McDonald's India franchisee to invest Rs 500 cr to ramp up presence
Hardcastle Restaurants Private Ltd (HRPL), which runs McDonald's outlets in West and South India, will invest Rs 500 crore over the next three years to double the number of restaurants in operation.
The company, which has been operating the fast food chain through a joint venture with McDonald's Corporation, also has converted the partnership into a development licensee model.
The recent change from joint venture to development licensee in India's South West is based on the corporation's view that India's economy will continue to grow rapidly and sustainably, creating significant present and future opportunities for the expansion of the McDonald's Brand.
According to HRPL, which plans to open 30 McDonald's outlets this year, the company's operations are profitable and cash-positive. Same-store sales have seen double-digit growth continuously for the last six years and the company has seen a total compounded growth of 35 per cent in revenues.
HRPL is a debt-free company and will fund the entire investment of Rs 500 crore over the next few years through internal accruals.
Development license:
The DL structure has been successfully employed in over 50 markets worldwide, including Latin America, Indonesia, the Philippines, Turkey and several countries in West Asia for over 20 years, McDonald's said.
Under the model, a licensee owns the entire business, including the real estate, and uses its local knowledge and capital to build the brand and optimise profitability over the long term.
In the past, McDonald's Corporation has converted about 1,700 restaurants in Latin America (18 countries) into a single development licensee under the leadership of previous joint venture partner Woods Staton. In 2009, sales of the Latin America business were in excess of $3 billion.
