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A  Research  Paper  On  

The  Restaurant  Services  Market    
In  India  
 

 
 
 
 
 
 
 
 
 

    7/05/15  
 !  
 
 
 
 
TABLE  OF  CONTENTS  
 
 
 
1.  Outlook  of  the  Restaurant  Services  Market  in  India……………………………………04  
 
2.  Key  Drivers  of  the  Market…………………………………………………………………………05  
 
3.  Competitive  Landscape…………………………………………………………………………….09  
 
4.  Major  Challenges:  Hampering  the  Growth  of  the  Market…………………………….13  
 
5.  Addressing  The  Challenges…………………………….…………………………….…………...14  
 
6.  Key  Prospects  for  Tapping  Growth  Opportunity………………………………………...15  
 
7.  Snapshot  of  the  Investment  Flow  in  the  QSR  Segment………………………………..16  
 
8.  Conclusion…………………………….…………………………….…………………………….……..17  
 
9.  Sources…………………………….…………………………….…………………………….………….18  
 
10.  Disclaimer…………………………….…………………………….…………………………….……19  
   
11.  About  RNM…………………………….…………………………….…………………………….…..20  
 
 
 
 
 
 
 
 
 

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India accounts
for 11.8% of the
Asia-Pacific
restaurants
industry value Market Value
  grew by 11% in
2014 to reach a
value of $151.6
billion

By 2019, the Indian

restaurants industry
will have a volume of
3,806 thousand
employees, an increase In 2019, the Indian
of 9% since 2014 restaurant industry
 
forecasts to be at a
value of $245.5 billion
with an increase of
61.9% since 2014

There were 692,298

thousand full service
restaurants in
India in 2013
Street and mobile
 
vendors have the largest
segment of the fast food
market in India,
accounting for 53.6% of3  
 
the markets total value
     
Source:  MarketLine  Industry  Profile  2015    
     Euromonitor  2014  
 !  
 

Outlook  of  the  Restaurant  Services  

Market  in  India  

1.  Introduction  
TAGS:   1.1 India is one of the fastest growing economies in the world with an average growth
 
#Indian   rate of 7% over the past decade (The World Bank 2014). With a population of 1.2
Restaurant   billion, India offers to be one of the most lucrative markets for consumer products,
Market  
  therefore attracting a strong and continuous flow of investments in scalable businesses
#Key  Growth  
Drivers   with a strong back end supply chain. As the purchasing power of the middle class
 
#Annual  
increase along with the urbanisation of smaller cities, the demand for quick service
Expenditure  on   restaurants, fine dining and casual dining restaurant will grow manifold in years to
Fast  Food  in  
Tier  II  &  III   come. The estimated size of the food and beverage industry is valued at USD 341
Cities  
 
billion (Linklaters 2013) within which the country’s restaurant sector is valued at
#  Key  prospects     USD 48 billion, with a potential to grow to USD 78 billion by the year 2018. Such
 
#Snapshot  of   demand represented by one of the most promising and emerging markets in the world
Investment  Flow  
  implies businesses to invest in a
#Growth  in   market with large potential to
Indian  QSR  
Segment   flourish. Indian Restaurant Market
 

The restaurant services market has been

divided into four areas; quick service Quick Service
3%   5%  
Restaurants
restaurants, fine dining, casual dining and
cafes, bars and pubs. The food and Fine Dining
26%   44%  
beverage service market has witnessed a
compounded annual growth rate of 20% Casual Dining
(Technopak 2012). The overall scenario 22%  
of the food and beverage sector has Cafes
transformed from a time where a handful
of restaurants existed to a time now Bars
where consumers are flooded with
choices of cuisines, locations and range
of prices.

Quick Service Restaurants account for 44% of the

restaurant market and together with casual dining
contribute a market share of 70% in the financial year
2013 (PWC), therefore accounting for a major portion 4  
of the revenues of the organised market in India
(Reuters 2013)
     
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2.  Key  Drivers  of  the  Market  

2.1 The Indian food and beverage industry has witnessed healthy growth over the
recent years and has illustrated a forward moving approach, resulting in multiple
factor that escalates consumption for F&B industry in India. The diagram below
depicts the major factors that are contributing to the growth of this industry.
 

 
More than 50% of India’s population
Favourable is below the age of 25 and 65%
Demographic below the age of 35, providing
  promising growth in consumption.
 
