Building the McDonald’s of India

If ever you want to get into the restaurant business, Raymond Albert Kroc is the man to mimic. Ray Kroc, as he is well known as, is yet another American school dropout who went on to create history. He, of course, is the person behind (he didn’t set up the company, he took over a small-scale fast-food company and then scaled it up) McDonald’s Corporation, the world’s most popular fast-food company.  He built a business around the eating habits of Americans serving them everything from cheeseburgers and fries to coffee and breakfast eggs. In phase one, McDonald’s scaled up by opening a number of outlets through the franchise route. In phase two, the company expanded its product offering, kept stores open 24×7 and even started serving health food – salads and fruit smoothies. Expanding globally was also a critical part of its growth strategy. In October 1996, India saw its first McDonald’s in Vasant Vihar, New Delhi.

It has been fifteen years, yet, the company is still in the process of laying the foundation in India. From sourcing the right potatoes for its fries to designing McDelivery (the brand responsible for delivering McDonald’s food at your door step) the company doesn’t want to make a wrong move. The reasons are simple: building a business in India has to be done the Indian way, the foundation has to be laid through a trial and error of systems and the consumer market is so large that once a strong foundation is laid growth can come from several directions.

This foundation is what all entrepreneurs in this sector are focusing on. Over the last few years, the Indian quick service restaurant (QSR) (newer companies seem to prefer this name for the category instead of fast-food) space has attracted attention from venture capital investors.  Along with movie watching, ‘eating out’ still tops the chart in the family entertainment category. The opportunity in this space is crystal clear. It’s up to the decision-making, strategic and execution skills of entrepreneurs to make a mark in the sector.

We believe our cover story in this edition of The Smart CEO will take you a few steps closer to understanding the finer nuances of operating a business in the QSR space. Our assistant editor, Divya M. Chandramouli, analyses the key drivers of a successful QSR venture with opinions from venture capital investors (Prashanth Prakash of Accel Partners India and Kanwal Singh, managing director at Helion Venture Partners), an analyst (Amnish Aggarwal, research analyst, Motilal Oswal Securities Ltd.) and an entrepreneur (Kiran Nadkarni, founder-chief-executive officer, Kaati Zone). The story uncovers several factors that an entrepreneur needs to bear in mind while setting up a QSR and in some sense, gives you a ‘checklist’ of things to do to make your venture successful. This ‘checklist’, of course, only serves as a guideline and will have to be fine-tuned depending on the exact nature of your business.

As is mentioned in the cover story, the business of a venture capital fundable QSR is something that is very new to our country. Going forward, we’re certainly going to see a lot of innovation and out-of-the-box ideas that will emerge. But, one thing is for sure – the ones that will be successful in the long run will be the ones that get the per-outlet economics absolutely right.

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