Praxis Business School

Retail Business Plan On Snack Bar A report Submitted to Prof. K. Dashrathraman In partial fulfilment of the requirements of the course Retail Management On 7th August 2011 By Ashwin Agarwal (B10004) Deepika Agrawal (B10007) Nishant Khattwani (B10013) Sushmita Agrawal (B10035)

SUBMISSION: - 1

1. Environment Scan

a. Retail Scenario In India

Barter System

Currency was exchanged with goods and services

Hawkers carried out the first Retailing in Push Carts

Followed by Kirana Stores .. Mom and Popup Stores

Finally Manufacturing era necessitated the small stores and specialty stores .

Retail word comes from the French word retailer, which refers cutting off, clip and device. Retailing is the interface between the producer and the individual consumer buying for personal consumption. This excludes direct interface between the manufacturer and institutional buyers such as the government and other bulk customers. A retailer is one who stocks the producers goods and is involved in the act of selling it to the individual consumer, at a margin of profit. As such, retailing is the last link that connects the individual consumer with the manufacturing and distribution chain. Indian retail sector comprises of organized and unorganized sector. Organised retailing refers to trading activities undertaken by licensed retailers, that is, those who are registered for sales tax, income tax, etc. These include the corporate-backed hypermarkets and retail chains, and also the privately owned large retail businesses. Unorganised retailing, on the other hand, refers to the traditional formats of low-cost retailing, for example, the local kirana shops, owner manned general stores, paan/beedi shops, convenience stores, hand cart and pavement vendors, etc.

The Indian retail industry has grown at a Compounded Annual Growth Rate (CAGR) of 13.3% for the period FY06-10. The growth in the Indian economy since the last decade and the change in consumption pattern of the Indian populace in terms of higher proportion of middle class population, greater proportion of working women etc can unarguably be linked to the growth of the Indian retailing industry. Of all the segments in retail, the contribution of food & grocery remained the highest at 58% of the total retail sales during FY10, with the clothing & footwear segment remaining the second largest contributor occupying 10% of the total retail pie during the same period. However in terms of growth figures, the entertainment, books & sports goods equipment' segment outperformed the other retail segments registering a CAGR of 22.5% during the period FY06-10. In spite of the growth, the industry remains largely fragmented with the organized retailing still at a nascent stage. In case of overall retailing revenues, the food & grocery segment accounted for the highest share at 58% of the total retailing pie aggregating Rs.11.49 lakh crore during FY10. In the organised retailing, the food & grocery segment stood as the second largest contributor with revenues aggregating Rs.24273 crore during the same period. However, the organised retail penetration of other segments such as clothing & footwear, entertainment & books and furniture & furnishing surpassed that of the food & grocery segment. The Indian retail industry has witnessed rampant growth over the last decade. However, during the economic recession since the latter half of FY09, the retailers especially in the organised segment suffered a set-back in the form of declining revenues and halt in their capex plans. The unemployment situation, further aggravating the fear of job losses during the recession, resulted in muted consumer spending with the consumers choosing to spend on necessities rather than discretionary items; the industry thus witnessed decline in footfalls, conversion rate, which was especially apparent in the decline of same store sales. The slowdown in consumer spending led to the inventory being stacked up resulting in a low inventory turnaround ratio, registering a decline to 4.3 times during FY09 from 4.8 times during FY08. Before the onset of recession, the large scale expansion plans of the Indian retailers warranted an increase in inventory and greater store operating expenses in the form of rentals and staff expenses thus increasing the working capital requirement. However with the economic recession in effect, the retailers faced a liquidity crunch owing

to difficulties in raising funds both from the equity as well as debt markets. Additionally, the funds raised during the economic boom attracted higher interest rates thereby affecting the retailers' ability to service the interest as well as principal repayments during the downturn. The total interest outgo of the retailers as tracked by CARE Research registered a y-o-y growth of 78.6% during FY09. Even though, post recession, the industry is witnessing a gradual turnaround, it is met by a few stumbling blocks that constitute the challenges ahead for the Indian retail industry viz. higher store rentals as compared to retailers globally, taxation & other policy regulations, inefficiencies in supply chain management and higher rate of shrinkage. In spite of the said challenges, CARE Research expects the Indian retail industry to grow on the backdrop of expectant rise in the countrys Gross Domestic Product (GDP) during the period FY11-FY13. The rise in income level of the Indian populace, in turn, is expected to fuel the domestic consumption ultimately resulting in higher revenues for the Indian retailers. Importantly, CARE Research expects the penetration of organised retail in the total retail pie to increase by FY13 owing to the expanding reach of the retailers to tier-II & III cities accompanied by higher consumer spend on discretionary items. Also, in an attempt to increase margins, CARE Research expects the retailers would restore to adapting measures such as increasing the share of private labels in the total store sales, reducing store level operating expenses etc.

