vendors, construction, menu engineering, financial analysis, marketing, branding, operations efficiency, training and development, and franchise development.
Paul Tran is the Senior Director of Development at Fransmart - the largest franchise development company in the world, known for launching highly-successful restaurant chains including Five Guys Burgers & Fries, Qdoba Mexican Grill, zpizza, and other national and global brands. He manages the firm"s emerging concepts division and is involved in recruiting franchise operators, raising capital, and territory development.