Business Opportunities in QSR’s

Food industry has been booming in recent times. One of the factors responsible for this is the rising disposable income of the middle class which, according to NRAI, is expected to rise to Rs 51,000 crore in 2021, f r o m Rs. 20,400 crore in 2016. Quick Service Restaurants’ business has been growing exponentially and is expected to touch Rs. 25,000 crore by 2020. The increasing demand has not only prompted international chains f r o m expanding their business in India but has also tempted several Indian entrepreneurs to jump into the fray. Several new ones are eyeing the market with interest. Ashok Malkani presents a kaleidoscopic image of the QSR industry to enable newcomers make a success of their proposed project.    

India’s QSR market, which is growing at a CAGR of 25 per cent due to rapid urbanisation and increase in spending power of the middle class and millenials, has not only encouraged the global brands to expand their footsteps in India but has also prompted Indian entrepreneurs to venture into this field.  The quick service restaurant (QSR) sector is, according to Assocham, expected to reach Rs 25,000 crore within the next five years. This is because the rate of Indian population eating out is comparatively low to countries like the US, Brazil, Thailand, China, etc. According to industry body, National Restaurant Association of India (NRAI), quick service restaurants (QSR’s) like Pizza Hut, Burger King, Goli Wada Pav, Burger Singh, etc have been growing exponentially in the recent times.

Research firm Euromonitor states that Families in Tier-I cities spend about Rs 6,000 annually on eating out, whereas families in Tier-II cities spend Rs. 1,500 to 2,000, annually. Burgers are believed to be all-day escape and fun food while pizzas are becoming meal replacement and comfort food.

Quick Service Restaurants, which have been a key segment for the Indian Food Services market, have grown over the last decade mainly because they have concentrated on competitive pricing clubbed with catering to the tastes of the consumers. Several international chains have had to make alterations in their menus to suit Indian taste buds. Today the market is quite competitive in nature, with players operating via core menu offerings and introducing variations in Indian and international foods.

To withstand competition, most of the players are tailoring their offerings in terms of flavours, pricing, services etc., to lure Indian consumers.  In terms of menu, Indian QSRs like Haldiram’s, Bikanervala etc., bend towards vegetarian food in contrast to which international players like McDonalds, Dominos, KFC and Subway etc., offer a mix of both vegetarian and non-vegetarian offerings.

The QSR format in India can be said to have started over two decades ago, with the arrival of McDonald’s in 1996. Since then there has been a rapid growth. Many global brands have set shop either through company owned stores or the franchisee model or a mix of both. It is believed that by 2020 over 35 per cent of India’s population (totaling about 35 crore) will be in urban areas. This is expected to give a tremendous boost to the growth of QSRs.  

According to a report by CyberMedia Research the market for QSRs in India is likely to touch $33 billion by 2020. The report further adds that the organised segment of QSR is, today, marked by the presence of 90 to 100 brands, with around 3000 outlets spread across the country.

The established international brands offer specialties like burgers, pizzas, wraps, sandwiches, etc. The likes of Taco Bell have introduced cuisine options like nachos and falafel to the Indian platter. Interestingly, another cluster consists of several entrants who are mostly confined to specific regions (e.g. Jumbo King, Fast Trax, etc.); these focus on providing customised Indian or international cuisines to suit the Indian consumer. 

Challenges

While there has been increase in investments by multiple institutions in the QSR segment, it is necessary for a new entrepreneur to make a thorough study of the industry and understand the challenges which he would face. Some of the challenges are: 

Food price inflation

Manpower: There is an attrition rate of about 25-30 per cent in the food services market. 

High real estate and labour costs, which impact the profitability

Fragmented supply chain marked by presence of multiple intermediaries

Obtaining requisite licenses

However, since eating out is becoming a regular form of entertainment today, the entrepreneurs are excited about entering this field. 

With opportunities galore in this sector the appeal and enticement sometimes makes the entrepreneur enter the field without taking into consideration various aspects which will make it a profitable venture. 

