In retail, Jaya Bhadhuri works. Not Aishwarya.

The McDonald's boss may not be very accessible, but when he starts to talk, you would not want him to stop. That is the kind of experience – Vikram Bakshi, managing director, Connaught Plaza Restaurants and JV partner of McDonald's India – ensures when you get the opportunity to speak to him at length. It's fun and there is much to chew – just like the McDonald's burger. No kidding!

Bakshi has an extensive experience spanning 25 years in diverse businesses – real estate, hospitality and retail. And it is his entrepreneurial spirit and never-say-die attitude that has successfully converted McDonald's, the American burger chain launched in India in 1996, into a totally identifiable and almost home-grown Indian brand. Which, Bakshi admits, was quite a challenge. However, a crystal clear focus on the requirements of the consumer guided him through.

In an insightful interview with Sumita Vaid Dixit of agencyfaqs!, Bakshi, among other things, talks about how just by losing focus on the customers, retailers set themselves in a trap. Excerpts.

Edited Excerpts

Yes, you are right in making that comment. Let me admit, we are not entirely there. However, I must add that it is a matter that has to be handled in a very sensitive manner. French fries is a product that cannot take any kind of abuse. But we are certainly looking into the matter. Our laboratory in Hong Kong is trying to find a solution to preserve the crunchiness of the French fries.

Very frankly, the challenge for us lay everywhere. Look at our standards, after seven minutes of making French Fries, if they are not consumed they are not sold. After 10 minutes of making the burger, if not sold, it is removed from the self. We work diligently to maintain these standards.

Coming back to French fries and its delivery to homes, the lack of crunchiness is a phenomenon we have to beat. Even while we take the order for French fries, we do discourage our customers from ordering for French fries. We tell them the fries may not be the same as they would have expected.

The informal eating out market is growing. While the overall market grows, one has to find out newer ways of reaching out to more and more customers. And when the brand is well established, it is an additional challenge to attract more customers.

Very often, it may not be possible to set up another restaurant close to an existing one. The capital cost of setting up an outlet is very high. Having kiosks was one way of reaching out, and we have already established that. Food court is another option that we have explored. And clearly, home delivery was the final destination. If you cannot come to us, then how can we go to you – was the trigger for the home delivery idea.

Sure. McDonald's has launched separate kiosks for beverages and desserts to save the time of those customers, who have to stand in snaking queues. Currently, there are three kiosks; in Faridabad (Haryana), Basant Lok Complex (near Priya Cinema, Delhi) and Ansal Plaza (Delhi).

And, the good part is, the response to the kiosks has been tremendous.

The endeavour at McDonald's has been to deliver good service to its customers. Just to give an example of the service standards of McDonald's food chain, the recently opened Lucknow outlet successfully serviced 1,470 people in one hour. We are, of course, looking at breaking the record now. However, the larger objective of such initiatives is to attract more people.

As for the food courts, we are present in 3C's (in Lajpat Nagar) along with MGM Mall and Mega Mall in Gurgaon.

There are a lot of factors to be taken into account, while exploring this format of opening a food court. For one, the outlet in the food court has to be positioned well. Then, there are concerns about the operator of the outlet, the kitchen space etc.

In a nutshell, when the market is growing, as a mass marketer, one has to have consistent products. One has got to have affordable pricing and of course, one has to be convenient too.

This is a fallacy. Everybody thinks that we had brought down prices, but we have never done that. Never. We started with the right prices. That's the big difference between McDonald's versus any other player.

What we actually did was re-engineer some products, to bring them under the Happy Menu.

One should be clear about the pricing. It should be affordable first. The profitability margins would come later. The problem is, most of the retailers put their margins first. That is the reason why most of them never take off.

A good example to illustrate my point is our success story with the Rs 7 ice cream cone. It has been a clear winner in terms of the success of the product and profitability. From a product which was available at cost price to us, we now make a 56 per cent gross margin.

Volumes drive. And that is what we forget. Volumes have a major role in determining the success of a product.

Well, yes and no. I think it's a question of how you start off. If you have to be a mass market player, you have to then look at penetrating the masses upfront. You cannot afford to play those games behind the counter.

If you drop the prices too frequently, people begin to question the integrity of the owner and wonder, if the proprietor was making money all along...

