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McD’s Cut Costs without Compromising on Quality


Westlife Development, which operates the McDonald’s chain of restaurants in west and south India, plans to double the number of restaurants to 500 by 2022. However, the company that reported an 8.4% same-store sales growth (SSSG) during the Jan-March quarter — highest in the last three years, said the overall quick service market hasn’t shown clear signs of revival yet. Amit Jatia, vice-chairman of Westlife Development, in an interaction with Sagar Malviya and Neha Tyagi, said the company has cut nearly 25% of operating costs for each new store in the last few months by re-working the entire backend and cost structure. Edited excerpts:

Are you sensing any revival in quick service restaurant market yet?

The footfalls that we are seeing have not changed and that is visible from the industry as well. What is different are the options a consumer has when he walks in at McDonald’s. We are conside-ring setting up McDonald’s as a coffee destination too.

Amit Jaatia

Amit Jatia, Vice-Chairman, Westlife Development

What prompted the 17% sales growth? 

In the two years, we feel that we have always followed our own path in terms of what we needed to do to engage the consumer. When footfalls were down, the industry was offering discounts, but we felt that we needed to reinvest in the business. We added another occasion for the consumer by re-imaging the store with a McCafe, a barista, handmade coffee and offering the customer anot-her option between breakfast and lunch and between lunch and dinner.

We understand that McDonald’s is changing its operations, especially for new openings, to cut costs.

We started seeing signs of changing dynamics in 2013. With inflation hitting us and SSSG flattening out, we started looking at the business operating model differently. The ability to open new restaurants was hurting us as we were losing money. We, therefore, re-looked at our suppliers and our costs as well with the changing dollar rates and dynamics. So today, we have our business operating model for today’s market dynamics. Without compromising on the quality and consumer experience, we brought down the cost of operating each restaurant by about 25% by using solar power, more effective cooling LED lights and better designs.

Your key vendors are also suppliers to rivals such as Burger King and Subway. Don’t you have an issue with that?

We helped set up these vendors. McDo-nald’s works with proprietary formulations which the supplier will not divulge. Competitors do not get access to them. The processes we build with our suppliers, the knowledge we transfer and the time we invest, all make a huge difference to the quality of output. We do not have a problem if our suppliers work with our competitors as long as they don’t share our proprietary knowledge with the competitors.

The market is now flooded with burger retail chains. What has been the impact on your sales?

I think it has created a larger market. When you look at burgers, people are still learning about them. Today, everyone knows the pizza, and over the next 5-10 years, we want everyone to know the burger. Today, many of the new entrants have only 1-2 restaurants, so there is no impact and you can see our results speak for themselves. We cannot have same store sales growth of these numbers.

Source: Economic Times
(Photo: static.dnaindia.com)

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