Westlife FoodWorld, the Indian franchisee for McDonalds fast food chain, will focus on South India for its expansion as it sees greater opportunities to experiment and grow in this region.
“We will add 40-45 new stores in FY24 with the majority of them being in the South,” said Akshay Jatia, Executive Director, Westlife FoodWorld, which runs McDonalds in the western and southern parts of India.
McDonald’s has had relatively greater success in western and northern Indian markets such as Delhi and Mumbai compared to Chennai and Bangalore, partly due to the greater popularity of rice and rice-items in the South. McDonald’s sells mostly wheat and chicken-based items at its stores.
“While we are already leaders in the West, we are inching closer to a leadership position in the South,” said Smita Jatia, Vice Chairperson, Westlife FoodWorld.
According to the management, the brand has been experiencing a growth uptick in the South with a substantial increase in per-outlet sales over the last few years.
Akshay Jatia said that profitability is better in stories in smaller towns and cities which are seeing a pick-up in sales in recent times, compared to established markets like Mumbai.
“Profitability is good..unit economics are structured even better in smaller towns, in cities where you have seen the growth come now..compared to cities like Bombay where average unit volume has been higher,” he said..
He also pointed out that the addition of new stores in the South amid ongoing inflation and weakened consumer demand will not affect the overall profitability of the company, considering the soaring growth exhibited by the region.
“We look at this as a better opportunity for profitability because while we continue to dominate in the West, extending our lead in the South, where the average unit volume is increasing, where brand relevance has become strong ..we expect profitability to improve in the long term..” said Akshay Jatia.
On the other hand, the company is also aiming at further uplifting the sales through efficient methods which have proved to be successful in the South market such as multilingual ad campaigns with popular celebrities and also the regionalisation of menu. Ad campaigns that featured Jr. NTR, the company said, has done exceptionally well in boosting the sales in the area.
“…McSpicy Chicken, McSpicy Chicken Wings, which were introduced as a part of implementing menu relevance, are already doing well in the South,” says Smita Jatia.
At the same time Saurabh Kalra, managing director of Westlife Foodworld, pointed out that the company has no recent plans to implement the customisation of menu in the West.
“Regionalisation of the menu will remain concentrated in the South until the company feels that the customers from the west are ready for it,” he said.
On the widespread demand slowdown in India’s fast food industry, the company said it is “unfazed by the near-term challenges” which it sees as “largely transient” and it expects customer sentiments to improve during the festive season.
Drive-Throughs
The company is also planning to add a considerable number of drive-through restaurants as a part of the new projects planned for South India.
“ We see new opportunities for drivee-hrough restaurants as it is building up in the country and McDonalds is known for it…we are looking to add a significant amount of drive through restaurants..By 2027, we expect to have around 180 drive through restaurants out of the total 600…” said Akshay Jatia.
Currently 71 restaurants out of the total 370 across India are drive-throughs.
The company sees drive-throughs as an important business model which will give Mc.Donalds an additional comparative advantage.
“ .. Drive-through is very important for us as a business model..drive-through is one of key levers in terms of expansion. It's a destination store, giving us comparative advantage,” Akshay pointed out, adding that the expansion of highway infrastructure will make the concept more popular.
He also pointed out that the average sales from some of the drive through restaurants have been higher compared to the normal stores.
“ ..the drive through restaurant in a small town called Barul recorded average sales 1.5 times bigger than the other stores..,” Akshay said.
Speaking about whether new layouts will be experimented with in the future, Akshay Jatia made it clear that the layout for future restaurants will be similar to the ones used in the existing restaurants.
“We have different kinds of layouts depending on how dense the cities are, available real estate and other things..We have similar types of designs for smaller towns or highways.. Recently we opened a gold standard drive through restaurant in MN Nagar Chennai, which is similar to the design we have used in the restaurant in Sangli, Maharashtra…this is the kind of layout that you will see more commonly in the future..,” Jatia added.