 
 
  Organised retail constitutes 8% of
Diffusion of   total retail in India
Organised Retail  
  Large potential remains in the
and International   organised sector.
Brands  
   
 
 

Growing E-
Many brands are using an e-
Commerce & commerce platform for offering their
Evolution of services.
Captive
India hosts 140 million smartphone
Retailing users and 305 million users of
  Internet (The Hindu 2014).

  Rising international travel leading to

people experiencing different
Changing cuisines therefore opening avenues
Consumer to other cuisine restaurants.
Lifestyle Growing youth population-providing
  change in food consumption patterns
in favour of QSR and casual dining.

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2.2 India presents countless opportunities in the restaurant service market being the
second most populous country with 65% of its population below the age of 35
proposing enormous growth prospects for existing and new restaurant businesses. It
can also be noted that India is likely to become the world’s youngest country, with
64% of its population in the working age group presenting interesting opportunities
for the quick service restaurant and casual dining segment. Growth of the middle
class, supported by the growing Indian youth population is also a driving force in
India’s rising consumption story. With the increase in spending power, the Indian
consumer market is seeking more entertainment options, driving the growth of the
restaurant segments.

Moreover, the increasing penetration of the organised sector contributing 8% to the

total retail in India suggests huge potential for the organised sector to grow. Existing
global brands have been popular amongst the Indian consumer market due to their
capability of adapting to the local taste of India and continue to penetrate the Indian
market. Amid the growth of mall culture and organised retail, food service industry is
also expected to grow within.

It is evident that with the development of new avenues along with the increase of food
courts at malls, forecourts, airport and railway lounges and along freeways is driving
growth of the organised Quick Service Restaurants and dining segment.
 

Growth  in  Indian  QSR  Segment  

70  

70  

60  

50  
34  
40  

30   15  
20  

10  

0  
2009  -­‐  10   2012  -­‐  13   2015  -­‐  16  
 
  Source:  CRISIL  Research  2013  

It can be viewed that the Indian Quick Service Restaurant Market

has grown over the 5-year period, depicting positive growth in
this segment in the future.
 

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India currently holds more than 300 million Internet users, of which 173 million
accesses Internet using their mobile devices (TOI 2014). Such figures depict
enormous growth opportunities for companies like Zomato who provide reviews,
location services, contact details, customer ratings and various other services for
restaurants. This helps build the reputation of restaurants and enable them to be
visible to a wider range of audience. It makes the Indian consumers more aware of the
available options around them and at the same time becomes an advertising tool for
new and upcoming restaurants.

2.3

Annual  Spending  on  Fast  Food  in  

Tier  I,  II  &  III  Cities  of  India  

8000   6800   5200  

6000  

4000   2500  

2000  

0  
Tier  I  
Tier  II  &  III  

Source:  The  Associated  Chambers  of  Commerce  &  Industry  in  India  2014  

According   to   the   ASSOCHAM,   the   rising   needs   of   consumers   for  

convenience,   increased   appetite   and   hunger   for   international   108%  growth  on  
cuisines   and   exposure   to   global   media,   the   annual   spending   of   spending’s  in  fast  
middle   class   households   of   tier   II   and   III   cities   have   witnessed   an   food  restaurants  
increase  of  108%  growth  over  the  last  two  years  (ASSOCHAM  2014)   over  the  past  2  
  years  in  the  Tier  II  &  
The   factors  propelling  this   buoyancy  include  the   changing   economic   III  cities  
and   demographic   profile  of  consumers   in  India  who  are  exposed  to   (ASSOCHAM  2014)  
international  brands  and  are  far  more  aware  of  global  trends.    

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Sales  in  Full  Service  Restaurants  by  

Location  in  India  

Total  

Stand-­‐Alone  

Retail  

Lodging  

Travel  

Leisure  

0   10000   20000   30000   40000   50000   60000  

Stand-­‐
Leisure   Travel   Lodging   Retail   Total  
Alone  
2013  (in  $US  mn)   1,034   1,796   2,994   4,246   44,367   54,438  
2012  (in  $US  mn)   953   1,694   2,965   3,918   43,420   52,951  

2013  (in  $US  mn)   2012  (in  $US  mn)  

Source:  Euromonitor  National  Statistics  2014  

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3.  Competitive  Landscape    
 
3.1 With the rise in competition and constantly growing markets, brands are required
to design an opportunity to differentiate themselves from others. While price-based
competition exists within the industry, fast food establishments also compete on
various fronts such as, location, food quality, style and presentation and food range.
Innovative products, including healthier items, are introduced frequently, while
variety and service are also fundamental.
 

