McDonald’s to go in for makeover

Yassir A Pitalwalla, Meghna Maiti, Financial Chronicle

Mumbai, December 10, 2012

McDonald’s outlets in south and west India are going for a changeover as Hardcastle Restaurants (HRPL), the master franchisee for west and south India operations is preparing for a reverse merger with its parent Westlife Development (WDL). With the changeover, HRPL aims to connect better with older customers and increase sales.

“Fashions too change over time. To keep ourselves relevant we are reimaging the look of our restaurants by going in for softer lighting, more use of wood and more apt graphics. This whole new design has already been implemented in some of our newer outlets in Navi Mumbai and at a few locations in Mumbai city itself,” Amit Jatia, vice chairman of HRPL, told Financial Chronicle.

The re-imaging is part of a billion dollar plus worldwide drive by the maker of Happy Meals to revitalise the look and feel of its stores to make it a cool place to hang out, marking the biggest makeover in its 56-year-old history. Hardcastle Restaurants hopes that the makeover will help it increase same store sales and sell more of its higher priced items replicating the experience in US post makeover. McDonald’s had earlier this year said that by the end if 2012 it hopes to have completed the interior renovations at about half of its worldwide restaurants.

Harish Bijoor, CEO of Harish Bijoor Consults, said it is important for McDonald’s to perk up their image to stay relevant and competitive. “The company has to compete with players such as, Subway, Starbucks among others.”

“We have got good feedback from customers. Some of our customers are now much older than when we first started out in India over a decade ago. The re-imaging ensures that we will not lose our connection with our older customers and we stay relevant to our current consumers,” said Jatia.

In the US, the fast food chain is moving to seating zones, slow zones for coffee sippers enjoying the wifi, fast zones at high bar tables for single diners wolfing down a sandwich, and family zones with booths for parents to lock their children on the inside to prevent them from wandering. “We plan to upgrade all our old restaurants to the new look in the course of the next two to three years while all new outlets will sport the new look from day one itself,” said Jatia.

McDonald’s has been trying to capture a larger share of sales by extending its offerings via home delivery and also by setting up dessert kiosks within the vicinity of its existing outlets. “Our ice-creams are very popular so we try to set up dessert kiosks selling our Sundaes and McFlurry’s among others in high street areas or the atrium of a mall where footfalls are very heavy,” said Jatia.

Devangshu Dutta, chief executive of consultancy Third Eyesight, said most players in the quick service restaurant space are trying to attract more profitable customers and focusing on outlet profitability. “The consumers would come more frequently. Also, people who come there could feel better about the product,” said Dutta.

Jatia hopes that the remodelling and the menu changes such as the extra value meal, spicy range and breakfast menu will help the quick service restaurant, reposition itself in the minds of consumers from a snacking occasion to a meal occasion. “We want people to consume meals in the lunch and dinner day parts. It’s about scale and volumes for our supply chain as we are in a high volume, low margin business. As our volumes increase operating leverage will continue to grow,” added Jatia.

Hardcastle, which is in the midst of Rs 500 crore capex to double its network to 250 restaurants, is following the principle of setting up where the customer wants them to be. “The marketplace has tremendous opportunities and we want customers of all levels of society such as section B and C too not just section A to frequent our stores,” said Jatia.

Alpana Parida, president of DMA Works, said, “In India, McDonalds is symbolic of America.”