Hardcastle Restaurants, the master franchise owner of McDonald’s in west and south India, posted a growth in revenue for the 12th consecutive quarter in June despite macro-level changes that had dragged its bottom line into the red a year ago. While consumer sentiment has improved in the past few quarters, its Managing Director Smita Jatia tells Arnab Dutta that the firm is prepared to battle higher inflation and face anti-profiteering authorities. Edited excerpts:
What are the factors that worked for Hardcastle in the past three years?
During the past 12 quarters, same-store sales have grown quarter over quarter. The time was turbulent for the sector — we had to deal with demonetisation and implementation of the goods and services tax (GST). While many resorted to discounting and freebies, we stuck to menu innovations, and introduced new platforms. The discounting game may bring new customers on board, but eventually, these customers go away once freebies stop.
Local innovations over global taste and familiar formats are our key business driver. Products such as Aloo Tikki burger that are invented in India have got global acclamations. Now, we are working to add items — like the new platform on rice — that are complementary to a conventional McDonald’s menu. We have started quick-service restaurant business in India, and now hold more than 95 per cent share of the branded burger market in the country, according to Euromonitor.
Does the business environment look positive now? Where do you see growth coming from?
Gloomy days are now past and consumer demand and sentiment is picking up. Discretionary spending and frequency of eating out is growing. But we have to be prepared for macroeconomic shocks. Traditionally, demand picks up during election years. Hopefully, we will see a similar trend in coming months.
Consumer footfall has increased steadily across retail platforms in the past 12-18 months and our stores have observed the rise as well. Moreover, per ticket revenue has also grown during the past few quarters. Fast-food restaurants make just 1 per cent of out-of-home eating business in India. Thus, all types of locations would be in target when it comes to opening up new stores.
But food inflation is increasingly becoming a concern…
We are prepared for an inflationary cycle. So are our suppliers and partners. Inflation has been at the higher side — over 7 per cent — in India. Our product mix is an important lever to adjust against inflation. We have a moving 12-18 months plan and are not contemplating hiking prices more than 3 per cent a year.
The anti-profiteering authorities are checking for any flaw in passing on of GST benefits. How will you face them?
They are reaching out to everyone and we are prepared. Last November, when input tax credit was taken away, our model took a hit of 10-12 per cent. We can show the difference between the tax structure between July and October in 2017 when input tax credit was in place and what it is now.
What is your growth plan?
Every year, we plan to open 30 restaurants and our target is to have 450 outlets by 2022 from 280 now. All our restaurants will have a McCafe zone in next two years.
