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Growing from bigger to biggest, Indian restaurant industry is on right track
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Monday, 01 November, 2010, 08 : 00 AM [IST]
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Hasan Mulani, Mumbai
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There are many raison d'être which show rosy pictures ahead for the Indian restaurants industry. The diverse culinary habits, range of cuisines, rising incomes, healthy change in the lifestyle are some major factors behind the growth of restaurants in the country.
With the market liberalisation policies undertaken by the government, our nation has also become a consumer market with a huge customer base. This has provided a fillip to the restaurant industry in the country.
The growth of the tourism industry has also been a positive factor behind the growth of restaurant business here. With more and more domestic and foreign tourists going to the popular tourist destination, it has been a boon for the restaurants.
In a recently introduced “White Paper on the Indian Restaurant Industry – 2010,” the National Restaurant Association of India (NRAI) – mouthpiece of standalone and chain restaurants in the country -- anticipates rapid growth in restaurant business in the next five years.
“The boom will provide employment to about two crore people and provide increased tax revenue to the government,” the Delhi-based association said.
According to the white paper, the restaurant industry is interestingly one of the Indian economy’s best kept secrets. Current revenues amount to a sizeable Rs 43,000 crore, with a growth rate of 5-6% per annum, the relatively new organised segment of the industry is estimated at between Rs 7,000 crore and Rs 8,500 crore.
In fact, the organised segment of the restaurant industry, at 16-20% of the total industry is more than the organised segment of the retail industry, which currently stands at 7-8%, and is growing faster than the overall restaurant industry, at 20-25% per annum.
“We continue with a lack of infrastructure, including cold chains, power and water supply and other constraints. The market size and potential of restaurants are only expected to rapidly grow in the future. By 2030, we would have 350 million (35 crore) people in urban areas. The industry will generate tax up from Rs1,050 crore to Rs 3,500 crore by 2015 to the exchequer,” said the white paper, read out by Vikram Bakshi, managing director of McDonald’s India.
The restaurant industry contributes to the economy in myriad ways, from employment to tax revenues, to being a buyer of goods and services from several other industries. Moreover, its contribution to the overall delight of consumers is undeniable, with eating out being one of the top 3 leisure activities enjoyed by Indians across the country.
“The organised eating out has been growing at a healthy rate of over 20%, without much support from government. With assistance and support, the growth levels can far exceed this level,” the report suggested.
Says Sameer Kuckreja, president, NRAI and MD of restaurant chain Nirula’s, “The restaurant industry could be a much larger source of tax revenue to the government if its growth potential is adequately tapped. Additional tax of up to Rs 4,200 crore can be generated by converting unorganised to organised players.”
According to him, the industry has significant potential to grow as seen from the benchmarking with some other countries. This would be assisted with intervention by the policy makers to help accelerate the growth by simplifying the complex licensing requirements that the industry currently has.
While many international brands have already made a foray in India, a host of others are lining up to commence operations. Some of the leading names queuing up to gain entry into India include Starbucks, Hooters, Dixy Chicken, Burger King and Grand Canyon Coffee.
Most multinational companies are expected to initially set up restaurants in the metro cities in order to test the waters for acceptance of their products and prices before moving on to establish restaurants in the Tier II & III cities.
The Indian restaurateurs expect multinationals would bring in standardised processes, procedures and technology. While most multinationals are expected to establish their own brands, some could also grow via the inorganic route by buying out established domestic brands.
“Restaurants are now become an integral part of the society. The upcoming trends in the restaurants industry is that international companies are entering India, kiosks and food courts are becoming more popular as food joints, expansion of brands into smaller cities and newer locations, Indian companies are making international forays, besides multi-cuisine outlets and chef-led innovations into fusion cuisine,” Vyoum Ghai, joint secretary, NRAI, and promoter of the Panhshilla Rendezvous and Buzz, renowned restaurants in Delhi told F&B News.
Industry seek
● Single window license clearance.
● Rapid implementation of GST.
● Recognition as an industry.
● Investment in relevant training institutes.
● Uniform implementation of standards by the industry.
The Indian restaurateurs seek urgent support from the government in the form of legislation, subsidies, financing, tax structure and setting up good quality institutions for training.
Simplification of the rules and regulations, as well as systems that ensure compliance would go a long way in contributing to the growth of the restaurant industry. At the same time, the industry too needs to strengthen its pillars. “Despite all the merits of the restaurant industry, there are a few bottlenecks in its way – lack of skilled and trained manpower, lack of adequate training institutes, difficulty in restaurant financing, food price fluctuations, physical infrastructure and the most important, cumbersome licensing. The complexity of required licence is the major roadblock in expanding the restaurants business in India. There are some basic licences which one has to obtain and it entails an expenditure of Rs 6-10 lakh per outlet,” Ghai added
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