Key Players in Indian Retail Sector

Pantaloon Retail (India) The first Pantaloon store was opened at Gariahat in
Kolkata in the year 1997 covering 8,000-square-feet area. Over the years, the store has undergone several transitions. When it was launched, the store mostly sold external brands. Gradually, it started retailing an eclectic mix of external brands as well as private labels. Initially, it positioned itself as a family store targeted across age and gender groups but later it shifted its focus towards being a fashion store and gave more emphasis on the youth. As on Dec 2010, Pantaloons had around 44 stores spread across major cities in India.

Shoppers Stop- A menswear store owned by K Raheja in the Mumbai suburb of

Andheri in 1991 has now transformed into Shoppers Stop, with 27 departmental stores. The company entered airport retailing in a joint venture with the Nuance Group. It also launched Indias largest hypermarket, hyper city. In 2005, it bought the Crossword bookstore chain.

Lifestyle-Growing from one store in Bahrain in 1973, the NRI-led Landmark Group
today operates over 5 million sq ft in the Middle East and India. The groups first Lifestyle store in India opened in Chennai in 1999. Now it has 325,000 sq ft in Chennai, Hyderabad, Bangalore, Gurgaon and Mumbai. Its first hypermarket, branded as Max, is expected to open soon.

Reliance Retail- Reliance Retail Ltd, a subsidiary of Reliance Industries Ltd, has an
aggressive plan to expand its retail network across India. It entered the food and grocery segment in November 2006 through its convenience store format Reliance Fresh. The store offers a range of fruits, vegetables, personal care, home care and kitchen utensils. It focuses on building a strong relationship with the agri-business value chain and sources directly from wholesalers. Reliance Retail also plans to invest Rs 25,000 crore on hypermarkets, supermarkets and specialty stores in the next four years.

Aditya Birla Retail-The Company, which will operate under the brand More, has
selected two formats hypermarkets and supermarkets for its initial foray. The first store has opened in Pune. Last January, the company acquired Trinethra Super Retail, which has given it more than 5, 00,000 sq ft and a strong presence in the South. The Birlas outlay for the business over the next three years is Rs 9,000 crore.

Bharti Retail- The worlds largest retailer Wal-Mart, which is entering India, chose
Sunil Mittals Bharti Enterprises as its partner in India. The venture has already started with the cash & carry (wholesale) format, which could be extended to retail operations once foreign direct investment is allowed in multi-brand retail, as is expected.

The Indian retail sector can be broadly classified into:

a) FOOD RETAILERS
There are large number and variety of retailers in the food-retailing sector. Traditional types of retailers, who operate small single-outlet businesses mainly using family labour, dominate this sector .In comparison, super markets account for a small proportion of food sales in India. However the growth rate of super market sales has been significant in recent years because greater numbers of higher income Indians prefer to shop at super markets due to higher standards of hygiene and attractive ambience.

b) HEALTH & BEAUTY PRODUCTS

With growth in income levels, Indians have started spending more on health and beauty products. Here also small, single-outlet retailers dominate the market. However in recent years, a few retail chains specializing in these products have come into the market. Although these retail chains account for only a small share of the total market , their business is expected to grow significantly in the future due to the growing consciousness of the buyers towards health and appearance.

c) CLOTHING & FOOTWEAR

Numerous clothing and footwear shops in shopping centres and markets operate all Over India. Traditional outlets stock a limited range of cheap and popular items, in contrast, modern clothing and footwear stores have modern products and attractive Displays to lure customers. However, with rapid urbanization, and changing patterns of consumer tastes and preferences, it is unlikely that the traditional outlets will survive the test of time.

d) HOME FURNITURE & HOUSEHOLD GOODS

Small retailers again dominate this sector. Despite the large size of this market, very few large and modern retailers have established specialized stores for these Products. However there is considerable potential for the entry or expansion of specialized retail chains in the country.