PRICE  

NUTRITIONAL  
AND  DIETARY   LOCATION  
REQUIREMENTS  

INNOVATIVE  
FOOD  QUALITY   OFFERINGS  

CUSTOMER   ENTRY  OF  

SERVICE   FOREIGN  
ORIENTATION   PLAYERS  

CONSUMER  
TECHNOLOGY   CONNECT  AND  
LOYALTY  

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The use of social media and technology has become a vital tool used by Franchises and
Restaurants to reach a wider range of consumers, providing them with a platform to
present their views and ideas on how these companies can do better. Social media is also
an effective tool for marketing as it provides brands with the ability to interact and engage
with more people in real time (Angeles 2014).

On the hand technology however has made the experience for consumers more interactive
and enjoyable with their online ordering and mobile applications. Dominos Pizza offer a
online Pizza tracker which provides the real time status of the customers order and have
also designed a new way to interact with their customers via a feature of chat where in
customers can interact with the representatives about their order or any query (Jubilant
FoodWorks Annual Report 2013-14).

This is how Dominos choses to distinguish itself from its competitors by offering addition
services to their customers that create value.

3.2 There is significant competition between franchise operators and other single-location
fast food restaurants. Although franchise operators account for a relatively small share of
establishments, their share of industry revenue is much larger. This relates to the
distribution of their establishments, prominently in high-traffic locations along with ongoing
investment in marketing their brands. However, an upward trend can be noticed towards the
co-location of several different fast food establishments in the same geographic area such as
in food courts at shopping malls and airports.

The competitive environment within full-service restaurants in India continues to be

fragmented. Dominos Pizza enjoys a high brand recall in the home delivery channel
whereas Pizza hut experiences high traffic in the seating in segment (Euromonitor 2014)

Innovation in food offering is an important trend that MNC’s follow in order to create
competitive edge.
Pizza Hut introduced Birizza, a combination of pizza and biryani for the Indian market in
April 2014 (Euromonitor 2014)
 

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3.3 Nutritional And Dietary Requirements

97%  Fat  
Free  
Subs  

Subway  
Sandwich  
Diet    

Eat  
Fresh  &  
Healthy  
Way  
 

Subway   differentiates   its   offering   by   providing   a  

healthier   alternative   in   the   quick   service   restaurant  
market.   Moreover,   Subway   also   provides   nutrition  
comparative   tool   charts,   which   allows   its   customers   to  
compare   the   nutritional   value   of   upto   three   subs.   With  
the   growing   health  conscious   society   of  India,  fast   food  
chains  would  need  to  make  their  offering  healthier  and  
add  nutritional  value  to  expand  their  customer  base.  
 
 

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3.4 Consumer Connect and Loyalty

International brands employ different strategies to create a customer loyalty towards

their brand. Many brands develop loyalty programs that increase customer
engagement and provide discounts to customers who are visiting their stores on daily
basis. Starbucks uses My Starbucks Rewards, which provides 1 star every time a
customer spends INR 300 with their registered Starbucks Card at the store.

5  Stars  puts  Starbucks  

Green  Level  
customers  in  the  green  level.  
 

Enjoy  a  
tall  drink   Free  beverage   Free  size  
of  your   customisation   upgrades  
choice  on   on  any   for  
your   beverage   featured  
birthday   beverages  

Collect  25  Stars  in  12  months  

Gold  Level  
and  you’re  in  the  gold  level.  
 

Free  tall  
Free   hot  drink  
drink  for   on  a  
every  10   purchase  of  
stars   250g  whole  
bean  coffee   12  

     
 !  
3.5 Entry of Top 10 Foreign QSR Players

McDonald’s

Kentucky Fried Chicken

Subway

Pizza Hut

Starbucks

Burger King

Dominos Pizza

Dunkin’ Donuts

Papa John’s

Krispy Kreme

Currently,  India’s  quick  service  restaurant  segment  is  worth  INR  

60  billion  and  is  expected  to  grow  26%  each  year  to  reach  an  
astonishing  INR  117  billion,  fuelled  by  the  arrival  of  more  
international  chains  and  strengthening  of  local  players      
 
Fast  food  chains  are  estimated  to  grow  at  30%  CAGR  by  2015.  Mc  
Donald’s  and  Subway  are  broadening  their  vegetarian  menus  
every  year  by  incorporating  tradition  flavours.  Mc  Donald’s  
Masala  Grill,  Paneer  wraps  are  some  of  their  Indian  offerings  only.    
 
