Yum!-Brands

Franchise News India,Franchise In India,NEW DELHI: Yum! Restaurants has put its company-owned KFC business on the block in western India. The US chain, which has 700 KFC, Pizza Hut and Taco Bell stores in the country through a mix of company-owned stores and franchisee outlets, wants to sell the business to a franchisee to avoid real estate costs such as rents, staff costs and other overhead expenses that are corroding its profitability. Yum directly operates 18 stores in the western region.

Slowing discretionary spends have been impacting same-store sales growth and profitability of restaurant chains despite low prices and value offers. The earnings statement of Yum! Restaurants for the quarter ended September shows a 14% increase in system sales in its India division, driven by 26% unit growth. But same-store sales declined 4% and operating loss stood at $3 million. Industry experts say operations run by local entrepreneurs bring down overhead costs substantially. A Yum! spokesman said in response to ET’s query: “While we continue to explore opportunities in the course of business, as a policy, we do not comment on market speculation.” ?”Yum India is uniquely positioned with both Equity as well as well- capitalised franchisees across all markets including the West, making it one of the fastest growing restaurant companies in India.”

Debashish Mukherjee, partner at consulting firm AT Kearney, said: “Typically, multinational firms prefer to leverage entrepreneurship of local franchise operators, and themselves operate on lower cost models while focusing on branding and customer relationships.”

Other quick-service restaurants are feeling the heat as well. Jubilant Food-Works (JFL), the listed exclusive franchise of food chains Domino’s Pizza and Dunkin’ Donuts, reported a 5.3% decline in same-store sales growth for the quarter ended September 30, compared with 6.6% in the year-ago period. The chain, which reported a 12.7% decline in standalone net profit to Rs 29 crore, attributed it to moderated growth trends in revenue combined with higher expenditure.
McDonald’s west and south region operator Hardcastle, too, reported a 7.9% drop in same-store sales in the July-September, compared with 5.5% in the corresponding year-ago quarter. UK cafe chain Costa Coffee’s India business, run by Devyani International, has shut down 15-20 loss-making stores over the past one year. The cafe business wants to focus only on profitable stores and had shuttered those which were in the red or proving to be a drag on business, an industry official in knowledge of the development said.

While its 340-odd Pizza Hut and Pizza Hut Delivery businesses are entirely run by franchisees including the Ravi Jaipuria-promoted firm Devyani International, the 350-plus KFC, or Kentucky Fried Chicken stores, are run partly by franchisees and partly by Yum! itself.

Devyani is Yum!’s biggest franchise operator, and runs close to 300 Pizza Hut and KFC stores in the North and East. Other franchisee partners of Yum! Restaurants, operating a smaller number of stores, include the Dubai-based Dodsal group and Malaysian firm KFC Malaysia. Dodsal group is learnt to be keen on exiting the eating-out business.



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