McDonalds eyes highway and expressway for growth

Farah Bookwala Vhora - Reporter, CNBC-TV18.

With timely and quality mall space becoming harder to get in India, the world's largest fast food chain, McDonalds, is now ramping up its presence at other retail locations to ensure it is able to meet its store expansion targets, reports Farah Bookwala of CNBC-TV18.

Like other food chain operators, trouble in India's realty market has impacted McDonalds' expansion plans too. The fast food chain, which has 250 outlets across India, aims to double this number by 2015 but with mall developers missing project deadlines because of an overall slowdown in the real estate sector. McDonald's risks missing its store rollout target which could in turn hamper its double digit growth in this market.

To prevent this, McDonalds' is ramping up its presence on highways and expressways in a big way. Looking to scale up from its current 13 highway outlets. And even though these models have not been very lucrative so far, the management believes strategic positioning will alter the road ahead.

Vikram Bakshi, MD - North & East, McDonald's India, say that more and more people are traveling by road. And if we are between a metro and a large city, we find that if we put ourselves somewhere in between on a number of places, depending on where you are, you have instant customers.

Limited mall space has also driven McDonalds to expand on high streets even though the company admits this is an expensive proposition.

“As we shift to high street it’s not going to be that easy because you have to pay the high rental to them that exist in those areas,” says Bakshi.

So by 2015, McDonalds' retail format pie will look considerably different than it does today. Currently, 60 percent of McDonald's outlets are in malls, 34 percent on high streets, 1 percent in special areas such as railways and airports and five percent on highways and expressways. By 2015, highways and expressways will account for 25 percent of all outlets, malls for 35 percent, and high streets and special areas for 40 percent.

India contribution to McDonalds' USD 27 billion global revenue is negligible presently. But its Indian partners are hoping that the country becomes one of its top five markets by 2020. And experimenting with different store formats is one among many steps undertaken to achieve that goal.