Foreign  brands  dominate  the  Indian  QSR  market  segment  with  
higher  m arket  share  and  the  ability  to  cater  to  a  larger  number  of    
customers.  However,  domestic  brands  are  also  keeping  pace  by  
trying  to  scale  up  their  operations  and  use  their  understanding  of  
local  taste  of  the  Indian  market  to  their  advantage.  The  local  QSR  
players  include  Café  Coffee  Day,  Nirula’s,  Kaati  Zone  and  Goli  Vada  
Pav,  who  are  successfully  holding  on  to  their  niche  customer  base.     13  

     
 !  

4.  Major  Challenges:  Hampering  The  Growth  Of  

The  Market  
 
 
The Indian market loves variety and localised flavour. Thus,
the demand for unorganised sector exists, which comprises of  
most of the market. This sector offers low selling prices due
to their low cost of infrastructure, facilities, labour, material  
and regulatory compliances.  
 
 
 
At time multinational brands posses low negotiation power
 
with developers who offer feudal terms in terms of location  
and revenue sharing. Furthermore, development of upcoming  
sites have paced down over the years placing further stress to
brands on the availability of quality places.  
 
 

 
 
Another challenge includes the availability of competent  
manpower and high attrition due to plundering from domestic
and international competitors and unrelated sectors.  
Organisations also incur high personnel costs, which account  
for 15 to 20 percent of their revenues.
 
 
 
 
 
 
Scalability is reduced due to the absence of adequate and
necessary infrastructure. The unavailability of raw materials  
restricts the width and depth of cuisine and price offerings.  
Locating and building relationships with a good vendor base
rakes time and money ultimately reducing the pace of growth.
 
 
 
 
 
As India is inviting a lot of interest from large fast food  
chains, businesses will need to make their business model
scalable, which will be a key differentiator. Therefore,
businesses will require capital infusion to support growth.  

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5.  Addressing  The  Challenges  

 

Place  grave  
importance   Structuring  
Partner  with  
to   of  the  store  
size  for  
training  
customer   institutes  to  
service   optimum  
utilisation   bridge  labour  
 
of  space   requirements  
  and  focus  on  
retaining  
Differential  
pricing  strategy  -­‐  
front-­‐end  staff    
Set  up    
use  competitive   special  lease  
pricing  for   agreements  
standard   on  a  revenue  
services  and   sharing  
premium  pricing   basis  
for  niche    
products  
 

The   restaurants   service   players   primacy   is   to   display   consistency   in  

offering   a   memorable   experience   to   its   customers   with   quality   food,  
attractive  pricing,  reasonable  food  portions  along  with  a  good  customer  
service   experience  and   ambience.   The   market   can   also   adopt   differential  
pricing   strategy   where   in   competitive   pricing   is   offered   for   standard  
services   like   at   McDonald’s,   Haldirams,   KFC   and   Subway   and   premium  
pricing  for  niche  products  like  Bukhara,  Mainland  China  and  Indigo.    
 
The  restaurant   players  also  need  to  pay  attention  to   minimising  cost  and  
maximising   value   by   adopting   strategies   such   as   preferential   lease  
agreements  on  a  revenue-­‐sharing  basis  and  optimum  utilisation  of  space.  
Furthermore,   restaurant   service   market   can   set   up   alliances   with  
training   institutes   to   bridge   labour   requirements.   This   will   reduce   staff  
turnover  and  improve  efficiency  within  the  market.  
 
 
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 !  

6.  Key  Prospects  For  Tapping  Growth  Opportunity  

Engaging with consumers

about what they like and
To utilise capacity,
  maintaining consumer restaurants are
interest is vital.
Innovation in menus that
required to align
brings variety and at the with customer
same time build a healthy
eating culture will drive requirements. For
 
footfalls of regular example, buffet
customers. Building close
relationship with the offering during
customer is fundamental
to the restaurant service
lunch hours meet
sector as it drives future A new competitor may need the quick service
revenue for the
organisation. to invest 20 – 50 percent of demand of
  total investments in customers.
establishing back-end
operations such as sourcing,
 
processing units, and
storage and distribution.
 

Communication across media platforms such as Facebook, Twitter

is fundamental to generate and sustain interest in restaurants. A
good example of incorporating technology in the delivery process
would be the Pizza Tracker at Dominos Pizza. This differentiates
Dominos Pizza from its competitors and provides other players in
the market with an opportunity to develop and integrate a unique
taste of their own to create value for their offering amongst
consumers.
 

