Westlife Development, the holding company responsible for McDonald’s outlets in South and West India has resumed operations in all of it’s 320 restaurants.
“QSR is a tough business with very thin margins and all of a sudden the cash flow stops…” This is how Saurabh Kalra, COO, McDonald’s India (West and South), describes the initial impact of the COVID pandemic and the subsequent lockdowns on the quick service restaurant (QSR) chain’s business in India.
Kalra is responsible for 320 McDonald’s restaurants (under Westlife Development) spread across 42 cities in South and West India. All of them have already resumed their operations and are now inching towards pre-COVID numbers. The remaining 160 McDonald’s outlets in North and East India are run by Delhi-based MM Agrawal Group.
McDonald’s is classified as western fast food (chain) within the QSR category. Kalra says, “It has been growing significantly better than the overall QSR industry growth. The dominant players in West and South India include McDonald’s, Domino’s Pizza and KFC. We are slightly higher in terms of market share.”
Kalra says that there were three key areas that needed immediate attention. First, customers needed the assurance of safety and hygiene. Then, the workforce, right from the management to the restaurant crew, had to be motivated and rallied. This was followed by finding ways to reduce cost without cutting jobs.
“We launched the Golden Guarantee 42-point checklist of safety procedures in May-June. We then streamlined our staff and initiated work from home. Even the crew member, who would usually make burgers, were learning more about burgers at home. We entered the (COVID) crisis with a very strong balance sheet and it has helped us sail through the first few months. In terms of cutting costs, we took steps, like starting in-house maintenance of equipment and rationalising operating hours for some restaurants,” he adds.
Kalra reveals that the format of McDonald’s restaurants varies basis their location. McDonald’s has food court restaurants, which are located in malls. Then, there are ‘home generators’, or restaurants located in residential neighbourhoods. Similarly, there are highway drive-through restaurants, and those near colleges and offices.
“With the college and working adults audience gone, it is primarily a family audience across channels.”
McDonald’s usually caters to consumers between 16 and 45 years, with a majority being between 25 and 35 years. “With the college and working adults audience (who usually visit during a break) gone, it is primarily a family audience across channels,” says Kalra.
“Mall restaurants are the slowest to pick up, since malls in Maharashtra are required to shut down by 7 p.m."
“Mall restaurants are the slowest to pick up, since malls in Maharashtra are required to shut down by 7 p.m. Restaurants near offices/colleges haven’t reached where they should have, since colleges and offices are closed. The fastest to recover have been the drive-through ones and those near residential areas (both in small towns and cities). In most cases, the latter has already achieved pre-COVID growth rates,” he adds.
"The fastest to recover have been the drive-through ones and those near residential areas."
Most of the 320 restaurants are located in residential areas, with an equal distribution of other formats. Around 50 per cent of the restaurants are located in Maharashtra. The state government allowed restaurants to reopen, with restrictions on the seating capacity, etc., on October 5.
To deal with the fact that the consumers were uncomfortable of entering restaurants, McDonald’s started its on-the-go service. This meant that the customers did not have to get off their cars, and orders were delivered outside the restaurants and in their vehicles.
"With malls operating without restrictions, we should be in the pre-COVID phase in two months."
“Dine in is far from recovery, but is recovering well. And then, the convenience channels, which include delivery, drive-through and on-the-go, are doing far better than the pre-COVID era. We foresee that the on-the-go habit will benefit us, even when the `new normal’ is restored. With malls operating without restrictions, we should be in the pre-COVID phase in two months,” reveals Kalra.
"Customers are gradually getting comfortable with eating inside restaurants."
While people were initially more comfortable with eating outside restaurants, in their cars or homes, Kalra says that they are gradually getting comfortable with eating inside restaurants. “It could be about the experience of feeling safe. We are seeing things getting normal in the southern markets. We expect to see this in Maharashtra too.”
All the development and expansion plans have been put on hold for the last four months. “We wanted to take this as an opportunity to get good deals (real estate) available in the market and penetrate newer markets, but we will be going `soft’ this year. There has been no new construction due to the lockdown, and we weren’t able to go out and scout for deals. Our real estate cycle is pretty long too. It takes almost 18 months to crack a deal,” mentions Kalra.
McDonald’s did not spend any money on advertising in the April-June quarter. Much of the conversation with the brand’s creative partner DDB Mudra has been around communicating safety, convenience and value to customers.
“We did not spend any money on advertising, since our restaurants were closed. We started spending judiciously in Q2 basis the sales. We worked with our media agency Madison to find avenues with the maximum bang for the buck. Digital channels happen to have the majority of spends at the moment and it seems to be doing quite well,” Kalra tells afaqs!.
The brand has added two new items to its menu. “Launching a McDonald’s product is a two-year journey. We had planned to launch ‘spicy chicken’ in the South and a ‘Chinese burger’ (at sub Rs 50 price) in the West. We launched them both recently and are seeing good traction. We go with local tastes as well as marketing,” he signs off.