But remember that before starting into this business you have to secure five licenses, namely Food license f r o m FSSAI, GST registration, Local Municipal Corporation Health License, Police Eating House License, and Fire License. The first three are important for starting the outlet. The others can be acquired after commencement of the restaurant. However, it is recommended to have all the permits in place before opening the outlet to keep away f r o m the legalities and small hiccups which come due to unavailability of these licenses.

As far as the three licenses are concerned, one can apply for the FSSAI License through its website, a Chartered Accountant can assist for the GST registration, while a local health inspector would be able to guide through the Municipal Corporation health license.    

Location 

Once the licenses are acquired there are various other aspects that a restaurateur has to take into consideration for establishing a successful QSR venture. One of them is location. The location of food service business will have a great impact on the business. This is one of the herculean tasks for a new comer, because the success of the business will depend as much on location as the menu. If the restaurant is in the wrong place, it won’t attract the amount of customers needed in order to stay in business. Choosing a happening place would help to get an upper hand in the market. One has to ensure that the place has visibility. Setting up a restaurant near a high traffic place or college campus would be great. One may like a place on first sight but it would be better to visit a few more sites, look for more options, check out competitors’ ambience and location. Check out if the area is filled with crowd or not and whether it is safe for people to visit at any time of the day.

Keeping the budget in mind is also important. Prime locations and crowded spaces would definitely be expensive as compare to less crowded locations. One needs to go with whatever suits the venture. Demographics have to be kept in mind, once decided on market segment to be served (college students or people with high pay roll). If contemplating on people with high pay roll, a parking space would add to the convenience of the customers. For college students, the probability is of a need for parking two-wheelers. Also take local zoning regulations into consideration. 

Size, accessibility and competition have to be taken into view. Also, if renting the space for restaurant, be mindful about the lease agreement.

Staffing

To serve guests qualified staff is required. Hire them by word of mouth (with chefs or other restaurant employees recommending their friends and colleagues with whom they have worked previously), through news paper ads, or social media or referrals or job portals and consultants. 

One thing that must be uppermost in mind is: The biggest asset of an organisation is its employees. One has to remember that in a QSR the staff has more responsibility than the staff in an ordinary restaurant because here there are a hundred things happening simultaneously and while there is no wait staff, there is also usually no difference between kitchen staff and counter staff. 

High competition, low pay, and severe work conditions all contribute towards the high attrition rate in the industry. Restaurant staff is the extension of a restaurant brand. One must endeavour to keep the staff happy because a happy staff is a productive staff. Happy and motivated restaurant staff goes out of their way to deliver impeccable service to customers. To help them serve the customers better they have to be well trained.  Proper staff orientation and training will enable them to create camaraderie among themselves and the friendly atmosphere will help them serve the customers better. 

Create fixed shifts and ensure that there is rest period between the shifts. Overworked and tired employees will send wrong vibes to the customers. One should also have incentive programmes to motivate them to work better.  

The employees would be able to get their woes redressed through an open communication system. With their woes redressed the attrition rate is sure to come down – if not stop altogether.

Managing operations  

When it comes to improving restaurant operations, several things come to mind: cleaning schedules, side work, food safety guidelines, daily sales reporting, and more. One of the important factors is that of product standardisation. This can be achieved by planning menu so that the base ingredients are the same. As is common knowledge, in QSR business only assembling happens in the kitchen, while about 90% of the cooking and preparation happens at the Central or Base Kitchen. For example, in a burger, the sauces, patties and fries all are mass produced in the central kitchen. The patties and fries are semi cooked in the main kitchen and they are just fried before being served. The rest of the stuff – buns, vegetables and sauces are all f r o m external sources. Since consistency is of great importance gauge the caliber of the supplier who will meet goals of excellence in taste. Remember, standardisation and staff training are the two major factors for efficient management of operations.  