However, our perspective is determined by the point of view of the customers. The intention is clearly to drive volumes. When the numbers become large, the pricing becomes alright. Then you begin to get the margins.

If you are asking that are all McDonald's outlets profitable, the answer is, no. And that is possibly never going to happen. That is because we have invested huge capital in our initial outlets. Each of our initial restaurants was built on an investment of Rs 3.5 crore.

But yes, on a cumulative basis, we have broken even. Though it has begun to happen now, but as a whole year, we will achieve our target at the end of March 2005.

It's rare to find a retail model that would break even immediately, especially if it is a chain. If you remain a niche player, you can be profitable. But retail is a long term business.

If I want, I can stick to these 37 restaurants (in North India) and make pots of money in the future. But my growth gets curbed. So as a mass market brand, where do I see myself?

Under all circumstances, a marketer must remember this – how does a retail chain make the customers' needs and aspirations match its own earnings? If you cannot achieve that balance, then it will very tough to move on.

Not a single retail model, that is mass market in nature, makes money. They all cook books...

Do you want to hear about the real story of a very successful Delhi-based South Indian restaurant chain?

Okay... one investor was ready to buy into this chain. Now, hear the rest of the story. The investor entered into an agreement with the owner of the retail chain. When issues of standards of food and hygiene were discussed, the investor was assured that this would be the least of worries, as the restaurants import cooks from South India and they are well versed in the South Indian style of cooking.

As for the standards of serving, the would-be investor was informed that all the boys were brought from the South on a salary of Rs 1,500 and put up in the dormitory. And on matters such as provident fund, if any one complained, the person was promptly sent back. Incidentally, these boys, who serve food, cannot even speak the local language. The deal was eventually called off.

My point is, let us not look at formats and businesses that have been created in a different world. Today, marketers are fighting in a market place, where the laws are very stringent. But these laws do not affect those retails chains where 70 per cent of the outlets are in residential areas. There's absolutely no cost for them.

As an organised format, we have to be above the law. Today, there are laws that govern what waste you throw out. Were you aware of this? I mean, the environment ministry is involved in this. I am sure these guys (referring to the Udipi restaurants) would not even have something as simple as the grease trap!

Yes, that's the whole point. The purchasing power of the Indian middle class is extremely crucial for the business of marketers like McDonald's. Since the middle class and upper class families spend 42-44 per cent of their monies in groceries, which does not exceed more than 7-8 per cent abroad, only the balance that is left is the spending power.

Thus, there is a limited amount of money available and within that, marketers have to see how they can succeed as mass market players. Obviously, all the markets think hard about what should be the 'right' pricing. And, that's the reason why we do a price sensitivity study. Consumers, after all, do have price expectations.

A retailer may harp on the ambience, but the fact of the matter is that the consumer has to have the money to relish that. Look at the speed at which these malls are coming up. However, the sad truth is these malls witness a mere 10-15 per cent conversion of footfalls. The balance 85 per cent of the visitors do not have the money to spend.

My point is that malls cannot allure the common man with a creative façade like a Aishwarya Rai. How about creating a look like Jaya Bhadhuri, which is homely? As Indians, we naturally get attracted to things which are homely, not flashy. So it's prudent to start creating those looks rather than scare people away.

Remember you are not serving people in the United States but the people in India. Retailers should not get distracted by the Page 3 people. Because most of the times, they eat for free in any case as they are invited.

Therefore one should be very clear of the business model and not get lost.

Sure. The coffee bar culture, for example, started off beautifully. But then, the crazy lust for expansion stunted the business growth. You cannot expect the guy in Gurdaspur to act like the guy in Delhi. He will feel out of place.

No never. What he have done in certain cases is relocating ourselves because of a bad real estate deal. But we have never abandoned a market.

I always talk about bring relevant. The first task was to have a product line-up that would be meaningful. In 1997, we set up menu development team that had marketing people, researchers, the chef, etc. And, most the products that have been developed by McDonald’s India, are out of customer feedback. In fact, 70 per cent of the products in McDonald’s India do not exist anywhere in the world.

A few learnings also came up as we tried to settle in the country. One of them was as McDonald’s, we would have to come up with uniqueness at all times. Because the customer will not come to McDonald's, if we offer samosas or kachchoris. What the customer was telling us that he wants the Indianness in the taste, variety, filling food, but in a unique form.

