Plan to nearly double restaurants to 500 by 2022: Westlife

Westlife Development, which operates the McDonalds chain of restaurants in West and South India plans to double the number of restaurants to 500 by 2022 from 236, said Amit Jatia, Vice Chairman, Westlife Development.The company opens around 30 to 50 stores per year. "Going ahead, we plan to maintain these numbers," Jatia told CNBC-TV18. In the fourth quarter of FY16, the company saw an 8.4 percent rise in the same- store sales quarter-on-quarter, compared to 3.1 percent. Jatia attributed this to the launch of the new Maharaja Mac and McCafe. Below is the verbatim transcript of Amit Jatia's interview with Surabhi Upadhyay and Nigel D’Souza on CNBC-TV18.Surabhi: I am taking a look at your very, very handsome revenue growth number which seems to be in excess of 7 percent. Can you start by telling us what your same store sales numbers has been this time around?A: Sure, we have had a good quarter actually and same store sales are at about 8.4 percent, so we are quite happy to see high single digit numbers after many quarters actually and total sales growth has come at about 17.2 percent or so. Nigel: Alright, so you are saying your same store sales growth has come in at around 8.4 percent that’s one of the highest readings we have seen in the last few quarters. Do you think that you can keep up this kind of a run rate?A: Well, more importantly over the last two quarters, we have been seeing consistent increase in our same store sales, so in quarter 2 we were at 1.7 percent, then we were at 3.1 percent and of course this quarter its 8.4 percent, so we really made good delta and good progress and we hope to sort of maintain the mid to high single digits as we move forward. Primarily, things like McCafe, reimaging all of this has given us additional occasions for consumers to visit McDonald’s, so we do hope that we stay in the positive territory for now and as long as that happens we will be quite happy.Surabhi: How many stores did you open in the quarter I am just trying to understand if this 8.4 percent is because of certain bump up that happen because there was a lot of store opening activity and also what your plan is in terms of more store rollouts this year?A: So firstly this is same store sales growth which has nothing to do with new openings. Although new openings were 13, so again pretty much a bumper quarter when it came to new store opening as well and for the financial year we did about 30 new opening. We intend to continue between 30 and 50 new openings as we move forward and we sort of given a bit of a sense on our vision 2022 where want to double the base of our current restaurants and take it from about 236 to 500 stores.Surabhi: Just coming down to pricing as well if you could give us what trends kind of more like this quarter. How do you see pricing evolve?A: So as we maintain our price increases are normally between 3-6 percent in a year and therefore we believe that the good news about our results is that the same stores have been driven by new consumer usage through McCafe, reimaging, delivery and the brand advertising that we have been doing. Also in this particular quarter we launch the Maharaja Mac and the new form of Maharaja Mac has both the vegetarian and a non-vegetarian option and that resonated extremely well with our consumers, so we feel that is primarily driven by all the work around the brand, menu and McCafe. While price increases have remained between 3-6 percent a year.Nigel: Could you give us a break up of what’s your vegetarian as well as your non-vegetarian, also give us your geographic break up because I think the last time if I remember right you had very small exposure to Tamil Nadu? Are you looking to increase that and finally tells what about your royalty payments, what kind of percentage are you paying currently. Is there any probability of that going up?A: So first and foremost when you look at our geographic spread, in South India in the last 8-9 years we built over 85 restaurants, so the base of our business is growing. We always maintain that for us it’s about long term strategy and is a cluster approach, so when we go to Bangalore so when we went to Bangalore in 2006 today we have 45 restaurants in Bangalore pretty much a leader in the QSR business in Bangalore, so we avoided going to many cities too quickly, however over the next 10 years from the 30 cities we are in we surely be in at least 50-55 cities, so we tend to focus very heavily on the markets we are already in, so almost 60-65 percent of our new restaurants opened in the same geography, while 30-35 percent restaurants come in new cities. So typically 4-5 new cities is what we add and those cities could be across our entire territory. It could be in South India, it could be in West India so that’s how we sort of taken that forward. Royalty, there is a plan which we have released and all the analysts covered that in the report. It currently stands at 4 percent and that’s how it is right now.Nigel: And if you turn profitable is there any likelihood that that royalty will be increased?A: No, it’s not based on profit or no profit, in fact, fortunately in FY16 we have become profitable, so while our cash flow is almost Rs 67 crore and our (earnings before interest, taxes, depreciation and amortization) EBITDA move from Rs 20 crore last year to Rs 72 crore this year, but also our net profit even though it’s a small number, but at least a Rs 2.5-3 crore profit for the year.