Equipped with 35 years of business experience in the Asia Pacific region, with names like KFC Japan and Yum!, Joel Silverstein has a focused insight into what makes the Indian market tick.
Why is it that international brands are finding it challenging to enter the Indian franchising market?
JS: India is an emerging market; its per capita spending is very low, so the businesses that tend to be scalable are low-price brands. Typically street food, drinks, fast food – they tend to be cheap and there’s a lot of copies in the market.
A company like Domino’s Pizza got to India 20 years ago, and the brand struggled for years, but now Domino’s is by far the biggest dominant business in the Indian pizza market – but they got first-mover status.
What else has a company like Domino’s Pizza utilized to be successful with its franchising?
JS: Delivery is a big one. India is a very high-tech delivery market. It’s a huge opportunity, and it’s going to be a much bigger percentage of food sales than the U.S.
The main reason for this is the fact that traffic and infrastructure are poor, so Indians don’t want to drive to go and eat. Everyone has a smartphone, so they’re going to use it. It’s hard to make money out of this at the moment, because the spending per person is extremely low, but it’s going to be big.
Why aren’t we seeing many Indian franchises expanding globally?
JS: I think Indian franchises at the moment can be unsophisticated. I would suspect that a biryani or curry concept might go overseas, but there aren’t many chains in India at the moment doing that. Biryani is like a hamburger to Indians – it’s everywhere – but nobody has been able to develop a national brand because people think biryani tastes different depending on the area that they’re in. That’s the problem with Indian food: it’s hard to scale up with a national brand.
What do companies need to prioritize?
JS: They have to hit the right price point. The big guys like McDonald’s and KFC have been able to localize well. It’s the second-tier brands that come into the Indian market, who can’t find a good partner, who will struggle.
The Indian market is a big opportunity long-term, but culturally, Indian businessmen love to negotiate, so it’s difficult unless you’re a really top-tier brand with name recognition.
It’s very frustrating for people. There are easier markets to enter in Asia than India, but the prize in India is the 1.4 billion people – but 1.4 billion people can’t afford your brand.
Are there specific regions within India that work better for franchises?
JS: Mumbai is the business center of India, so most companies have their headquarters there, but I think the best market for food and beverage franchises is going to be in South India. The spending power there is the highest in the country because it’s where all of the IT companies are located.
The West and Mumbai have very high rents, so operating restaurants there is difficult. Delhi is better, but South India – specifically Bangalore – should be a priority, if you can find a partner for your business that works.