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McDonald’s plans more eateries, franchise model

06-July-2004
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McDonald’s plans more eateries, franchise model

McDonald’s India—represented by two joint ventures—has now begun exploring the option of developing a franchisee model. Further, it has also firmed up plans to open 20 new eateries (55 currently) and enhance its dine-in capacity from the current 5,800 seats to around 8,050-8,300 seats by December-end 2004.

US-based McDonald’s entered India by signing a joint venture each with Hardcastle Restaurants Ltd for the western region and Connaught Plaza Restaurants Ltd for the northern region in 1995.

Speaking to FE, McDonald’s North managing director Vikram Bakshi said: ‘‘We’re at an inflexion stage with the largest share of the quick serve restaurant market (QSR). We’ve already put in Rs 500 crore between suppliers and two joint ventures in the last six-seven years.’’

‘‘We’ve (North and West) achieved break-even in 2003-04,” he added.

McDonald’s West managing director Amit Jatia agreed that the company was exploring the option of a franchisee model.

The New Mix

• To open 20 new eateries (now 55) by Dec ’04

• To enter smaller towns like Meerut, Dehradun

• To up 5,800 dine-in seat capacity by over 40per cent

In the next couple of years, McDonald’s is expected to invest around Rs 250 crore towards supply chain and new restaurants, which will take its cumulative investments to Rs 750 crore.

But Mr Bakshi admitted that it would be a challenge to find enough margins in the business that could be shared by the two companies—the master franchisor and the local franchisee.

‘‘As you add volumes, all your investments in cold-chain and distribution become viable,’’ Mr Bakshi said.

Mr Bakshi said less than five per cent of its value procurement is imported while the rest is procured locally.

‘‘Only for French fries, we need to import potatos from New Zealand and Europe,’’ said Mr Bakshi. ‘‘Our domestic vendor base has already grown to 30 suppliers—and as our volumes and retail reach expand this number will get increased further.’’

Declining to divulge revenue figure, Mr Bakshi said the company secured a revenue growth of 25 per cent in 2003-04.

In terms of expansion, McDonald’s North will open eight more restaurants (now 35) and broaden its focus from the National Capital Region to enter five new locations—Lucknow, Meerut, Jallandhar, Karnal and Dehradun by the year-end. It will increase the dine-in seat capacity to 4,300 from 3,300 now.

Mr Jatia said by the year-end McDonald’s West would open another 10-12 restaurants (now 20 restaurants with 2,500 seats in four cities) with each outlet costing Rs 2.5-Rs 3 crore (excluding real estate cost).

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