Hardcastle to invest Rs 300 crore to open 75 McDonald's outlets by FY15
Hardcastle Restaurants, the joint venture partner of McDonald's in West and South, has said that it plans to invest up to Rs 300 crore to add at least 75 outlets of the American fast food chain by FY15.
"Last year, we opened 32 new restaurants. Our stated goal is that in the next two years we will open anywhere between 75 to 100 new restaurants (in West and South). It took us 17 years to build 166 (outlets) and then in a couple of years we are looking at about 75 to 100 new restaurants," Hardcastle Restaurants vice-chairman Amit Jatia told reporters in Mumbai on Tuesday.
"Typically, we invest Rs 2.5-3 crore in a restaurant. We are building 75 to 100 restaurants so that is anywhere between 250 to 300 crore, just on capex alone. So we are thinking of investing Rs 300 crore over the next two years," he added.
Hardcastle Restaurants is the master franchisee for West and South India operations of McDonald's Restaurants and is a direct subsidiary of Westlife Development that got re-listed on the BSE on Tuesday.
In North and East regions, Connaught Plaza Restaurants is the other joint venture partner for McDonald's India. Westlife Development had last month raised Rs 180 crore through preferential issue of shares to Arisaig India Fund, following the Bombay High Court's nod for merging Hardcastle Restaurants as its direct subsidiary.
Westlife Development has diluted its stake by 3.47 per cent, by allotting a total of 54.04 lakh fully paid equity shares to Arisaig India Fund.
The preferential allotment to Arisaig will have a lock-in period of one year from the date of allotment and consequently, the equity base of Westlife Development would expand to 15 crore shares.
Mr Jatia said the company is in acceleration phase and will be funding the new expansion with internal accruals and the preferential share allotment.
"The QSR (quick-service restaurants) industry has become more matured now. When we first started, it was just a fad and today it's a necessity. We feel that as more and more QSRs are coming in, the industry is emerging," Mr Jatia said.
"It is a $100 billion dollar eating market of which QSR is about $18 billion to $20 billion and it is growing at 10 to 15 per cent. Which is why believe this is acceleration phase for us," he added.
Westlife Development clocked a revenue of Rs 684.3 crore in FY13, Jatia said adding close to 98 per cent of the firm's business is from McDonald's.
"Last five years, our CAGR (compound annual growth rate) has been 35 pc," he added.
He admitted that the gloomy economic scenario is affecting the same store sales of the company.
"Same store sales we did extremely well in the last five to seven years. In FY12 it was 22 per cent but in FY13, in the backdrop of the consumer sentiment it was 6.2 per cent. It did come down but it is compounding. In last four to five years, we have doubled our same store sales."
"We are quite pleased that even in this environment, last year we were able to do 6.2 per cent (same store sale). Right now it is tough (to report same store sales at the 6-7 per cent)," Mr Jatia said.
"For the first quarter (of FY14) we have reported almost flat. It is 0.5 per cent. We feel that as long as we stay in the positive territory (growth) in our business, we are all right. Plus in McDonald's the volumes are very high," he further said.
Pointing out that the margins were under pressure, Mr Jatia said, "It is a challenging environment for margins but we hope to at least maintain this."
