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Big companies have increased engagement with QSR chains for better business models
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Tuesday, 27 July, 2021, 13 : 00 PM [IST]
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Aditya Bafna
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The fine dining industry has received a huge blow due to the Covid-19 pandemic. With the uncertainty of the lockdowns and increasing consciousness about dining outside, it’s not looking good.
In a time like this, big companies are on a lookout for alternatives to increase their sales and stay relevant in the market. Most companies have shifted their focus to QSR chains.
QSR or Quick Service Restaurants focus on providing customers with food in a quick and efficient manner. Which means that, generally, there is no table service available. The food is cooked to order in a short span of time. Owing to the current global time QSRs have received a tremendous hike especially in the Indian market. It is estimated to touch a 51,000 crore mark by 2o21. Some of the famous frontline players in the market include Domino’s pizza, Mc Donald’s, KFC, Burger King, Starbucks.
With the shutdown on dining out and for health precautions many people are relying on online deliveries and takeaways as an option. During such a situation, QSRs have turned to the food delivery sector, and a number of other foodservice companies adopted the concept of takeaway services to deliver safe, hygienic and customised orders to the customers—which helped them to sustain and continue the business.
QSRs are also working on creating an online presence to increase their availability to the customers. This phenomenon, however, isn’t new. Due to the changing lifestyle, food habits and consumption pattern of the consumers, the QSR industry is growing rapidly. It is in fact the fastest growing industry in India and world-wide. A report by Researches and Markets states that the QSR market in India is projected to grow at a CAGR of over 18% during 2021-2025.
Some of the contributing factors are increasing urbanisation, rapid expansion in food delivery services, rising young and employed population, growing number of dual-income families and expanding disposable income in the country. Thus, it has piqued the interest of many big companies.
In the near future, CARE Ratings expects that the restaurant and foodservice industry will record a rise of about 10.4 percent in CAGR over the next 5 years between 2018 and 2022 to cross Rs 5.5 trillion by 2022, with QSRs expected to play a prominent role in this growth.
The Indian Quick service restaurant (QSR) sector is attracting significant attention from private equity and venture capitals, with PE players such as Everstone Capital, Goldman Sachs, India Value Fund Advisors, and Samara Capital making big investments in this space. Recently, Charcoal Eats, the Mumbai-headquartered QSR start-up, raised Rs 16 crore during a funding round led by Lokmat Investments.
There are a number of reasons as to why big companies are interested in QSR chains. Some of the reasons are:
? Affordability and Variety:
QSR’s will always draw customers due to their affordability. Moreover, they allow the customers to choose from a variety of options for both vegetarians and non-vegetarians alike. It’s age inclusive and pocket friendly.
? Low Investment:
QSR is considered recession free business as the cost difference does not look that evident as it looks on the CSR or fine-dine restaurants’ menu. It’s a low investment plan. In the QSR business model, there are no unnecessary investments in making interior decorations, sitting arrangements or parking space. The business entirely focuses on the quality of food and serving the customers. Getting staff is also cheap and easy, as the chef does not have to be an HM graduate or even professionally well trained. Unlike other businesses, QSR requires low investment during the initial stages, since it grows with time, both the profit and the investment also grows, which is a part of the reasons why it is an evergreen business.
? Huge market:
Millennials belonging to the age group of 15-35 years are among the highest spenders and most likely spend a significant amount of their earnings on food. These are the optimal target demographics that QSR targets as potential customers. Fortunately, the present age demographics are expected to elevate sales as India’s median age is 26.7 years, one among the lowest globally compared to 37.2 years within the US, 45.8 years in China.
? Increasing per capita income:
With India’s fast paced and expanding economy, growing at a CAGR of 9.8% fuelling the country’s consumption boom, which has directly increased the number of times Indians have food outside. It is noted that Indians have food outside at least 6 times a month and this number is certainly going to increase, backed by higher disposable income amongst millennials, favourable demographics and increasing internet penetration.
? Internet penetration in Tier 2&3 cities:
With increasing access to high-speed internet in cities and villages, along with the impact of online ordering through food delivery options like Swiggy and Zomato, the demand for fast food is expanding as customers want similar comfort and privileges as those in the metro.
Chain QSR outlets are expected to expand their presence in multiple non-metro cities across the country to satisfy the growing demand.
As of June 2018, India’s Internet penetration in urban areas stood at 82.1% and 19.5% in the rural areas. India is the second highest worldwide in terms of having the highest number of active Internet users and the data usage level of 8 GB per month is comparable to that of developed countries. Hence, a QSR with well-established online and take away models is sought after by big companies.
Although it is relatively easy to start a QSR outlet compared to a fine dining restaurant as the capital investment involved is less, the competition in the Indian QSR segment is extreme and you need a complete restaurant management software that will allow you to manage your QSR operations efficiently, increase customer footfalls and maximize your profits.
The traditional belief of QSRs serving just greasy, fatty, junk food like burgers and fried chicken is transforming. Most chains have had to adapt to a market that’s more conscious than ever about maintaining a healthy lifestyle. This can be viewed by the growth of healthier options like Subway and therefore the way companies like McDonalds have adapted their menu by providing salads and Deli wraps alongside the traditional burger and fries. Hardcastle Restaurants, owner and operator of McDonald’s restaurants in west and south India, plans to invest Rs 800 – 1000 crores over the next 3-year period to introduce healthier options like low-calorie, low-fat alternatives and digitise its stores to drawn in millennial. In this manner, adapting to changes in the market and expanding its horizons, the QSR industry is a very promising industry to those looking to invest and has therefore managed to draw the attention of big companies.
(The author is owner of Nutridock)
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