McDonald's India is in the process of analysing its growth strategy in India in terms of new outlets in the market. As part of its expansion plans, the company aims to expand through multiple outlets at locations it is already present in. The company will introduce 170 new outlets across the country in the next five years, with 40 new restaurants opening in 2009 alone. It has earmarked about Rs 500-600 Crore to fund the expansion process; it has already invested about Rs 100 Crore. While the company is presently not considering any private equity partnerships for the same, it will fund the development process through debt and equity funding along with internal accruals.
The company operates about 160 restaurants in India. All McDonald's outlets are owned by its two joint venture (JV) companies in India (Hardcastle Restaurants and Connaught Plaza Restaurants), with 85 per cent of the outlets owned on a long-term lease basis. The company also invests in outlets on a revenue sharing model of five to six per cent. There are plans to foray into the new cities by 2010. It will review its strategic growth plan in the next three months, which will include identifying new locations for growth.
As part of its strategic plan’s revision, the company will also review its innovation pipeline in terms of product portfolio. McDonald's India recently introduced the breakfast menu on a trial basis at select outlets in Mumbai and Delhi. The breakfast menu contributes to about 20 per cent of McDonald's revenues, globally. However, how does the company plan to introduce this meal segment in the Indian market? Amit Jatia, MD, Hardcastle Restaurants, also a JV partner and MD of McDonald's India (West and South India), states, “The company will invest in marketing and promotional strategies to introduce the product and develop the market for breakfast menus. It aims to launch the product across India in the next four to five months. It has also launched Chicken McNuggets, a product from its global portfolio, in the Indian market. McDonald's India's average annual investment on marketing and promotional activities ranges up to Rs 30-35 Crore per year and the company has increased its annual budget by 70 per cent (from 2008 to 2009).
While, most F&B brands have seen a significant drop in average ticket size (ATS), Jatia informs that the company has seen a growth in the ATS by four to five per cent in the past. “Although, there is no change in the end product, cost cutting measures have been taken to streamline the production line on a rational and economic level,” he adds.
Source : hospitalitybizindia
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