Friday, November 23, 2007

Burger King, Wendy's in talks with DLF for JV

Will DLF orchestrate the burger war in India? US’ two leading quick service restaurant (QSR) chains Burger King and Wendy’s have held talks with the real estate major for an entry into the Indian market.
Sources say that the ball is now in DLF’s court for zeroing in on a partner. The exact partnership model that is being explored is yet not known.
Burger King has been keenly looking at an India entry and had even mandated Kotak Mahindra to scout for a local partner. Internationally, Burger King mostly operates through the franchising model, and almost 90% of its 11,100 restaurants are owned and operated by family-managed businesses.
With 6,000 restaurants worldwide, Wendy’s too is dependent on a franchisee-led growth to a great extent. However, it is learnt that unlike Burger King, India entry is not top priority for Wendy’s.
“Burger King is on a major expansion spree internationally while Wendy’s is trying to consolidate its position in the North American and European markets,” a source close to the development said.
According to the source, Burger King is interested in setting up a joint venture (JV) company with DLF. This JV company would act as a master franchisee for the QSR in India, and will have the right to appoint sub-franchisees in the local market. As per present regulations, Burger King is allowed to hold up to 51% in the JV. When contacted, a DLF spokesperson declined to comment.
Sources say that Burger King is looking at a tie-up with DLF, mainly for its prime commercial real estate. Increasing real estate rentals are the biggest deterrent in the expansion plans of most QSR chains in India, including Burger King’s global competition McDonald’s.
“Most QSR chains have put their expansion plans on hold because they are having to shell out a significant 30-35% of their topline towards real estate. This is quite unaffordable. Internationally, this figure is just 10-12%,” said Dhruv Prasher, COO of Decube Retail Plus, a Delhi-based consultant.
It is here that a tie-up with DLF may come handy for Burger King. The real estate major plans to develop over 35 million sq ft of retail space, spread across malls and shopping centres, in various parts of the country in the next 3-4 years.
Industry sources feel that even though McDonald’s is firmly established in metros like Delhi and Mumbai, Burger King’s entry is likely to start a burger war of sorts. “In the short-term, McDonald’s would lose some customers to Burger King out of the sheer curiosity factor. However, this would happen only if both are located in the same catchment area,” an industry source said.


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