The F&B service industry is one of India’s most vibrant industries with over 25 per cent yearly growth. The Indian food and beverage market, estimated to be over Rs 2 lakh crore in size, may nearly double to touch Rs 3.80 lakh crore by 2017, according to a FICCI-Grant Thornton report.
Among the various segments, the industry underwent a paradigm shift with the advent of the QSR concept. Currently, worth approximately Rs 60 billion, the Indian QSR segment is expected to grow by 26 per cent every year to reach Rs 117 billion by 2017, on the back of various foreign-origin chains and domestic QSR players.
With customers being exposed to varied cultural influences, there has been a firm increase in the number of people eating out and experimenting with cuisines. Add to this the evolving food consumer – who wants variety in cuisine as well as an exceptional experience in the outlets they visit – and the atmosphere for QSR growth in India is just perfect.
However, despite this vast market potential, costs and legislative snarls have impeded the development of street food-inspired indigenous QSR chains in India.
Dominance of Foreign Origin Chains
The branded QSR category in India is largely dominated by foreign-origin chains, including McDonald’s, Domino’s, KFC, Pizza Hut, among other newer Indian franchisees of global QSR brands. So far, despite of a slew of regional food service outlets that are fairly successful in targeting local tastes and preferences, India has not able to create a national homegrown chain.
There are varied reasons for this, the most prominent of them being that Indian homegrown brands don’t spend a lot of time and investment on product design and market R&D. They fail to spread their network because of their conservative nature as far as investment in the backend, supply chain side of business goes. These are efficiencies that a foreign brand QSR typically relies on, a major part of their success.
Just having a lot of opportunities is not enough. Opportunities need to be harnessed and converted into profitable enterprises. To build a national QSR brand that can even go global, Indian players need to invest in a robust backend as well as frontend system.
Convenience Trumps Experience
In a country with more than 1.31 billion people, opportunities are in abundance for the growth of the QSR industry but a majority of them – especially domestic brands – are struggling and many just about manage to stay onboard. The situation further aggravates at a time when discretionary spending is at a decade-low level and consumers are scrounging to spend on eating out.
Rampant surge in online food delivery channels via food aggregators and delivery options, further adds to QSRs woes.
Food aggregators and delivery companies like TinyOwl, Foodpanda, Zomato, Just Eat, Swiggy, among others, allow customers to choose and order from detailed menus that are available online. They give an additional convenience factor of ordering from comfort of home and provide discounts, cashback and lucrative offers, which these QSRs can not match.
According to a Bloomberg report, more than 400 food delivery apps cropped up in India in the past three years, raising approximately $120 billion.
However, these food aggregators have their fair share of problems, starting with low APC (average price per customer), low order value (average order Rs 400). There are no extra delivery charges, high average of delivery costs and less than 20 per cent margins from restaurants.
Then there are issues like lack of service standards being maintained by restaurants – hygiene, quality, and timely delivery to name just a few. Apart from this, food aggregators face pressure when it comes to delivering consistent quality of food from QSRs. Non-performance by restaurants impacts the brand of the aggregator to a large extent.
When expectation of quality and hygiene are not met, customers tend to gravitate towards high-end restaurants or chains.
Traditionally food startups have kept a distance from these aspects relying on solving this problem by going to competing restaurants. However this strategy fails when there is a large number of restaurants equally ill-equipped on their service standards.
One Plus One Can Equal Eleven
Food tech startups have a lot to learn from QSRs who emphasize on the need for standardized and reduced region-wise menu, prices and packaging with additional benefits such as convenience, health benefits, service delivery efficiency and cost finances.
Food aggregators like TravelKhana – a marketplace enabling people to order food in transit through a wide variety of restaurants en route – trains its partner regional restaurants using its in-house quality, audit and training teams. It even makes good quality machines and consumables accessible to restaurants by directing them to the best sources.
With fewer restaurants on board, TravelKhana’s innovative Virtual QSR model is able to facilitate strong quality processes for them, helping them scale across the nation and have technology route the largest number of orders to the best performing restaurant based on feedback by customers.
Their model is allowing restaurants to not only gain traction and scale up their value chain but is also helping them in generating business offline largely through a substantial customer base.
About the Author: Pushpinder Singh is the CEO and Co-founder of TravelKhana. TravelKhana is a food aggregator, the first India-wide marketplace enabling people to order food in transit through a wide variety of restaurants en route.
The views and ideas expressed in this article are his own.