Apart from strengthening online deliveries, several restaurant chains plan to expand to smaller towns this year
Buoyed by the uptake of online delivery during the pandemic, quick service restaurants (QSR) are firming up plans to expand to newer geographies across the country. The overall organised QSR market contracted by 23% in FY21, compared to FY20, according to a report by Edelweiss Securities. With high rents and the slow rebound of dine-ins becoming major impediments, QSRs are adopting alternative retail models, and making changes to their product offerings to boost their businesses.
The pandemic has accelerated the transition of organised QSR chains on to digital. Apart from tie-ups with aggregators like Swiggy and Zomato, most of these chains have introduced their own food delivery apps. Besides, QSRs such as Pizza Hut, Taco Bell and Burger King, owing to their high brand recall, have benefitted from the takeaway feature. However, unorganised players have been hit hard due to the high commissions charged by third-party aggregators, and the cost of customer acquisition.
The online delivery market is at a nascent stage in India, compared to China and the US, in terms of the number of customers ordering online. This is slated to change as QSRs look to expand their presence beyond the metros. Analysts expect organised QSRs to grow by 19-20% in the next five years.
Kabir Advani, managing director, Berco’s Chain of Restaurants, says the company is clocking in 70% of its pre-pandemic business currently. Sales from online delivery for Berco’s in the last four months have been higher than pre-pandemic times. “We are looking at adding four more kitchens to our cloud kitchen portfolio in Delhi-NCR, and further focus on tier II and III towns,” says Advani. Berco’s shut down four of its outlets in the past year. However, with the unlock in progress, the restaurant chain is planning to add two dine-in outlets in NCR in the next few months. “We will focus on hybrid models, both cloud kitchens and dine-in outlets,” he adds. Besides, small formats like 30-seater restaurants are also on the cards.
In January this year, Taco Bell introduced its own app in India, and claims to have witnessed significant demand and growth in delivery and takeaways over the last few months. Rebel Foods also launched its own food delivery app EatSure in 2020, which features its own as well as partner brands. “The focus is on customer assurance, transparency about the preparation of food, handling and delivery, with a recent addition of live camera feed of the kitchens,” says Raghav Joshi, co-founder and CEO, India business unit, Rebel Foods.
In April-May 2021, the company’s business through online channels grew 25% month-on-month. “We have added 50 cloud kitchens during the second wave, and plan to add 100 more in the next nine months,” Joshi adds. Instead of focussing solely on fixed retailing, the company has been experimenting with an alternative retail model — EatSure Express Food Trucks — since August 2020.
Mad Over Donuts managed to register 45% sales of pre-Covid times in April 2021, when takeaways, deliveries and 50% seating were permitted. Tarak Bhattacharya, executive director, Mad Over Donuts, says, “Through CRM programmes, our key focus will be on customer acquisition for the next year.” Towards this, the company has created a chat tool to enable conversational and social commerce. “We are aiming for a 30-40% rise in sales through delivery systems, and reaching our pre-Covid numbers by the end of this year.” The company will also be extending its physical retail presence this year.
What’s in store
According to Retailers Association of India, the overall QSR segment has witnessed a degrowth of 70% in sales in May 2021 as compared to May 2019. Ankur Bisen, senior VP, retail and consumer, Technopak, says, “Unorganised players have had challenges with transitioning online, due to lack of capital and business continuity during the lockdown; but organised chains have done well.”
However, the return of positive consumer sentiment would be crucial for the market to grow holistically. Nihal Mahesh Jham, AVP, Edelweiss Research, says the reopening of multiplexes and resumption of dine-ins by the end of the year will improve the overall performance of QSRs.
“Going forward, more brands will engage and promote their apps, because of the high commissions charged by aggregators, and focus aggressively on expanding their presence across the country,” he adds.
However, while large chains may see traction on their own platforms, most QSRs have to depend on Swiggy and Zomato, given their massive reach.