e) DURABLE GOODS
The Indian durable goods sector has seen the entry of a large number of foreign Companies during the post liberalization period. A greater variety of consumer Electronic items and household appliances became available to the Indian customer. Intense competition among companies to sell their brands provided a strong impetus to the growth for retailers doing business in this sector.

f) LEISURE & PERSONAL GOODS

Increasing household incomes due to better economic opportunities have encouraged consumer expenditure on leisure and personal goods in the country. There are specialized retailers for each category of products (books, music products, etc.) in this sector. Another prominent feature of this sector is popularity of franchising agreements between established manufacturers and retailers.

b. Key Drivers
1) Changes in demographics- India has the lowest median age of 24 as compared to
developed countries. The composition of the Indian population is shifting towards the age group of 20-49 i.e. the working population with purchasing power. Thus, India has the largest young population in terms of sheer size and this young segment is the major driver of consumption as they have the ability and willingness to spend.

2) Increased credit friendliness- There has been a radical change in the Indian consumers mindset regarding credit. With the easy availability of credit and declining interest rates, personal credit has witnessed growth. The boom in financing has resulted in an increase in spending on housing and consumer durables such as two-wheelers and cars etc. Also the use of plastic money has led to a significant increase in consumers engaging into shopping and eating out.

3) Rising Incomes- India is the second fastest growing economy in the world. A larger number of households are getting added to the consuming class with growth in income levels. Increasing instances of double incomes in most families coupled with the rise in spending power is further fuelling the growth of retail sector. Though this growth is most evident in urban areas, it has also taken place in rural markets.

4) Media- There has been an explosion in media as well during the past decade. This media bombardment has exposed the Indian consumer to the lifestyles of more affluent countries and raised their aspirations and expectations from the shopping experience they want more choice, value, service, experience and convenience.

5) Consumer Behaviour- The growth of modern retail is linked to consumer needs, attitudes and behaviour. Rising income levels, education and global exposure have contributed to the evolution of the Indian middle class. As a result, purchasing and shopping habits have been inculcated and are increasing day by day. Today, people are willing to try new things and look different, which has increased spending on health and beauty products apart from apparels, food and grocery items.

6) Rural Market- The rural market is beginning to emerge as an important consumption area, for most key consumer durables and non-durable products. In response, manufacturers of consumer goods have begun developing new products and marketing strategies with the rural consumer in mind.

7) Supply Chain- The consumer goods sector has been transformed by increased liberalization, continuous reduction in customs duty, a shift from quota to tariff-based systems for imports and sophistication in manufacturing over the past few years. Entry restrictions for multinationals have been removed in nearly all sectors. All this has enabled chain retailers to enjoy better range, depth and sourcing options as well as improved average margins. There has been a proliferation in the range across all

categories, with a simultaneous increase in the supply of products and quality retail space.

8) Entry of Corporate- In contrast to the situation a decade ago, the level of interest in retailing as a growth opportunity has increased visibly now. Large conglomerates like the Tatas & ITC have initiated investment in retailing. Big business houses today are in a position to provide the Indian masses with shopping satisfaction, entertainment, quality products, educated salespersons, product information and discounts.

9) Foreign Retailers- The increasing attractiveness of the sector has drawn the interest of a number of global retailers. With the opening up of the economy, more and more MNCs have entered the Indian business arena through joint ventures, franchisees or even self-owned stores. While foreign retailers cannot start operations on their own mainly because of FDI restrictions on the sector, a number of companies, are exploring entry options. In apparel, Benetton, Lifestyle and Zegna are already in business, and Dairy Farm has a number of retailing joint ventures in India.

10) Technology- The computerization of the various operations in a retail store including inventory management, billing and payments as well as database management, widespread use of bar coding, point-of-sale terminals has changed the face of retailing drastically. Apart from providing the retailers with better and timely information about their operations, the technology also performs tasks such as preventing theft, promoting the store's goods and creating a better shopping environment. This is done with the help of closed-circuit televisions, video walls, in-store video networks, and other forms of interactive applications ranging from CD-ROMs to virtual reality to let customers select and buy products.

c. Key Challenges
Factors Barriers to FDI Description -100% FDI not permitted Implications -Absence of global

-Franchisee arrangement players allowed -Limited exposure to

best practices Lack of Industry Status -Government does not - Restricted availability recognize the industry of finance -Restricts scaling up Structural Impediments - Lack of urbanization -Poor transportation infrastructure -Consumers habit of buying fresh foods administered pricing -Lack of awareness of Indian consumers - Restricted retail growth - Growth of small, onestore formats, with unmatchable cost structure - Wastage of almost 20%-25% of farm produce growth and

