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Why QSRs are growing fast across the world but not in India?
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Thursday, 16 February, 2023, 08 : 00 AM [IST]
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Dr Soumya Rathore
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QSR is broadly categorised into food and beverages segments with food category holding the majority share in the market. Quick Service Restaurant or QSR is a restaurant that provides food in very short time with minimal preparations through delivery or small outlets. Generally, its menu contains fast food items due to lesser cooking time and lesser variations. QSR includes three types of restaurants – Self service restaurants, Assisted self service restaurants and Full serviced restaurants.
Self service restaurants are based on the customer approach directly to the order and the receiving of food in outlet counters. Assisted self service restaurants provide an assistant either to collect or to deliver the order of customer at the table. Full serviced restaurants have a full staff which entertains customers for both collecting and delivering the order at their respective tables. The Indian consumer market has vast opportunities for the global brands that can attract both urban and rural customers. On account of increasing urbanisation, rising incomes and deeper penetration of the media in the country, the Indian consumer is becoming increasingly conscious of eating food at high-quality outlets across socioeconomic segments. A big part of Indian population is the youth segment that is young, dynamic and food lovers.
The growing participation of women in the workforce and double-income families’ preference for eating out or ready-to-eat meals are creating new opportunities in the industry. These factors increase the trend of “eat out” so as to increase the demand of QSR. The concept of QSR is gaining rapid hike in Indian market from past few years due to the entry of Indian as well as International players of food market. These players attract the customers by making the price more affordable and provide different variety of foods. Some of the major market players operating in India QSR market include Jubilant Food Works Limited, Coffee Day Global Limited, Burger King India Private Limited, Tata Starbucks Private Limited, Subway System India Private Limited, among others.
Domino’s Pizza, McDonald’s, Cafe Coffee Day, KFC (Kentucky Fried Chicken), Pizza Hut, Burger King, Starbucks, Dunkin’ Donuts, Costa Coffee, Subway and Taco Bell are few of the popular frontline QSR brand operating in the country. The entry of numbers of players in the QSR space has pushed the chain market and the size is estimated at INR 5,500 crore (USD 1,060 million) in 2013. It is projected to grow at a CAGR of 25 per cent to reach INR 16,785 crore (USD 3,230 million) by 2018. The Quick Service Restaurants (QSR) market in India is projected to grow at a CAGR of over 18 per cent during 2021-2025 due to increasing urbanisation, rapid expansion in food delivery services, expanding young and working population, and growing number of dual-income families and rising disposable income in the country.
However, all the above factors are providing a good road map but simultaneously QSR industry is still struggling in India when compare with the other parts of the globe. Several outlets have been closed, a large number are struggling, still a large number are just about surviving and lot many of them has not been able to find their feet. There are a lot who are successful, but, more importantly, there is almost a complete absence of national chains, except of two cafes, three –four international chains and a few regional chains. Even these are very recent phenomenon and many of them are struggling. Fast food is not so novel concept for Indian market; many street food and petty food vendors have offered snacks from long time back that includes Indian traditional snacks. Whether the Southern “Dosas”, “Phulkas”,”Vadas”,”Samosa” or “Bhelpuri”, this inexpensive snack items are very popular and growing stronger day by day due to low price and easy availability. However, the entrance of International players in the domestic market has increased the popularity of QSR through developing the chains of fast food restaurants like McDonald’s but still it’s a long way to go.
Challenges for the QSR industry in India
1. Food Price Inflation - The main challenge of QSR industry is the price fluctuation. Many factors that are responsible for price variation are weather conditions, the economic slowdown, and unfavorable demand-supply conditions. Monsoon hits the price greatly in Indian context. Another important thing is to compete the price with the street food vendors.
2. Trends of Traditional Foods - People are limited to their cultural habitats especially in rural areas and in small cities. A large majority of Indian consumer still prefer traditional and ethnic cuisine. They restrict themselves to cuisines that are traditionally prepared and can be prepared at household levels.
3. Fragmented market and increasing competition - There are several players that offer products, which are similar, at competitive prices. No single player leads the market, and consumer loyalty is therefore also low. This makes it challenging for players to engage with and retain consumers, and heightens their performance-related uncertainty.
4. Dependency on third parties - QSR industry is largely dependent upon the third parties for their raw materials supplies. This can affect the price as well as the quality of the finished product.
5. High real estate - High real estate costs, coupled with the high Service Tax on property, are putting pressure on the profitability of stores and deterring the growth of food service outlets.
6. Red Tapism - In India, obtaining the requisite licenses, e.g., food safety licenses, NOC from fire and pollution department etc. is the major obstacles hindering the smooth functioning of QSR service. The process required a lot of paper work and time to obtained the required licenses.
7. Multiple levels of taxes - In India, restaurant industry is burdened with multiple type of taxes like VAT, service, excise tax, besides different state taxes.
All these above challenges indicate to the fact that just having a lot of opportunities is not enough. These opportunities need to be harnessed and converted into profitable enterprises. For the smooth functioning and success in India, QSR industry should recognise the key trends of domestic market and strengthen their brand franchise. This will result in their understanding their customers’ needs better and will make their feet deeper and stronger in the Indian market same as the other developed countries.
(The author is assistant professor, PG Department of Food Technology, RBS Engg. College, Agra. She can be contacted at somi_22rathore@rediffmail.com)
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