Internet-first restaurants to get more investment as investors may take a relook at QSR

BENGALURU: Investors are taking a relook at the quick service sector ( QSR) that they say could be headed for a revival after several years following the emergence of Internet-first restaurants and last-mile options for home delivery.

Jacob Kurian, partner at PE fund New Silk Route Advisors, which invested in south Indian chain Vasudev Adigas Fast Food in 2012, said he expects renewed investor interest in the sector amid optimism about the economy and expected uptick in consumer sentiment.

Early movers among the Internet-first restaurants, which work on a delivery-based model, include Holachef, Spoonjoy, Frsh, Yumist, Eatlo, Biryani 360, Tapcibo, FreshMenu & Foodyn.

"The expansion of standalone last-mile delivery logistics companies on the back of the ecommerce boom is expected to also support the delivery businesses of restaurant companies. We expect to see a growing number of delivery-only formats in food supply companies that will not have any retail front-ends," said Kurian.

Experts say this trend will gather pace even as the number of physical QSR outlets grows fast. QSR chains, based in metros, are expected to expand to smaller cities and towns while the sector is expected to see several new entrants. Investors are likely to focus on the formats and cuisines that have a certain potential to scale beyond the metros to tier-1 and tier-2 towns.

Bengaluru-based Ammi's Biryani aims to double the number of stores to 150 this year. "We are positive that our acceptance will be higher con sidering our Indian ethnic cuisine," said Navaj Sharief, chairman and managing director of TMA Hospitality Services, which owns Ammi's brand. Vasudev Adigas, which currently serves over 1.7 million customers a month in Bengaluru and its vicinity, is set for a similarly aggressive expansion. "We expect to reach a milestone of serving two million customers in a month and to reach 30 million customers in a year by the end of the fiscal," said Kurian. The industry expects this year to turn out better than the previous one as the cost pressure eases and consumption grows, said Samir Kuckreja, president of National Restaurant Association of India.

"Tough 12-18 months so far....On the revenue side, consumption level will improve as inflation goes down, and QSR will be one of the first to be impacted positively,” said Kuckreja.

According to Venture Intelligence data, QSR received a meagre $8 million in venture capital and PE investments in 2014 in two deals, down from $15 million in the previous year in four deals. Of the 10,000 outlets listed on Foodpanda.in, QSR chains comprise 30%. "In 2014, QSR saw 30% growth and deliveries grew 40%. Now, with Burger King, Dunkin Donuts and Johnny Rockers coming in, growth will increase” said Rohit Chaddha, co-founder of Foodpanda.in.