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Why QSR is perfect investment bet

The Quick Service Restaurant (QSR) vertical in food sector is expected to witness a sharp uptick in size from Rs 9,125 crore in 2016 to Rs 24,665 crore in 2021 at a compound annual growth rate (CAGR) of 22 per cent. But there is more to this than meets the eye that makes it a win-win for investors.
BY Shrishti Rai
Feature Writer, BusinessEx
Sep 21,2017

It takes more than just good food to set a great casual or fine dine restaurant. Isnt it? Look at it - you need nothing less than 2,500-3,500 square feet space, then there is a high rental cost that you would need to cough up. When it comes to food, there has to be an elaborate menu along with a bunch of well-trained chefs and floor staff to lend a hand to you. Then there are multiple other things on the supply and marketing side etc.

This seems relatively less messy if you are planning to start a QSR. For instance, a 350 square feet floor area is all that you need in terms of space.You definitely need a smaller team. Indians these days prefer eating out or having takeaways at an affordable cost and less waiting time.

No wonder more entrepreneurs are entering the QSR vertical with differentiated menus to perfectly match the taste buds of Indian foodies. The numbers too echo that - the sector is expected to witness a compound annual growth rate of 22 per cent over next five years, reaching Rs 24,665 crore in 2021 from Rs 9125 crore in 2016.

There are a few successful players in each category as McDonalds, Burger King in the burger segment, Pizza Hut, Dominos in pizzas and Subway in salads and sandwiches. Also, many outlets of successful brands are closing down, for example, KFC; the popular fried chicken outlet has brought down its number of outlets in India from 395 in 2014 to 315 currently. The reasons are unthoughtful expansion in the same places, the high cost of real estate rentals, along with increased options to eat from, thanks to food-tech startups like Zomato, Swiggy etc.

Nourishing the buds

Multiple deals have been struck in QSR over last few years, Wow! Momo, a QSR chain serving a variety of momos raised funding of Rs 7.9 crore from Bandhan Bank in July 2016. Again, this year the brand secured Rs 44 crore in a series B funding led by Lighthouse Funds. Another significant round was led by Sequoia Capital India and Lightbox. They invested series C capital worth $6.4 million in another quick food-delivering app-based company Faasos. The brand received total equity funding of $60.4 million.

QSRs serving Indian delicacies like Gurgaon-based Biryani Blues that raised series A round from private equity fund Carpediem Capital.Similarly, Lion Ventures and Coverfoxbet $15,000 in Charcoal Biryani in February 2016.

Multi cuisine quick restaurants are too making a presence in this space and are getting funded. For instance, IIFL seed ventures fund and Mayfield invested Rs 50 crore Series B capital in one such business, Box8, a Mumbai based kitchen, which prepares and delivers Indian meals along with salads, sandwiches etc. Similarly,48East - a food startup serving gourmet Asian food secured Pre-Series A funding from Dubai-based, Al Dhaheri. The Bengaluru based startup serves delicacies from 48 different Asian countries in their weekly changing menu. Yet another fast Indian food chain Hello Curry a food delivery and restaurant company raised $ 2 million in two funding rounds, namely venture and seed from Sashi Reddy and SRI International.

Joining of forces

Many acquisitions were alone seen in the recent year within the segment, Hello Curry in April 2016 acquired The First Meal, an online breakfast and health foods subscription platform based out of Hyderabad, in a cash-and-stock deal. An year before that, the firm had acquired another online food ordering and delivery service Paratha Post in a similar deal, the amount of both the deals was undisclosed.

Dosa Place by Adhya Restaurant, a Hyderabadi startup acquired another Hyderabad based food Company ChennaiChef for an undisclosed sum last year.

Even in the international markets, people are developing a taste for Indian food. Curry Up Now, a fast-casual Indian food company, has operations in the US, has acquired the fast-casual Indian chain, Tava Kitchen. This was a strategic move to expand faster while providing an authentic Indian food variety to the customers.

Ever expanding opportunity

The QSR sector in the country is expected to be tripled to become Rs 25,000 crore within five years, according to Assocham. This makes the sector a go-to destination for investors. Another factor making the industry attractive is a rise in aspirational class. Currently, almost 50 per cent of Indians eat out at least once every third month and in the metro cities, the average is eight times every month. The average is pretty low in comparison to developed countries like USA and Brazil where people eat out at a weekly average of 14 and 11 times respectively. So the averages in India are still to improve, making the market even bigger for investors to venture into. However, it is of much importance to focus on a distinctive experience and food quality.

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