Recently I wrote about QSR (Quick Service Restaurants) losing steam and the culprit could well be poor and sub-standard customer service and not economy and slowdown. (Slowing sales at QSR – Will anybody look at the Quality angle?)
Few days ago, Economic Times had an article on how Pizza hut and KFC are suffering from lower Same Store Sales (SSS) with the blame completely on reduction in eating out by people owning to bad economy. (After Starbucks, Pizza Hut, KFC Same store sales growth hit 11% due to loss of appetite)
It is generally believed that KFC is not doing well in India because it is perceived as primarily a chicken only place. I beg to differ. Neither the customer service nor the taste stands out at KFC. Why would I want to go to KFC again! Here it’s not about Same Store alone; it’s about the entire chain across the country.
Last week, I visited two places at extreme ends of the spectrum, within days of each other. First was a visit to Incognito – a fine dining Restaurant, Bar & Cafe and the next was Burger King (BK) – latest global entrant in the QSR space in India.
Incognito – located at a quiet place with dedicated parking, ground to ceiling glass forming the facade, international dishes on the menu with an authentic taste and comfortable seating. The place is owned by a group which started primarily as a bakery & expanded into a semi fine dine place and this happens to be its latest venture – which is turning out to be a very popular place in Pune.
The place had everything that one would expect from a fine dine – ambiance & decor, comfortable seating, global cuisine, attentive service & great music.
Cut to BK – a global brand, present in 79 countries with over 13000 outlets, known for one of the best meat burgers, decides to enter India – two decades after McDonalds, its global rival. When the Indian franchise was finalised, one of the first tasks was to get a team of chefs in place to localise the menu.
What resulted was a vegetarian WHOOPER. Probably a first, “Indianized” version of their world famous WHOOPER burger. I visited and restricted myself to the chicken WHOOPER along with a small sized cold drink. The straw which came with the glass was double the length of the glass, probably designed for the largest quantity – a complete One Size Fits All philosophy for this QSR!
I had a pleasant experience at both the places. Incognito had soothing lighting, comfortable seating, unique decor, global menu and the dish I ordered – Singaporean Peppered Cottage Cheese with Broccoli was very tasty.
On the other hand, BK had bright interiors, a tray which had my meal, dense seating, self-service but the WHOOPER I ordered was tasty and the experience was overall a pleasant one.
Growing Indian dine out market
Indians are surely eating out & it’s difficult to predict the right mix. There are contradicting numbers on the market size – from ASSOCHAM to Crisil, the numbers vary a lot. Last year Outlook Business had a report which said that Informal eat out market is over INR 60 billion (USD 960 million) and growing at 12% a year. Within this, western fast food is growing at 15% a year.
With numbers like these, how can same store sales go down is what I continue to think, but some back of the envelope calculations show that the stores are growing at much higher pace and thus the new stores are seeing more foot falls even as the same ones suffer as they turn older.
Johny Rockets, Fatburger, Carls Jr and Wendy’s are waiting in the wings to start operationalizing stores in India. As they start entering major markets, starting with the malls which see higher footfalls and give more visibility, cannibalizing will start. The existing stores will suffer due to public mentality of trying out something new.
A typical cycle for QSR setup involves the parent training the staff and handholding for around 6 months after which the franchise takes over completely. This is when the fall starts, in terms of quality as also attrition starts kicking in.
For the new entrants who are flush with cash as part of initial capital, the differentiating factor could well be price and quality. These new players are not going after size and market share but looking at smaller tighter operations. At the same time, larger and older players like McDonalds constantly claim that to make money in India, the newer players will have to attain critical mass. However, this comes with stretching supply chains and entering tier II and tier III segments which have cheaper rentals and but lower footfalls.
Is localization of menu the way forward?
India is seeing an interesting Irony – of people flocking fine dine to taste foreign cuisine and large foreign QSR chains localising the menu to attract more crowd. Every interview of a foreign QSR chain’s head in India, talks about “Evolving Indian taste palate”, yet they are seeing flattish growth.
Is localisation the way forward or are QSRs looking at the wrong way and blindly following the biggies like McDonalds to localise the offering? Are the QSRs not in sync with what the customers want?
Foreign QSRs which so far control 60% of the pie are also facing tough competition from Indian QSRs like Jumbo Wada Pav, Goli Wada, Fasoos, Eatsone – the former two offering street food in hygienic conditions and the latter two offering a mix of global options and Indian ones. With these are the Smoking Joes and Yo!China’s which are growing at a break neck pace. All these vie for the same pie and strangely, the Indian QSRs offering foreign food menu is seeing better growth than foreign brands localising the menu
These will be interesting times – with the customer deciding who stays and who exits. My 2 penny worth of prediction is that KFC will find the going tough and will see a massive scale back in operations while the newer QSRs will not go beyond the metros
For QSR to succeed, they need to fend off pressure to expand and focus on sustaining Quality & Service. But then isn’t this true for a fine dining place too and for that matter any business and establishment!