Menu planning 

While planning menu one has to understand the buying trends of the customers. Generally, in a QSR, the tendency is on impulse buying. One of the main reasons why the customers visit a QSR is because they provide simple food with a familiar taste at a quick pace. Since there has to be an extremely short period in which the menu has to roll to customers, plan menu to ensure that everyone can not only understand it. It is also necessary to have suitably priced items which are desired by the customers.

To gauge the customers’ likes and dislikes research the acceptability of different products. Once done, can decide the cuisine and create the right menu. Experts advise the dishes with same base ingredients, a combination of the same sauces and least amount of assembly time. 

Pricing also plays an important role. One of the major factors for making a QSR a success is the pricing. If products are priced highly, as compared to the competitors, one would be out of the running as far as the success of QSR is concerned.

Marketing strategy

India, with a population of over a billion people provides ample opportunities for QSRs. While this has led to a rapid growth in this segment, it has also witnessed many failures. Thus one has to be extremely careful about adopting the right marketing strategies.    

Marketing a Quick Service Restaurant is inherently different f r o m marketing any other restaurant format. Since QSRs are believed to work on the premises of impulse buying the Marketing strategy has to focus more on these people than on the product itself. 

At the fast pace that this segment of the F&B industry is growing there is no doubt that the competition is becoming rather stiff. It is therefore necessary to keep marketing strategy on the mark if want to avoid losing potential customers to competitors. One thus have to enter into both, online and offline modes of publicity. According to the National Restaurant Association, 83 per cent of the adults use smart phones or tablets to look up information like working hours, location, menu, etc., about restaurants. One should thus align marketing strategies so that they are in tune with the social media. 

According to analysts it is necessary for QSRs to go mobile. Quick service restaurants can create effective campaigns on mobiles to reach diners whose decisions are made on a whim. Whether want to provide consumers the transparency they demand or simplify the ordering process this is considered to be the top marketing strategy of the present and the near future to improve awareness of the restaurant and its offerings – and increase sales. 

While online marketing is one strategy, offline marketing also plays an important role because – even in this telecommunication age everyone is not tech-savvy. To target this section it is imperative to venture into offline marketing too.  

One way of doing this is distributing flyers and pamphlets. Since the target customer base of a quick service restaurant is usually within a distance of 5 km, distribute the flyers and pamphlets to capture local audience. Remember, targeting the local audience and instilling impulse in them with pamphlets would definitely help in increasing business. The pamphlets should not only be cheap but they should be designed in such a way that they attract the customers. One of the techniques would be by ensuring that the pamphlet contains menu as well as the USPs of your offerings. 

Another way of popularising the outlet would be by participating in food festivals in the neighbourhood.  

Conclusion 

The scope for QSR is expected to grow, particularly in the urban areas, because, according to Associated Chambers of Commerce and Industry of India (Assocham), 35% of Indian population will migrate to urban areas making it to 52 crores f r o m the current population of 34 crores. The increasing disposable income of the middle class is believed to be the reason for the increasing demand of fast food. 

Urbanisation, the spending power of the youth, nuclear families and improved logistics are believed to be the major catalysts for the growth of QSRs. Thus if you are planning to enter into this segment – have a big bite off that burger, gulp it down with a large sip of the cold coffee and go ahead!  
 

Customising Bakery
Indian bakery industry is considered to be one of the largest sections of the Indian processed food industry. Its main components are biscuits, bread,  ... Read More
 
Home Baked Goods
Bakery businesses have grown tremendously over the last few years, though it has been around for awhile. Traditional bakers have been offering standar  ... Read More
 
Challenges Facing India’s Bakery Industry
Even as the multi-billion dollar bakery industry in India is slated to record a healthy growth rate over the next five years, the industry is facing c  ... Read More
 
Breaking Fast in Post-Modern India
The role of breakfast in our daily routine cannot be overstated. It is perhaps the most important of all meals; a hearty breakfast can greatly facilit  ... Read More