Model Shop Act a progressive step, will boost revenue: Westlife

The Model Shop & Establishment Act, passed by the Cabinet today, is a progressive step and it will boost revenue, says Amit Jatia, VC of Westlife Development.

In an interview with CNBC-TV18, he said that 24x7 stores have worked well for McDonald’s globally and the same can be expected in India after the implementation of the Model Shop Act.

Commenting on the Seventh Pay Panel recommendations, also passed in the cabinet earlier today, Jatia said that every retail brand will benefit from this as it will be good for the economy.

Discussing the business outlook, he said Westlife's "foundational work" done in FY16 will continue to build in this fiscal and 30-40 new stores are expected to open in FY17.Below is the transcript of Amit Jatia with CNBC-TV18's Sonia Shenoy and Anuj Singhal. Anuj: Your first reaction and considering that you have presence in southern and western states, how easy would it be for you to implement this step? A: It is a very progressive move and we welcome the move. This is something that we have been wanting for quite some time. Globally in most urban cities McDonalds is a 24x7 business and now with this model law coming in, it is definitely something that will help the business and brand in the country. So, we are looking forward to as and when the model law becomes a law in every state. Of course in terms of implementation it does take time because the good news is that this means incremental jobs, it means incremental revenue from the government because keeping restaurants open 24x7 generally means an increase in the business as well. Consumers in urban cities like Mumbai, Pune, Bangalore, Chennai, Hyderabad are looking for places to consume beyond 10-11 pm which is the current closing time. So, it will take us 3-6 months to implement it but it is a very progressive and forward looking move by the government. Sonia: However it may be a little soon to consider the pay off between revenues garnered and cost of keeping stores open for longer, but what are your preliminary thoughts on what the financial prospects of this could be? A: Yes it is an economic aspect. So, the thing is that globally this has worked for us very well. In India we have to yet determine it. So, what we would have to see is what is the extent of the business that one can generate. I am pretty confident that if we invest in it and keep the restaurants open say in a city like Mumbai for a little while and as consumers start getting familiar with the fact that they could now come to a restaurant as long as and as late as they want, I think long term it may work out quite favourably. However we still have to get the business model right for that. Globally though as I mentioned earlier, it has worked well. Anuj: The 7th pay commission recommendations have also been approved and considering you have witnessed a turnaround in your like to like growth in the fourth quarter, what kind of impetus can we expect the pay commission to provide to the QSR industry? A: Anything that grows consumption by the consumer and anything that sort of puts more money in the hands of the consumers is good for the economy. I have read many times that we are a savings economy and to grow consumption if the consumers disposable income which has been a challenge in the last couple of years moves forward, I think every retail brand is going to take advantage of that. So, we are quite happy that the consumers will see some more income or money in their hands and I think that will definitely help retail which is much required at this point in time. Sonia: What is your own outlook on revenues and profitability for the next fiscal year, for FY17? A: We don't give forward looking statements and we don't give guidance. Therefore it is hard for me to comment immediately on FY17. However we do believe that some of the foundational work that we have done in FY16 will continue to build for us in FY17. For example if we have 75 McCafé at the end of FY16, we are hoping to sort of double that base between the next 12-18 months. Brick by brick not necessarily quarter by quarter but year on year you will continue to see McDonalds make strides both from a business point of view and from what we bring to the consumer. Anuj: We understand your intent to double your number of stores over the next 5 years, can you give us timeline on target that you have set for this year? A: We have said that we are going to double the base over the next 5-7 years which effectively means that we will do between 30-40 restaurants in particularly FY17 and then we expect to continue to grow these openings year on year as we move forward. Our belief is that it has got to be aggressive but sustainable and therefore the quality of the real estate deals that we do, the quality of the real estate that we get should be right and sustainable for business. So, we believe that 30-40 is where we expect to be in FY17.