In the West, franchising in the QSR business started way back in the 1950s. McDonald’s had eight franchised restaurants in the early 1950s.
Another brand was Pizza Hut, which opened in 1958, when Dan and Frank Carney borrowed $600 from their mother. They were so successful that they began franchising restaurants quickly. By 1968, they opened their first restaurant in Canada.
This initial phase saw a lot of trial and error; course correction, learnings documented into Standard Operating Procedures (SOPs) & fine-tuning. That’s how these giant QSRs got to where they are today.
The QSR franchising story in India is relatively new. The first commonly known one is Nirula’s (1970), India's oldest fast food restaurant chain.
International chains like KFC (1995) and McDonald’s (1996), that entered India post-liberalisation, invested heavily in the backend system. This made it possible for a lot of Indian QSRs like Jumboking (2001) to print smaller footprints in order to grow their business. The 2000s saw the consolidation of QSRs in India. Jumboking tied up their manufacturing and supply chain with KFC, Burger King (2014) and so on; and scale was born.
Today, practices such as centralised manufacturing, quality control, centralised supply chains and so on are common, as they help to reduce unit cost and distribute the product manufactured out of the central unit. I’d like to believe that in the next decade, India will see a lot of action on the franchise front of the QSR space.
I believe there is enough disposable income and opportunity for prospective QSR entrepreneurs to ramp up and scale up their business using franchising in order to grow.
Few variables I see as key to development of QSR franchising in India
1. An important and emergent trend will be hyper-specialisation- for e.g.; Pizza Hut focussed on the dining experience while Dominoes focussed on delivery. They created a differentiation in the market, and it was this unique selling proposition which was franchised and created a lot of wealth for all stakeholders. There is tremendous clarity on what product to sell and who is the customer.
2. In India, sadly we still have menu cards with 200 items listed. Each extra item on the menu compromises the distance that your supply chain can travel. Implementing a 200 item menu implies lack of standardisation, portion control and regimentation. E.g.; there can be a QSR chain around ‘cholle’ itself.
3. As labour costs increase, it becomes more and more difficult for the individual operators to operate - people will start understanding the value of becoming a part of franchising model where they can create more and more money for themselves by becoming a part of it.
4. The success of QSR franchise is also dependent on the availability of good quality real estate. India, as it develops, they are better malls, better high streets that are developing and this development will ensure a steady supply of good real estate for franchise businesses to grow in India.
5. As more women join the workforce, there will be greater need to eat out. This is also contributing to the mushrooming of the QSR industry in India.
Clearly, India has a lot of catching up to do. The Indian system of franchising is younger but will ramp up drastically in a couple of decades; given the entrepreneurial energy inbuilt into the DNA of our country. So pick your product, from biryani to idli to pav bhaji - and build a billion dollar QSR around it.
(The author is MD, Jumboking, a homegrown
QSR chain in Western India)