Hardcastle Restaurant has been appointed McDonald’s Development Licensee
McDonald’s (South & West) joins the global league of Franchisees with Hardcastle Restaurants Private Limited now becoming a Development Licensee
McDonald’s charts out a three-year pathway for Hardcastle in South and West: Doubling presence to 250 Restaurants: Rs 500 Crore investment.
McDonald’s (South & West) has joined the global league of business franchisees with Hardcastle Restaurants Private Limited now becoming a Development Licensee. Vice Chairman of McDonald’s (South & West) Amit Jatia says “This is a great moment for us as we have matured to a point where we have been trusted with carrying forward the aggressive plans of McDonald’s for India. In the immediate future, we will be investing Rs 500 crore and doubling our presence over the next three years in India. We now join other McDonald’s businesses such as Latin America where the Development Licensee operates over 1700 restaurants with sales of over $3 billion.
According to Peter Rodwell, Division President — Greater Asia & Middle East Division, “McDonald's has varying franchise structures that are applied based on changing/ differing markets/circumstances and stages of brand development. Today, as the world’s largest quick service restaurant chain we have over 32,500 restaurants in 117 countries out of which over 26,300 are operated by varying franchise models, including 50 Development Licensed countries.”
The recent change from Joint Venture to Development Licencee in India’s South West is based on the Corporation’s view that India’s economy will continue to grow rapidly and sustainably, creating significant present and future opportunities for the expansion of the McDonald’s Brand,” says Rodwell.
McDonald’s (South & West) is today a profitable business after successive years of being cash positive. Same-store sales have seen double-digit growth continuously for the last 6 years and the company has seen a total compounded growth of 35 per cent in revenues. McDonald’s India opened 33 new restaurants in 2010 of which two-third of the new restaurants were in South and West India through HRPL. In 2011, HRPL now plans to open another 30 McDonald’s stores in South and West. This will be the highest opening in the last 15 years.
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Based on HRPL’s high growth (over 35% per annum and strong double digit same store sales continuously for the last 6 years) along with strong improvements in profitability, McDonald’s Corporation and HRPL agreed to convert the ownership structure to that of a Developmental Licensee (DL).
The transition to a DL implies a higher level of commitment by McDonald’s as it enhances its trust in the local partner. McDonald’s ensures that the transfer to a DL takes place only after the financial strength, viability, profitability and long term sustainability of the business is assured.
McDonald’s decision to convert the Joint Venture to a Developmental License in South West India is based on what we consider to be the best franchising method to capture the opportunity that is present today and the enormous growth opportunity that we see as India’s economy continues to grow rapidly.”
“The transition to a Development Licensees implies a higher level of commitment by McDonald’s as it enhances its trust in the local partner.
With HRPL becoming an Development Licensee, there are strong and robust commitments to investments, expansion and growth.
Hardcastle Restaurant’s appointment as a Development Licensee highlights the growth and success achieved by the company to date and our strong partnership. We are excited about the evolution of our partnership and energized about working together with Hardcastle Restaurant’s to expand the McDonald’s Brand,” says Rodwell
HRPL is a debt free company and will fund the entire investment of Rs. 500 Crores over the next few years through internal accruals After the change of ownership, HRPL repaid all its debt outstanding from local banks and is a debt free company. HRPL is funding its aggressive expansion from internal accruals.
DEVELOPMENT LICENSEE
According to Rodwell, “McDonald’s franchising policy has many elements that are considered, the most important is selection of our partner. It is McDonald’s business practice to franchise strong healthy markets with strong business models to ensure we partner in the ultimate objective of faster sustainable profitable growth to capture brand expansion opportunities. This DL process is used in many Global markets such as Latin America (18 countries), APMEA markets such as Turkey, Philiphines, Thailand and Indonesia. McDonald’s has successfully implemented this strategy in a number of large countries, including in Latin America with over 1700 restaurants. The licensees own the entire business, including the real estate interest, use their local knowledge and capital to build the brand and optimize sales and profitability over the long-term.”
The DL structure has been successfully employed in over 50 countries worldwide for over 20 years. The DL’s are located in all of Latin America, Indonesia, Philippines, Turkey and numerous countries in the Middle East. The licensee’s own the entire business, including the real estate interest and use their local knowledge and capital to build the McDonald’s brand and optimize sales and profitability over the long term.
One example is the conversion of about 1700 restaurants in Latin America (18 countries) into a single DL under the leadership of previous JV partner Woods Staton. In 2009, Sales of the Latin business were in excess of $3 billion. Similarly more and more JV’s are converting to a DL ownership structure in line with McDonald’s Global strategy.
Brief Background on McDonald’s:
McDonald's is the world's leading food service retailer with more than 32,000 restaurants in 117 countries serving 60 million customers each day. Celebrating 15 years of leadership in food service retailing in India, McDonald’s today has a network of over 200 restaurants across the country, with its first restaurant launch way back in 1996. Prior to its launch, the company invested four years to develop its unique cold chain, which has brought about a veritable revolution in food handling, immensely benefiting the farmers at one end and enabling customers to get the highest quality food products, absolutely fresh and at a great value.
In line with its respect for local culture, India is the first country in the world where McDonald’s does not offer any beef or pork items. McDonald's has also re-engineered its operations to address the special requirements of vegetarians. Vegetable products are kept separate throughout the various stages of procurement, cooking and serving. The mayonnaise and the soft serves are also 100% vegetarian.