McDonalds India Franchisee Vikram Bakshi On India Learnings and Growth Ahead

NEW DELHI—McDonald's Corp. plans to step up its expansion in India this year and next after finding that the country's new middle class will line up for its fast food, even in the smaller cities.

After opening about 35 new stores this year, Indian franchisees of the U.S. burger chain plan to open 45 branches or more next year, said Vikram Bakshi, managing director of McDonald's operations in the north and east of India. They will have about 210 stores in India by the end of this year, he said. The company expects its revenue to rise by more than 30% this year, he said, with about half of the growth coming from new outlets and half coming from increased spending by existing customers.

"The existing customer is coming in more often and has more money in his pocket," he said.

As McDonald's sets up shop in smaller cities, it is finding pent-up demand, said Mr. Bakshi. After years of watching McDonald's commercials on Indian television, small-city consumers are familiar with the menu, he said, though they don't always understand that you have to line up to order food. "They just sit down and wait for someone to take the order," he said.

In towns and cities like Lucknow, Varanasi, Panipat, Ambala and Meerut, McDonald's branches are mobbed when they first open, with first-time fast-food buyers snapping up items off of the menu unique to India. These include the Chicken Maharaja Mac and the vegetarian McAloo Tikki burger.

A McDonald's restaurant in Noida, located near New Delhi.

Pork and beef products are not sold in McDonald's India franchises, and the kitchen is segregated into vegetarian and non-vegetarian sections.


More than 10,000 customers a day have been flocking to one of McDonald's newest outlets in Bhopal in the state of Madhya Pradesh.

One of the biggest bottlenecks to further growth is infrastructure, said Mr. Bakshi. McDonald's needs good roads for deliveries, uninterrupted power and gas, and shopping areas popular with consumers. Better infrastructure could more than double his McDonald's growth rate in India, he said.

"With the kind of hunger that we have seen for a product like ours, it is very clear that if our infrastructure would improve to the level of China's then our growth would double to 40%, 50% or 60% per year," he said.

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Source:The Wall Street Journal, India Business Week, Aug 31,2010, Eric Bellman.

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The Franchise Industry In India In 2010.

Despite the global recession and the economic uncertainty in India, the franchising industry grew promisingly at 20 per cent.

The industry saw some changes in franchise-franchisor relations and the franchising process during this period.

A change was also seen in the categories franchisers preferred to do business. Categories such as education, quick service restaurants and services retail (salons, fitness centres and so on) were preferred. Some brands such as KidZee, Adidas, Raymonds and McDonald’s have franchised 100 per cent of their stores.

Franchising models have also changed because of the economic conditions. Sales responsibility is being shifted to the franchisees, with minimum guarantees being replaced by sales incentives.

On the part of retailers and brands, franchising has posed to be a profitable venture because of the promised return on the capital invested, and at the same time, lower costs on monitoring and running the store.

Source:Strategic tools for the practicing manager:Business Standard
Technopak Advisors / New Delhi February 23, 2010, 2:34 IST