High Cost of Real Estate

- Pro-tenant rent laws - Non-availability of government land, zoning restrictions

- Difficult to find good real estate in terms of location and size - High land cost owing to

- Lack of clear ownership constrained supply titles, high stamp duty (10%) - Disorganized nature of transactions

Supply Chain Bottlenecks

-Several segments like food and apparel reserved for SSIs -Distribution, logistics constraints Restrictions of purchase and movement of food grains, absence of cold chain infrastructure - Long intermediation chain

- Limited product range - Makes scaling up difficult - High cost and complexity of sourcing & planning - Lack of value addition and increase in costs by almost 15%

Complex Taxation System

- Differential sales tax rates across states - Multi-point octroi - Sales tax avoidance by smaller stores

- Added cost and complexity of distribution - Cost advantage for smaller stores through tax

evasion

Multiple Legislations

- Stringent labour laws governing hours of work, minimum wage payments - Multiple licenses/clearances required

- Limits flexibility in operations - Irritant value in establishing chain operations; adds to overall costs

Customer Preferences

-Local consumption habits - Need for variety - Cultural issues

- Leads to product proliferation - Need to stock larger number of SKUs at store level - Increases complexity in sourcing & planning - Increases the cost of store management

Availability of Talent

- Highly educated class does not consider retailing a profession of choice - Lack of proper training

- Lack of trained personnel - Higher trial and error in managing retail operations - Increase in personnel

costs

Manufacturers Backlash

- No increase in margins

- Manufacturers refuse to disinter mediate and pass on intermediary margins to retailers

2. Choice of Retail Business:

a. Reasons for choice
Fastfood Joint Name: - Adda
Business description: To open a food joint, serving a variety of fast food. The value proposition is to make available all kinds of fastfoods preferred by individuals which can be consumed at any point of time during a day. The attraction factor would be a joint which would serve the following eatables: Chats Rolls(Veg/Non-Veg) Puchka Fruit juices Different types of sandwiches Fruit salads Cold drinks Mineral water Jhaal muri Churmur

at cheaper rates and there would be provision for sitting as well as take away. This joint would be located in Park Street in kolkata as currently there is no such organised retail providing such a service. The target audience for the above joint would be the working class having corporate offices nearby and the youth. The joint will be spread on a 1000 square feet area and will have a wooden floor.

Reasons for choice:

Location: As Park Street is considered as one of the most convenient locations in kolkata from where every aspect of entertainment is easily accessible and at that juncture there is no such fastfood joint which provides such a variety of choices. Urbanisation: With rising media exposure and consumer mobility, hanging out at food joints in prime locations has been seen as a means of lifestyle in most cities. Edge over local competitors: The eatables provided by the local competitors are all scattered in different locations without a proper sitting arrangement. The edge which we have over these existing players is that we are bringing all the different types of products which they serve less than one roof along with providing them with a congenial environment. Other reasons o As it is a made to order industry, demand forecasting is less required o Scope for unlimited innovations according to the taste of the consumers o Easy availability of raw materials with less initial investment

b. Others evaluated but dropped and why

Laundromat
One of the alternatives was to open a Laundromat. But it was discarded because we feel that the Indian market is still not ready to accept this concept. Here the local laundries have captured the major market. There exists stiff competition and hence scope for growth is limited for a new player. Also, several added expenditures like maintenance, handling of money which includes collections and loading coin changers, advertising, insurance,

licenses, rent, personal property tax, depreciation and interest charges are cutting a major part of the profits. We therefore felt that in this sector we wouldnt be able to differentiate ourselves from the local laundries already existing and hence opening a Laundromat did not incite us.

Highway cafe
Another alternative was to open a cafe lounge on a highway which would be atleast 4 to 5 kilometres from the city with added facilities like a ps3, foosegame and a wifi facility. However, there are lots of challenges in pursuing this idea. One challenge we faced was the security factor where customers would find it unsafe travelling on a highway at night. Another hurdle we faced was the temperament of the consumers which was not in favour to drive till highways to enjoy coffee. The plan would incur lots of capital expenditure. So, we concluded that with an uncertainty of walk-ins, which will lead to less return on per sq. ft. basis, the plan will not be feasible to carry.

