NEW DELHI: Amit Jatia, vice-chairman of Westlife Development Ltd, which operates McDonald’s restaurants in West and South India, views 2020-21 as a pause. The company opened about four restaurants last quarter and will be opening 20-30 every year from 2021-22 as things get back to normal and consumer spending rebounds. Excerpts from an interview:
Do you see consumption rebounding in the March quarter?
The government relaxing covid restrictions in the third quarter has definitely strengthened consumer demand and improved market conditions in various sectors. The pandemic has lasted too long, and the new consumer behaviour is proof that they are used to this new normal now. Things are gradually getting back to normalcy even with regards to eating at restaurants. What we have been witnessing at our McDonald’s restaurants is that while our convenience channels of delivery, takeout, on the go and drive-thru continue to grow strongly, dine-in demand is also coming back in full force. Now, with positive news on the vaccine being out soon this year and stimulus packages from the government, I am quite optimistic about consumption rebounding in the fourth quarter.
What is the impact of avian flu on chicken products?
We haven’t had any impact so far. The flu has just hit our biggest market—Maharashtra—a few days back. It’s too early to comment on it just yet. At McDonald’s, we anyway follow the highest standards of food safety and hygiene.
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Broadly, restaurants have been struggling. How did Mc Donald’s rebound from the pandemic lows?
We have three competitive advantages. The first is a real estate advantage. We have a portfolio of real estate. Malls are easy to do, but we also did drive-thrus—they are 20% of the portfolio. This portfolio bounced back faster. Malls were closed as late as November. Second is the quality of the real estate asset. Our rents increase every five years, whereas many other restaurants pay yearly rent increases.
Third, our deal structures are for 20-25 years. You will see that my competitor in the same mall has a nine-year deal and pays strong minimum guarantees. Over the last many years, we have demonstrated to our landlords that we pay rent on time, we are well funded and that our sales continue to climb.
Besides, when the crisis arrived, we were prepared. We were able to navigate effectively. The first thing in a crisis is the balance sheet. I believe in sustainable growth rates. We entered the crisis with almost zero debt, and we entered with a very strong digital foundation. Therefore, we could pivot quickly towards omnichannel. We launched contactless delivery and takeaway. We are now inching towards the new normal—I have predicted that from January that the business will be back to normal or in the fourth quarter of 2020-21.
How has the omnichannel pivot worked for you?
Amazing. Since we had the foundation, we were able to recover 80-90% of our sales. The convenience channels have become a habit for the consumer, and they are here to stay. People’s biggest barrier was coming inside the restaurant. We could convert many restaurants into a drive-thru. Our biggest strength became takeaways. Our technology, our app made a difference.
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