Mcdonald?s Is Hopeful Of Posting Profit In Next Two Years

Posted by Ritu Kumari on June 15th, 2017

Having posted a growth of 5.7% in consolidated revenue during the quarter ended March 2017, McDonald’s India (West & South) is confident of achieving profitability within 24 months.

The annual revenue of Westlife Development, whose subsidiary Hardcastle Restaurants manages the McDonald’s India (West & South) franchise, for the Financial Year 2016-17, was Rs 930.79 crore, with the Q4 revenue standing at Rs 224.8 crore.

Summing up the results of the fourth quarter as well as of the fiscal year ending March 31, 2017, Amit Jatia, Vice Chairman, Westlife Development, says: “FY17 has been a significant step forward for the brand. The company has delivered a robust performance, recording a year-on-year sales growth of 11.7 per cent.”

Therefore, Westlife Development Limited expects to post a net profit in the next 24 months, said Amit Jatia.

According to Jatia, the higher earnings were a result of aggressive menu innovations, brand extensions, migrating to a more efficient restaurant-operating system and increased sales through new store openings.

Though store openings usually mean increased expenditure, the company beat this factor by putting in place a “Restaurant Operating Platform 2.0” programme, a strategy which helped reduce fixed costs by 20-30%. It actually helped to bring down costs by as much as 30% for the franchise. The result was new stores adding to the company’s cash flow, rather than reducing it.

Nine out of the 25 new restaurants opened in FY17, opened their doors during this quarter – four in Maharashtra, one each in the states of Chhattisgarh, Goa, Gujarat, Karnataka and Tamil Nadu. The company aims to have 450-500 restaurants by 2022.

“We ramped up our menu, introduced new Breakfast dishes, as well as daytime offerings like soups, salads and wraps, providing our customers wholesome and healthier meal options. The launch of EOTF (“Experience of the Future”) stores gave customers the benefit of a contemporary experience as well.

During Financial Year 2017, the company also increased its specialty coffee outlet McCafé’s footprint with 36 new McCafés , seven during the last quarter alone. McCafé’s growth is important to McDonald’s because it’s not just about the numbers but also about broadening the base of the franchise and helping the company to grow the baseline sales.

“Our biggest achievement for the fiscal year FY16-17 is that while Euromonitor had estimated a 5.6% increase in the size of the informal eating-out sector, we have witnessed as much as 11.7% growth in revenues, beating industry rates by a huge margin,” Jatia said in an interview.

Earlier, Westlife had been struggling with stagnant Same-Store Sales due to weak consumption sentiment among customers. However, analysts had predicted that its new restaurant format, Experience Of The Future (EOTF) would help to give a boost to Same Store Sales despite pressure.

However, brokerage firm Nirmal Bang had disclosed to a newspaper that the initiatives taken by McDonald’s would help it to maintain a competitive presence and support improvement in SSG to high single-digit and/or teens in the medium-term. It pointed out how, despite the significant slowdown in the industry and continuous entry of new players, the company had managed to deliver a positive SSG. The strategy of brand extensions like McCafé and McDelivery were key moves that had helped to manage this downturn, it said.