India has more KFCs and Pizza Huts than Canada or Mexico, and they’re customized too

• Outside of the US, as compared with North and South America, India has more KFCs and Pizza Huts.
• India has more quick service restaurants than bars, clubs or even full service restaurants.
• Top two Indian franchises that run KFC and Pizza Hut have changed store formats, their utility and even menus to cater to the Indian pocket and palate.

One would think that American fast food brands like KFC and Pizza Hut would be more popular on home turf than outside – like in Canada and Mexico. But they are spreading their wings in countries like China and India.

While China has a higher number of these stores outside the US, India has more Pizza Hut outlets than Australia. It also ranks very close to Australia in terms of the number of KFCs– proving that Colonel’s chicken and pizzas have found favour with the Indian palate.

QSRs – not bars or ice cream parlours

India has 400 million millennials – 120 million of them in urban areas – who prefer quick service restaurants or QSRs to pubs, clubs, bars, coffee shops and even ice cream parlours. The country has 2.8 million QSR outlets, accounting for a 34% market share in food outlets and twice as many full-service restaurants, said a report by Mirae Securities.

“Millennials are becoming more discerning in their consumption habits, both in terms of the frequency at which they eat or order from outside as well as the variety they seek, and this is not a trend but a pattern,” said a report by Mirae Securities.

Smaller, slicker, and successful

All kinds of quick-service restaurants – be it those serving pizza, burgers or fried chicken – have seen growth. Along with trends and macroeconomic factors, the industry itself recognized this opportunity and improved the affordability along with the availability of their products.

The top two Indian franchises that run these stores in India, Devyani and Sapphire, have both evolved a scalable economic model. For one, they reduced their store sizes of both KFC and Pizza Hut by 40-45%, which reduced their investment and operating cost.

Most of these stores are operating at a 20% margin, implying payback in less than three years, as per the report. Some of these stores are also delivery-focussed – a business that has taken off during the pandemic and continues to yield results – making stores smaller and paybacks better.

Contribution of delivery business grew during the pandemic

Source: Mirae Securities

Biryani chicken buckets and combo pizzas

The franchise operators also revised their menus to suit Indian needs and price points. The most interesting change was to convert its rice bowl offering into a Biryani bucket, as the former product never took off. This is the most favourite product in the south, and has also become a hit in the north and the west.

While KFC runs on buckets and zingers, which make up half of its business, biryani and rice bowls make up 7-8% of the business. A similar but a deeper strategy was undertaken by Pizza Hut whose products and prices were much higher than peers, especially Domino’s.

In the last 2-3 years, they continuously added combos and meals to make the brand more affordable and attractive. Now, meal combos make up for around 47% of their sales. Its average per customer (APC) has also come down to ₹500 from the ₹750-800 it was, three years back.

It’s also adapting to Indian tastes – and launched Momo Mia Pizza and San Francisco Style. The former is already successful and is delivering high single digit contributions to sales, the report said.

This variety is also allowing it to keep its premium status while playing the price cards. Their entry level pizza and sides are expensive also because the variety is low.

“On the other hand, in the premium category, the combo is priced at 37-40% cheaper than Domino’s in the regular size pizza and 31% cheaper than Domino’s in the non-veg medium size pizza,” the report said indicating that they are pricing it at a different vantage point.

It looks like, when it comes to food, most young Indians prefer it quick, fast, tasty and affordable – which is why they’re flocking to QSRs – a sweet spot that these American brands have managed to hit.