3. For chosen retail business:

a. Environment scan i. Global
The global fast food market grew by 6.6% in 2008 to reach a value of $154.7 billion. In 2013, the global fast food market is forecasted to have a value of $200 billion, an increase of 29.3% since 2008. The global fast food market grew by 3% in 2008 to reach a volume of 85.8 billion transactions. In 2013, the global fast food market is forecasted to have a volume of 94.7 billion transactions, an increase of 10.4% since 2008. Quick Service Restaurant segment leads the global fast food market, accounting for 66.3% of the market overall value. Americans leads the global fast food market, accounting for 52.4% of the market overall value. Since, 1970, Americans spent about $6billion in the growth of fast food industry. In 2013, global fast food market is forecasted to have a value of $200 billion. A generation ago, three-quarters of the money used to buy food in United States was spent to prepare meals

at home. Today about half of the money used to buy food is spent at restaurants. Americans now spend more money on fast food than on higher education, personal computers, computer software, or new cars. Their expenditure on fast food is far higher than what they spend on movies, books, magazines, newspapers, videos.

ii. India
Upto the year 1995 Indian food market was predominantly dominated by the traditional dhabas, potential restaurants in the customers colony and some restaurants in a five star hotel. Having fast food i.e., burgers, pizzas etc., was considered to be an option for eating out. It was not synonymous with the American concept of fast food as a quick takeaway bite or a substitute for lunch. Apart from fast food being available at the local colony restaurants and at some five star restaurants, Nirulas was the only fast food chain existing in the country with its restaurants expanding with every passing year since its inception. Nirulas was the first one to bring fast food to India in the 1950s and since then it has evolved into a common hangout for all age groups. The Indian fast food market is growing at around 30-35 percent per annum and generates over 4800 Crores in sales. Fast Food Market in India is anticipated to reach around INR 146 Billion by 2014, growing at a CAGR of around 34% during 2011-2014 Fast-food restaurants seem to be big business in India, and so a many foreign chains have made an entry into the market to joint the early movers like McDonald's or KFC. According to Indian Fast Food Market Analysis, although the market has witnessed a robust growth in the past couple of years, it remains largely under penetrated and concentrated into metropolitan cities. India is the worlds second largest producer of food next to china, and has the potential of being the biggest with the food and agricultural sector. The total food production in India is likely to double in next ten years. The foreign players look to dominate the Indian fast food industry and have large plans for expansion. For instance, Domino's plans to open 60-65 outlets every year for the next three years. With greater plans to explore the Indian market, Yum Brands plans to open 1000 fast food outlets by 2015. McDonald's has set an invest goal of nearly $35 Million to double its store count to nearly 350 in India. Multinational chains like McDonald's, Pizza Hut, KFC or home grown ones like Sagar Ratna, Yo! China, Haldiram's, Bikanervala or Nirula's, they are all racing to open new restaurants. McDonald's, which had

20 outlets in India till 2002, has 187 today. It plans to open 200 more over five years with an investment of Rs 500 crore. Yum! Restaurants, owner of the KFC and Pizza Hut brands, plans to add 15 and 20 outlets respectively. The eating out market is on an upswing. The rising number of working women and nuclear households, and an increase in general affluence have led to higher discretionary spending on food. According to the Food Franchising Report 2009, 30 per cent of working singles eat out at least once a month, with a majority spending at least Rs 101-150 per outing. Urban Indians now have a repast outdoor six times a month compared to 2.7 times in 2003. Retail consultancy Tech-nopak Advisors says the expenditure on eating out at 11 per cent is second only to groceries for Indian households. Growth isn't the only change in the food business. The shift from unorganised or street food towards a cleaner, more hygienic environment is one, even as the proliferation of stalls selling steamed corn, doughnuts and even sushi across malls, along with the success of South Indian cuisine in Delhi and butter chicken in the South shows that Indians are willing to experiment. Each of the foreign food joints that have come into the country has their own strategy lined up to differ from the rest. Each of these studied the Indian tastes and style and thereby targeted the Indian customer. An average Indian restaurant goer is no convenience eater, unlike the Americans.

