McDonald's master franchisee to invest Rs 750 cr on expansion

Plans to set up around 250 stores in southern and western region in 3-5 years

Despite lower footfalls in the quick service restaurant (QSR) segment, HardCastle Restaurants, a master franchisee of McDonald's for southern and western India, is planning to invest Rs 750 crore to expand the chain over the next three to five years.

The company that already owns 81 stores in the region plans to add another 175-250 stores over this period, Amit Jatia, vice-chairman, HardCastle Restaurants, said.

The planned expansion and investment is despite QSRs seeing lower footfalls on sour consumer sentiments across the country today. This is being reflected in the fewer footfalls and lesser spending on impulsive buys, at beneficiaries like QSRs that are located in high streets and malls.

Spending at QSRs is often an ‘impulsive spend’ and currently, people are not easily loosening their purse strings with sentiments falling.

"This has meant lower growth for QSRs and it is just part of the business cycle," said Amit Jatia, vice-chairman, HardCastle Restaurants.

The chain's (HardCastle Restaurants' franchisee McDonald's stores) revenue grew barely nine per cent for quarter-ended December 2014 over the corresponding quarter of the previous year.

With the sentiment yet to pick-up, the performance of the company could be on similar lines even in the quarter-ended March 31, though it has not announced the numbers yet, Jatia added.

It costs the franchisee in the range of Rs 2.5-3 crore to set up one restaurant. This would exclude the real estate costs, he added.

HardCastle Restaurants' had seen a loss of Rs 4.69 crore for December quarter of 2014 compared to more than Rs 3.98-crore profit that it had made for the corresponding quarter of the previous year. This was on revenue of about Rs 195.7 crore it recorded in December, 2014 over Rs 179.45 crore it had reported in the corresponding period the previous year.

As the chain has scaled up, it has been introducing inputs like bigger varieties of potatoes, lettuce among others to the Indian palate. "This has meant a direct benefit to the farmers," said Jatia.

The company, through its supplier, has been encouraging farmers to take up farming of the potato varieties it needs. The potatoes it procures are grown in Mehsana district in Gujarat. The farmers have been able to pay their advance taxes, the company said, of the difference it has been able to make to the lives of the farmers.

"In the process of McDonald's growth, the company has managed to increase localisation to 90 per cent," he added.