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 !  

7.  Snapshot  of  the  Investment  Flow  in  the  QSR  

Segment  
 

ICICI Venture acquired 10% stake in Devyani

International who is the master franchisee of
Pizza Hut, KFC for $55 Million.
 

Mast Kalandar, a Bangalore based QSR chain, secured

a second round of investments from Helion Venture
Partners, Foodprint Ventures and Salarpuria Group.
   

Yo! China received funding of $5.5 Million

from the Matrix Partners.
 
Accel Partners invested in Bangalore based
fast food chain Kaati Zone.
 

 
Starbucks the world’s largest coffee chain was
brought to India under the name TATA
STARBUCKS, a 50:50 joint venture between Tata  
and Starbucks.
 
 

 
 
 
 

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8.  Conclusion  
With the on set of the advancement in the restaurant services market, the Indian
market has to offer large prospects in the fast food, casual dining and fine dining
segments. The proposition made by one of the fastest growing economies in the world
will offer potential entrepreneurs an opportunity to invest in this sector, which has
tremendous growth opportunities.

QUICK SERVICE RESTAURANT SEGMENT

IS ESTIMATED TO GROW AT 30% CAGR BY
2015

INTERNATIONAL FOOD CHAINS ARE

INTRODUCING MORE AND MORE ITEMS TO
THEIR MENU WHICH INCORPORATE
LOCAL TASTE AND FLAVOUR

YOUNGER POPULATION, GROWING

URBANISATION, HIGHER SPENDINGS,
INCREASE IN TRAVELS AND EXPOSURE
TO WESTERN LIFESTYLES ARE LEADING
TO THE ADOPTION OF NEW DIETARY
HABITS

INDIA’S QUICK SERVICE RESTAURANT

SEGMENT IS WORTH INR 60 BILLION AND
IS EXPECTED TO REACH INR 117 BILLION
BY 2017 WITH THE ARRIVAL OF MORE
INTERNATIONAL FOOD CHAINS AND
STRENGTHENING LOCAL PLAYERS

INTERNATIONAL FOOD CHAINS ARE

INTRODUCING MORE AND MORE ITEMS TO
THEIR MENU WHICH INCORPORATE
LOCAL TASTE AND FLAVOUR
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9.  Sources  
ERNST & YOUNG

TECHOPAK

JUBILANT FOODWORKS ANNUAL REPORT

THE WORLD BANK

LINKLATERS

REUTERS

TIMES OF INDIA

THE HINDU

THE ASSOCIATE CHAMBERS OF COMMERCE & INDUSTRY IN INDIA

EUROMONITOR DATABASE

IBIS WORLD INDUSTRY REPORT

SPECIAKITY RESTAURANTS ANNUAL REPORT

FOOD NAVIGATOR

FNB NEWS

 
 

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Disclaimer  
 
This Article is prepared solely on the basis of publically available information and
information provided by the “Company”. RNM has not undertaken any exercise of
whatsoever nature to ascertain the accuracy/ completeness of the information in this
Article. Any user of this Article should conduct his own investigation/Due Diligence/
Research prior to making any investment decision. RNM cannot be held responsible
for any such investment decision.

No responsibility or liability is accepted for any loss or damage howsoever arising

that you may suffer as a result of this Article. RNM is acting in the capacity of an
Advisor to the Company and holds no position of responsibility/professional duty
towards the recipient of this Article. Neither the issue of this Article nor any part of its
contents is to be taken as any form of commitment on the part of RNM or the
promoters or any of its subsidiaries or affiliates to proceed with the investment
envisaged by the issue of this Article and RNM or the promoters reserve the right to
amend the proposed timetable and/or the investment procedure, to terminate the
procedure and to terminate any discussions and negotiations with any prospective
purchaser at any time and without giving any reason.

In no circumstances will RNM or the promoters or any of its subsidiaries or affiliates

(including the Company) be responsible for any costs or expenses incurred in
connection with any appraisal or investigation of the Company or for any other costs
or expenses incurred by prospective purchasers in connection with the proposed
investment in the Company.

 
   

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Contributors:  
 

 
C.A  Raghu  Marwah  (Managing  Partner)    
Contact  Details:  [email protected]  
 

 
Rohit  Dhanota    
Contact  Details:  [email protected]  
 
 
 
 

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CORPORATE FACTS

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