Growth Drivers of Indias food Industry

The growth of the food industry is driven by:

Higher disposable incomes Change in spending pattern Increasing organised food retailing Increasing export opportunities

Porters 5 force model

Potential Entry
Relatively high initial capital outlay Growing industry consolidation Economies of scale Logistics learning curve Low switching costs for customers

Bargaining Power of Customers

Fragmented customer base Relatively low average purchase Rising segment of discerning consumers

Buyer Bargaining Power of Buyers

Regional franchises exhibit market power Many substitute suppliers Low operator brand loyalty Low switching costs (e.g. distribution channels)

Industry Rivalry
Low pricing power Low margins Market consolidation

Threats of substitutes
High product differentiation (e.g. meal solutions) Many local industry players (e.g., independent caterers) Few global industry players (e.g., KFC, McDonalds etc.). Low switching costs for customers

SWOT Analysis Strengths

1. Quick Service: - one of the biggest strengths of fast food is that it provides quick service. The biggest advantage of this is that it saves a lot of time. And in this modern world time is money hence quick service is the biggest strength 2. Affordable: - Usually fast food is priced at a very affordable rate which starts from rupees 2. Though the prices are low in the fast food industry, the quantity is more and hence value for money. 3. Attraction: - The advertisements of fast food are very flashy and appealing especially to the youth and the younger generation. One of the most important

people in the buying decision is the kids who are influenced by ads on TV who in turn influence their parents. Hence it boosts the sales.

Weakness
1. Different Preferences: - India is a land of diversity. People in India have different preferences and taste. The fast food industry cannot cater to all the tastes and preferences of people. For e.g. some people eat Non Veg and some dont eat non veg, thus creating a problem. Such problems have risen at KFC and McDonalds. Another difference in preference can be seen in the choice of the type of food. Some people prefer South Indian while some prefer North Indian. So a south Indian joint selling masala dosa cannot start selling chole bature as per customers preference. 2. Lack of customization: - Fast food is usually pre-made and pre-packed and not fresh from the oven. So once the dish is made it cannot be altered according to the customers choice or preference. For e.g. a McDonalds burger is prepared much before the customer purchases it and he has to buy it as it is. Even if the customer wants the burger without onion or cheese still he has to purchase it due to lack of customization. 3. Unhygienic and unhealthy: - Most of the times though being tasty the oil content in fast food is very high. Hence people are now moving away from fast food. The fast food prepared is also unhygienic especially at the road side joints. Hence these are considered weaknesses to the fast food industry.

Opportunities
1. Growing nuclear families: - Nowadays it is said to be the age of the fast food. Parents and kids especially prefer fast food due to its quick service and for its satisfying appetite at affordable prices. This is a growing opportunity for the industry because families nowadays prefer eating out, rather than cooking at home.

2. Growing urban lifestyle: - The growth story of India is not limited to metro cities. Now it has also found its way into some rural areas and some semi urban cities. Fast food joints are not a thing of big cities now. People in cities and towns are now having additional incomes in their pockets. Eating out now is a normal thing for the homely people in the semi urban areas.

Threats
1. Oppositions from various organizations: - Due to the various preferences in the food some opposition is received by the fast food industry. As reported in the papers organizations like PETA are opposing the use of beef fat in the items of McDonalds. There was also a huge hullabaloo when Kentucky Fried Chicken (KFC) was being introduced to India. This is a major threat to the fast food industry. 2. Location: - One of the major threats in India is from the location point of view. Fast food joints cant be opened in certain locations even though there might be evidence of major consumer demand in the area. For e.g. a Hindu dominated area might pose a threat to joints serving beef related products since the cow is considered sacred to them. 3. Ready- to-eat: - Nowadays ready to eat products are more in demand in the market owing to the fact that consumers have to take minimum trouble in preparation out of which the results are healthy food, rich nutritional value, easy on pockets and higher value for money as compared to the foods available in a fast food joint. 4. Health Concerns: - Due to the low quality ingredients used in the majority of local fast food joints, the sanitation and the hygiene factors which are mostly not maintained, have given cause to various medical and other health related organizations and certain NGOs who have taken it up to voice these issues and bring it to the attention of the general public. Thus directing the attention of the public to change the tastes to foods that are more hygienic and safe. Here canned foodstuffs stand to gain advantage.

b. Current Players i. Global

Year 2010 Rs per Month McDonalds 3000.00 2665394.53 0.77 2058597.66 1256917.97 801679.69 Rs per sqft per Month Global Yum McDonalds Yum 3000.00 1098243.24 888.46 366.08 0.72 0.77 0.72 793885.14 686.20 264.63 632736.49 418.97 210.91 161148.65 267.23 53.72

Average sqft size of a store Net Sales Gross Margin RGM OPEX EBITDA

ii. India
Jubiliant Food works Limited(JFL) No of stores across india
Average store size in sqft

