NEW DELHI, Feb. 24: Hardcastle Restaurants Private Ltd (HRPL), which runs McDonald’s outlets in West and South India, today said it will invest Rs 500 crore over the next three years to double the number of restaurants in operation.
The company, which has been operating the fast food chain through a joint venture with McDonald’s Corporation, also said it has converted the partnership into a Development Licencee (DL) model.
“We will be investing Rs 500 crore for doubling our presence over the next three years in India to 250 outlets,” HRPL Vice-Chairman Amit Jatia said in a statement.
While HRPL operates McDonald’s outlets in Western and Southern India, Connaught Plaza Restaurants — managed by Vikram Bakshi — has the rights to the brand name in the Northern and Eastern regions.
“The recent change from JV to DL in India’s South West is based on the corporation’s view that India’s economy will continue to grow rapidly and sustainably, creating significant present and future opportunities for the expansion of the McDonald’s Brand,” McDonald’s Division President (Greater Asia and Middle East) Peter Rodwell said.
According to HRPL, which plans to open 30 McDonald’s outlets this year, the company’s operations are profitable and cash-positive.
Same-store sales have seen double-digit growth continuously for the last six years and the company has seen a total compounded growth of 35 per cent in revenues, it said, but did not specify exact figures.
“HRPL is a debt-free company and will fund the entire investment of Rs 500 crore over the next few years through internal accruals,” Jatia added.
The DL structure has been successfully employed in over 50 markets worldwide, including Latin America, Indonesia, the Philippines , Turkey and several countries in the Middle East for over 20 years, the company said.
Under the model, a licencee owns the entire business, including the real estate, and uses its local knowledge and capital to build the brand and optimise profitability over the long term.
In the past, McDonald’s Corporation has converted about 1,700 restaurants in Latin America (18 countries) into a single DL under the leadership of previous JV partner Woods Staton. In 2009, sales of the Latin America business were in excess of USD 3 billion, it added.