Mar 15, 20212 min read

Indians Are Still Hungry For Fast Food

New Delhi: India’s quick-service restaurant (QSR) market is expected to clock a compound annual growth rate of 23% between now to the fiscal year 2025 as large food services chains such as McDonald’s, Burger King, Domino’s, among others deepen their reach in India’s smaller cities, and benefit from a younger demographic, a report by Edelweiss Securities released Monday said.

Covid has, in fact, become an enabler boosting preference for QSR, the report said, especially as consumers shifted to familiar brands. The pandemic-induced lockdown also wiped-out significant supply from the market benefiting larger players. Fast-food chains are still less than 5% of India’s food services market—the global average rests at 20%.

India’s food services market was estimated at ₹4,236 billion in FY20, Edelweiss said in its research note citing data from Technopak. As of FY20—organized QSRs had a market size of Rs348 billion. Future growth in the segment will be driven by chains in the QSR market, which accounted for 54% of the total QSR sub-segment in FY20 and is estimated to reach 64% of the QSR sales by FY25, it said.

“QSRs took a heavy knock from covid-19, especially the store/non-delivery focused players. Fortunately, these chains had the infrastructure and process for delivery services in place long before the spread of the pandemic, which enabled them to adapt swiftly to government regulations," the report said.

Fast-food chain Burger King reported a blockbuster IPO last year; meanwhile, Jubilant Foodworks, which operates the Domino's pizza franchise in India recently revised its potential store opening target in India from the earlier 2,000 to 3,000. The management, however, did not give a definite timeline for opening these stores. Domino's, which opened stores in India in the 90s, has over 1,300 outlets in India. The promoters of HT Media Ltd, which publishes Mint, and Jubilant FoodWorks are closely related. There are, however, no promoter cross-holdings.

The more recent popularity of online food ordering and food delivery platforms has enabled QSRs to reach more consumers.

However, the report also flagged concerns over challenges that restaurant chains could face. "Despite its popularity, success and return structures remain divergent. Most QSRs, except Dominos, are still tweaking their business models even as they keep expanding. QSR brands will also need to work towards favourable store economics and continue to localize their menu," the report said.