378 2000 For a store Rs/month in 2011 Rs per sqft per Month

Total income Total expenditure EBITDA

Rupees 6783300000 5581600000 1201700000

264925.0441

220.7708701

(Source: http://www.dominos.co.in/admin/en/filestore/9c2b2ac601ce0307f2c48b469b107711.pdf )

* Please refer to the attached excel for further details.

c. Market size in India:

i. Current India's fast food market is worth US$9.33 billion, registering year-on-year growth of 9% in 2010. The market is stipulated to reach US$12.25 billion, with CAGR of 7% in the next 3-5 years (2010-2014).The moderate growth is primarily attributed to higher regional and local penetration of fast food outlets in Tier II and Tier III cities along with improved household disposable income. Demographic segments aged between 25-35 years are the largest consumers of fast food, with approximately 35% eating out once a month in cosmopolitan

cities such as Bangalore, Hyderabad, Mumbai, Delhi, Kolkata, etc. The fast food market volume sales stood at 455.9 billion transactions, with year-on-year growth of 9.1% in 2010.

ii. Look up in 5, 10 and 15 years and CAGR

Year Market Size(in billion $) CAGR 2011 9.33 34% 2016 40.30934 34% 2021 174.1525 34% 2026 752.4084 34%

According to our new research report, Indian Fast Food Market Analysis, the Indian Fast Food Industry is anticipated to grow at a CAGR of around 34% during 2011-2014. Anticipating the future growth, many big international players are entering into the market by making deals with the domestic players. And those already present in the Indian market are expanding their presence in different provinces of the country. This trend will emerge more strongly during our forecast period, providing opportunities to local players to widen their product portfolios.

Key Drivers and Key Challenges

-High cost of real estate

Key Drivers

-Health related issues: obesity -Lack of skilled manpower -Increased Competition

-Growing disposable income -Favourable demographics -Changing lifestyles and preferences -Increasing proportion of take away food -Increasing number of working women

Key Challenge s

d. Key Drivers Growing disposable income emergence of double income group leads to
increase in disposable income. Now people have more disposable income so they can spend easily in fast food and other activities.

Favourable demographics- Target market of fast food is normally considered

within the age of 15 to 50.The percentage of this age group is increasing very rapidly. So, fast food players change their policies and products to attract this so much large sector of population. When population increases, there is also an increase in references because of large personality differences.

Changing lifestyles and preferences- Change in the lifestyle of demographics

is very important forces which become the cause of change in fast food industry near in future. Fast food in developing countries is considered as junk but in some it is considered as a status symbol. So, companies set their rices and other marketing mix tools accordingly but now the lifestyle of developing countries is changing. So, fast food chains in these places are changing their ways of doing business.

Increasing proportion of take away food- Nowadays it is said to be the age of

fast food. Parents and kids especially refer fast food due to its quick service and for its satisfying appetite at an affordable price. This has resulted in an increasing demand for take away food.

Increasing number of working women- working women have no time for

cooking, and if they have then also they dont want to cook. Because they want to come out of the traditionally defined gender roles. They do not want to confine themselves to household work and upbringing of childrens.

e. Key Challenges

High cost of real estate- with the growing economy, land value is appreciating
continuously. Getting a land in a main area would cost a huge sum which would have a direct impact on the investments.

Health related issues:

a) Obesity: Studies have shown that a typical fast food has very high density and food with high density causes people to eat more then they usually need. b) Low calories food: Emphasis is now more on low calorie food. In this line McDonald has a plan to introduce all white meat chicken Mc Nugget with less fat and fewer calories.

Lack of skilled manpower- To maintain a proper decorum and serving hygienic,

is not possible without skilled labour. Getting skilled labour in the budget would be a challenge for the business.

Increased competition- While the fastfood sector has long been regarded as
competitive, the level of rivalry only intensifies. Numerous chains are expanding: multi-unit development deals are being inked left, right, and centre. Brands like Subway, Krispy Kreme, Camille's Sidewalk Caf, Cosi Inc, Whata burger, Papa Murphy's, Moes Southwest Grills and Bob's Big Boy are all on the expansion trail. Meanwhile, a number of incumbent chains and/or their franchisees are struggling to return positive results on existing operations. One well-known example is Burger King where one high profile multi-unit franchisee went bankrupt, and improved sales and profits are vital in turning other franchisees and the franchiser operation around.

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