India isn’t what it used to be, and McDonald’s is finally taking note.
After over two decades of operating fast-food restaurants across Asia’s third-largest economy—over 400 at last count—the American chain has realised that low-priced burgers and lacklustre stores just won’t cut it anymore.
With growing incomes and a greater choice of both fast-food and fine dining, Indians are becoming more demanding when they eat out, favouring more exciting options, such as tacos and waffles, over the plain old McAloo Tikki burger. And the spread of chains such as Starbucks and Dunkin’ Donuts has lured millennial consumers outside of lunch and dinner timings, ramping up the competition even further.
As a result, a local franchise partner of the world’s largest fast-food company has been forced to step up its game in India by investing in upgraded stores (paywall) and expanding the menu to include more burgers and breakfast options. That’s in line with its global strategy to adapt to changing food habits. But its evolution in India shows that things have really changed since the early days of fast-food in the country when the primary focus was finding a way to get locals to try out burgers and fries for the first time.
Change is constant

When McDonald’s opened its first Indian store in New Delhi in 1996, it took a lot of convincing to get customers.
“Western fast-food chains were seen as a novelty back then,” explained Ankur Bisen, senior vice-president, retail and consumer products, at the consultancy. That’s why McDonald’s promoted low-priced options, such as the Happy Price Menu (burgers priced at Rs20), and Indianised the burgers with ingredients familiar to locals, such as potato patties instead of meat.
The strategy paid off, spurring the transformation of India’s food industry. Today, the overall fast-food market is estimated at around $1.12 billion. American chains such as Burger King, Domino’s, and Dunkin’ Donuts are a common sight in cities big and small. Indian customers can’t get enough of the foreign fare.
For all this growth, the amount of money Indians actually spend on eating out still trails that of their counterparts in other markets. Per capita expenditure on meals outside the home in urban India is just $110, according to a 2016 food services report by the National Restaurant Association of India (NRAI). Brazilians spend $745 and the Chinese $750; in the US, the figure is much higher at $1,870.
What’s more, the frequency of dining out hasn’t changed in India since 2011.
Amit Jatia, vice-chairman of Westlife Development, which owns the master franchise rights for over 240 McDonald’s outlets in south and west India, recalls that same-store sales growth, a metric used to measure sales at stores open for at least a year, remained negative for eight quarters between mid-2013 and September 2015, a result of the slump in the eating-out market.
Jatia knew he had to do more to bring in new customers and push them to spend more.
“In 2012-13 we started recognising that it is going to get tough over the next three-to-four years. The first sign we got was that the frequency of eating-out was not rising,” Jatia told.
Some tough questions led to Jatia making some tough decisions.
“We asked ourselves, if we were to enter India today what would our cost structure look like? What would the consumer want today? What would the operating environment look like?” he explained.
And that prompted the beginning of what he calls a complete reinvention for the chain in parts of India.
McDonald’s 2.0

For many years, McDonald’s did brisk business in India by relying on low prices, offering burgers at around Rs20.
By 2012-13, though, this value-based strategy had become much less effective as rivals such as Domino’s and KFC, too, added low-priced options to their menus. Moreover, rising input costs pushed up prices from Rs20 to slightly over Rs30 now.
“We thought value will carry us forward but competition had caught up…and, therefore, we needed to reinvent ourselves,” Jatia said, noting that many of McDonald’s rivals also abandoned the value approach eventually.
As a result, in 2013, Westlife decided to change tack, investing in revamped restaurants, new upholstery, and lighting, besides an expanded menu with prices and flavours designed to appeal to younger consumers. In 2015, it also relaunched the fast-food chain’s most expensive burger in India, the Maharaja Mac, priced between Rs176 and Rs194. Over the past few years, the company has been spending more marketing money on pricier burgers and new flavours.
The other part of the strategy was to convince Indians to visit McDonald’s outlets even outside of the usual lunch and dinner timings.
So the company began testing out the McCafe format, starting out with Mumbai in 2013. This was as an attempt to capitalise on India’s booming café culture and lure locals away from Starbucks with beverages that cost anywhere between Rs100 and Rs200. Over the next few years, the McCafe concept gradually spread to over 100 McDonald’s outlets across south and west India, selling coffee, muffins, and cookies that Jatia says are now adding significantly to the company’s revenue. For the fiscal year ending March 31, 2016, Westlife Development reported revenues of Rs856.83 crore, up 12.1% from the previous year, and net profit of Rs2.8 crore.
In 2016, McDonald’s India launched the Restaurant Operating System 2.0, a model to reduce the cost of opening and operating new stores by 20-30%.
The company also made its breakfast menu (launched in 2010) available all day long in certain outlets, offering its signature waffles and Egg McMuffins at all hours to draw customers even during outside of typical mealtimes. Earlier this year, more local flavours—a masala dosa-inspired burger and scrambled masala eggs—were added to this menu.
Technopak’s Bisen says the strategy to upgrade restaurants was much needed to shore up margins. “The price proposition helped built mass and volume; these new initiatives will help the company with higher margins,” he said.
For Jatia, the upgraded McDonald’s is ready for a future in which more Indians will be eating out. The company plans to launch restaurants with a completely new look and feel this year, and lots more lie in store for customers.
“I believe in something called positive paranoia; be positively paranoid if you want to make a change,” he said.

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