It’s been over a decade since the QSR (quick-service restaurant) segment has come into its own in India. One of the leading players in this food-on-the-go sector is McDonald’s. Besides serving burgers and the usual, the chain is rapidly responding to the cafe society buzz in India.
Anant Agarwal, Vice Chairman of Connaught Plaza Restaurants Limited, which owns the master franchise for McDonald’s (North and East India), spoke to CNBC TV18 about his plans and targets — including upcoming investments of another $100-120 million in the next 3-4 years and the potential to clock over ₹2,000 crore revenue in the current calendar year.
Below are the edited excerpts of the interview:
Q. When we talk about comfort food and the QSR segment, we’ve seen the growth scaling up, then plateauing. Now, since you took over the company in 2020, we are seeing a fresh-look McDonald’s in the North and East of India, with revamped stores and McCafés. How has the journey been and why the transition to McCafé?
A: As you rightly said, we took over the business in 2020. We took over close to 160 stores. At the beginning, our focus was on renovating all the old stores to a new format called EoTF, or experience of the future — where we provide digital menu boards, table service and self-ordering kiosks. McCafé is part of the EoTF stores — only EoTF stores can have a McCafé. McCafé is something we started three years back and today we stand at 120, which is a vote of confidence for coffee and McCafé.
The total store count for McDonald’s today would be 244 and McCafés at 120 and we plan to take this number to 250 by the year-end.
Q. When you talk about 250 stores, does this means an addition of about 60 stores in this calendar year. Where will this growth come from and which cities are you looking at?
A: We’ll be opening 60 new McDonald’s stores. That will take the total number to 300+. Out of those McDonald’s 300 stores, 250 will have a Mc Café, i.e. a large chunk of these outlets will focus more on the coffee culture.
Cafe culture is absolutely buzzing in the country. Today, roughly 10% of our sales come from McCafés and the growth in McCafés is a little faster than burger and food sales. This shows a distinct tilt towards coffee.
India is traditionally a tea-drinking nation, but Gen Zs and millennials prefer to have coffee. What is very special about us is that while in most chains a cappuccino latte would cost nothing less than ₹250-300, we offer a cappuccino for ₹99. And I can say with a lot of confidence say that this would be one of the best quality cappuccinos at the best price.
So, the idea is to democratise coffee consumption in India.
When we talk about affordability at the price points, we have also seen that a lot of investment has gone into this entire shift towards McCafés.
Q. What sort of investments are you looking at?
A: Till now we have invested close to $100 million in the business in the last four years and we plan to double our stores in the next 3-4 years. We would be investing another $100-120 million in the next 3-4 years. Most of our funding would be coming from internal cash flows. The idea is to make the business very robust and our focus right now is on pure revenue and store growth. Listing would be a thought for the future. But in the next 3-4 years, our focus is purely on topline and bottomline growth.
Q. When you say listing is a thought for the future, do we see it in the near future?
A: It’s a thought for the future.
Q. Talking about investments, you’ve already said this is going to be purely internal accruals. So what is the revenue like currently and what are your revenue projections?
A: In calendar year 2025, we are targeting a revenue of ₹2,000-2,200 crore and we plan to double this number in the next 3-4 years.
Q. And when you talk about opening new stores, what sort of a cities will you consider? Are they tier-1 or tier-2 cities? What is driving sales for you?
A: The expansion will be across tiers but our focus will be on states like UP, Punjab, and the entire Northeast. The tier-2 has also been really good for us and has been giving us great sales.
For example, we just opened a store in Hoshiarpur and we saw queues outside the stores on the first day. This is the kind of response we get in tier-2 cities. Guwahati too saw queues in the first couple of weeks post-opening. The East is a big focus area for us. So are UP, Punjab and the NCR, where there’s always a scope of growth. It’s very holistic mix but more focused on other states.
Q. Which segment is doing well? Is it dine-in, drive-through or delivery? What is doing the best and what are the plans?
A: There are four channels — dine-in, delivery, drive-through and McCafé. While the others are growing quite evenly, McCafé is growing much faster. Drive-through plays a very big role in our growth and expansion and is a key strategic area. We try to get drive-through at more stores.
Q. What about delivery? How does delivery compare with dine-in? What is driving sales?
A: Delivery would be at a 32-33%. It’s a very significant number but dine-in and drive-through are much bigger for us. So, the focus is on providing the customer experience and brand building that happen at the store. The focus is always on dine-in and providing the best hospitality. But delivery too is a very key channel for sales growth.
Q. Is it through delivery partners or do you have your own delivery channels?
A: We have a very good relationship with our 3PO partners, Zomato and Swiggy, and most of our delivery sales are through these two channels.
Q. Do you think that delivery partners are doing well enough for you to get that number?
A: Yes, I think we have a very good equation with them, so we are considering this partnership and relationship as pivotal.
Q. Are you considering expanding the menu as nowadays people are more health-focused. We’ve seen a lot of chains moving to ragi, oats and so on. Do you think that is something that you would like to work on for your menu?
A: Yes, I think health has been a big focus area. Our partners in South and West have launched a whole millet bun. We’ll be launching that as well.
But McDonald’s has been a brand which stands for value, so I think that is a key focus area for us. Also, we’ve seen the demand for premiumisation in the last couple of years. There is a bigger demand for gourmet kind of burgers. Our focus will also be to curate a gourmet kind of an experience for the customers.
We’ll also see launches happening at a ₹200+ price point in the next couple of years.
Q. How do you see competition? You already spoke about your competitor — Westlife, which owns the franchisee for South and West. We’ve seen the growth of Devyani International, which is into pizzas, also Costa Coffee. There is Jubilant, which has offerings on the burgers and cafe side through Dunkin.
A: I feel competition is always very healthy for us and the more the competition, the bigger the market. As long as we are confident about our offerings and the service quality, I think we’ll continue being the number one player in the market.
I feel competition is always good. The more the merrier in the market, I think.
