Restaurants, bars to boost investments to feed demand

Large restaurant and dining-in chains, cafes and bars said they are revising their investments and growth targets upwards this year buoyed by an expectation-busting revival of the business after the pandemic ebbed. The companies said they are either raising funds or investing in businesses after a two-year gap.

"McDonald's north and east has clocked the best ever sales in the April-June quarter, which is ahead of our expectations. We are investing disproportionately on the business in new stores, store transformation and technology empowerment, going forward," said Sanjeev Agrawal, chairman of MMG Group, which operates 160 stores of McDonald's India in the north and east of the country.

Analysts said management commentaries of quick service restaurant companies are far more positive versus near-term challenges expressed by consumer staples. "There have been changes in growth projections. Projects which we had deferred because of Covid disruptions have been put back on the drawing board," said Anjan Chatterjee, chairman of Speciality Restaurants that operates brands including Mainland China, Asia Kitchen and Sigree Global Grill.

The listed Devyani International (DIL), which operates 1,000 stores of KFC, Pizza Hut and Costa Coffee, will invest ₹300 crore this year on store expansion and tech-enhancement, the company's chief executive Virag Joshi said. Weekend footfalls at malls, specially, have been robust, Joshi said, while announcing the opening of the chain's 1000th outlet last week. DIL, which also operates its own brands Vaango and The Foodstreet, said it was on track to add another thousand stores by 2026.

Executives said despite the ongoing inflation which hiked menu prices anywhere between 5-15%, consumers are bingeing on dining out and deliveries. The Beer Cafe founder Rahul Singh said: "Last quarter, revenues have superseded pre-Covid numbers. To harness this inertia, we have the largest ever rollout in plan by adding 21 new outlets to our current count of 31."

Return of corporate events are contributing equally to growth targets being revised upwards. Events, which give immediate scale to profits, had turned only online in the past two years on account of the pandemic.

"We are raising funds after 2019 to expand all our brands, across formats. The fundraise is about ₹35-40 crore this financial year," said Rohit Aggarwal, director at Lite Bite Foods that runs chains such as Punjab Grill, Street Foods of India and YouMee. "We believe convenience channels of delivery and takeaways are here to stay and will play a crucial role in store unit economics," Motilal Oswal wrote in a sector report on Sapphire Foods on Monday. Sapphire Foods is one of two franchisee operators of Yum! Brands'-owned KFC and Pizza Hut.