Our Pizza McPuff, the Wrap, Curry Pan, Aloo Tikki burgers were all born from this insight.

The brand is now well established. Very clearly, the current focus is on how the success of the business model of the existing 58 (35 in North India and 23 in the West) models can be replicated elsewhere. Next month, we are opening an outlet in Bangalore.

About Bangalore, my only worry is how I can provide the same quality, ambience and the same quality of experience that I do in the areas that I control. I am only concerned about how I can provide my patrons with the same experience when they come and swarm us.

When the Lucknow outlet opened, people had to stand in queues for half-an-hour and I had to apologize to everybody. The rush was unbelievable. We served 1,470 in one hour. It's rare to get that kind of a crowd in days...

We decided to simply focus on the areas that we existed. The objective was to first garner the largest market share, establish the brand, make sure that the new restaurants that we open were viable business proposals.…and then jump to any other place. Otherwise, there is always this danger of hurting the brand and the overall business plan. We did not want to spread ourselves so thin and kill the brand. Thus, the strategy was to concentrate on some pockets of the market and then contemplate expansion.

And this plan has worked out well for us. It has created a huge demand in the minds of the people and also the fact that we have been advertising on the satellite channels for the past four years has created a hunger for the brand.

In India, McDonald's advertising campaigns have been always aimed at connecting the brand with its customers in a highly relevant and culturally significant manner. Our advertisements in India have retained the key strengths of our global heritage and aim to communicate our philosophy of QSC&V (quality, service, clean and value), which is the guiding force behind McDonald's service to its customers.

McDonald's in India not only aims at connecting to the mindset of today's generation of consumers, who not only desire individuality but also want to connect to the larger, global village, we live in today.

If you watch our television commercials, you'll notice how these display a new attitude and energy that is 'forever young'. The stories are told from our customer's perspective and express the way people feel about the brand and how McDonald's fits into their lives.

Our focus will continue to be on the whole family as McDonald's key target audience are the families and we have learnt that a hassle-free environment, that is child friendly, is sure to bring in families to our restaurant. We wish to express the same sentiment in our line of communication too.

At McDonald's, we try to create a special bonding with every customer who visits our restaurants. We put customer satisfaction as a priority and the prime focus is to provide value to our customers. All our promotions are an initiative in this direction. We are always looking for ways and means to reward our customers – the kids and families. This way, we have been successful in enhancing 'the McDonald's experience' for every customer.

Well we were also told that. But the outlets in Jaipur and Lucknow are a great success. There was an article in the Dainik Jagran that read McDonald’s ne Jaipur walo ko burger khana sikhla diya. (McDonald's has taught the people of Jaipur about how to eat burgers)

McDonald’s is a well established brand. The initial pull or the sustained pull is not an issue any longer. The biggest challenge for us is how well can McDonald’s serve its customers on the peak days and peak hours. Because, no amount of seating that we have is adequate on those days. And, I cannot do the seating on the basis of peak days. Otherwise, I will end up creating this monsters of restaurants. Which on weekdays will be looking empty.

Yes, it is very much. Imagine, there was a time when we used to serve our customers in 1 minute and 20 seconds. Today we serve them in 50 seconds. And, I am told that the service is sill slow!

There is a little exercise that I make my employees undergo. I ask them to close their eyes and open them in a minute’s time. And most of them open within 50 seconds. What I tell my people that if your average time is 50 seconds for a minute, that is exactly what the customer requires. So we have to move on to the next level.

To be faster, friendlier, better, convenient…that is what we strive for.

That whole discussion on whether McDonald’s will become a part of the lives of the people, or will it be able to establish itself is passé now. We have gone past that stage.

I was recently asked at the Rotary meeting that how can a two-year old identify a McDonald’s. That happens because we have made ourselves truly friendly. Our restaurants and people are bright and friendly. And, this is not a place, where you stop your kids from having fun.

But the surprising part is that kids comprise 18 per cent of my customer base. The balance 82 per cent are people like you and me – adults.

Our challenge is of a different nature now. We need to be tuned in to the changing attitudes and thought process of the customers. If we do not keep inventing better ways of serving our customers, we will simply fall out of the line.