It has been over two decades since McDonald’s, Pizza Hut and Domino’s entered the Indian market and since then international QSRs have played a huge role in building the food services market. However, the last couple of years have been quite a challenge for them. New stores failing to yield the desired numbers and dwindling footfalls in older stores, has been leading to unimpressive single-digit or in some cases, negative same store growth (SSG) numbers. As a result, their profitability has taken a hit. Jubilant Foodworks saw its profit after tax decline by 34% from Rs.91.7 crore in nine months of FY16 to Rs.60.5 crore in nine months of FY17.
As they continue to chase growth, all players have taken a hard look at their overall strategy. Be it store expansion, location, operating costs, or even store ownership. And instead of pursuing mindless growth, the focus is back on reining in costs and expanding judiciously. But can the international food chains sustain their first-mover advantage and re-invent themselves, yet again to cater to the changing Indian market?
It has been tough for the QSRs in the past couple of years and the numbers show it (See: Hunger Pangs). Ajay Kaul, outgoing CEO, Jubilant Foodworks believes that it is not just QSRs that are struggling with growth. “For the past 2-3 years, it’s not just the food service category, these are also the worst years for the FMCG industry,” he points out. Jubilant Foodworks — the master franchisee for Domino’s and Dunkin Donuts shut down some of its stores for the first time in 11 years. The Virat Kohli of QSRs in India, which has been adding over 150 restaurants every year since 2013, had to shut 7 stores in the third quarter of FY17. KFC, which had 352 restaurants at the end of 2014 shut some of its stores bringing the count to 310 restaurants at the end of 2016. Pizza Hut (both KFC and Pizza Hut are owned by the Indian arm of Yum! Brands) has brought down its restaurants from 380 to 356 in the same two year period.