In India, burger wars are heating up as the nation’s appetite for American-style fast-food is growing, the Financial Times reports. U.S. burger giants Burger King — a subsidiary of Restaurant Brands International Inc (NYSE: QSR) — and Wendys Co (NASDAQ: WEN) are expanding in India for more significant market share.
What Happened: Burger King’s Indian franchise’s initial public offering last week was one of the hottest from a retail investor point of view, oversubscribed by 157 times. Its promoter entity QSR Asia Private Ltd offered 74.5 million shares, raising ₹810 crores ($110 million).
Burger King entered India in 2014 and currently operates 268 outlets in the country, including eight franchises located at airports. It plans to use IPO proceeds to expand to 700 outlets by 2026.
On the other hand, rival Wendy’s launched in India in 2015 and operates a handful of outlets. It follows a different delivery-only partnership strategy for expansion by partnering with 250 cloud kitchens run by online restaurant group, Rebel Foods. Wendy’s plans to add 150 brick-and-mortar outlets in India.
According to FT, QSR Asia Private Ltd is controlled by Singapore private equity firm Everstone Capital and Rebel Foods is backed by Sequoia Capital and Goldman Sachs Group Inc. (NYSE: GS).
Why It Matters: “India is where China was ten years ago. There is a demand-supply mismatch for fast-food. The runway for growth is long,” said Jasper Reid, CEO of Wendy’s India-owned franchise, International Market Management.
The fast-food market in India comprises independent restaurants serving local delicacies. Still, the demand for American-style fast-food is growing since the arrival of McDonald’s Corp (NYSE: MCD), Yum! Brands, Inc (NYSE: YUM)-owned KFC and Domino’s Pizza, Inc (NYSE: DPZ) in the 1990s. Domino’s is the leader among the U.S. brands in India with 1,350 outlets.
The pandemic has reduced the foot traffic in India but analysts think it favors the U.S. fast-food chains if the local rivals struggle to keep up with a broader shift towards delivery.
Kallol Banerjee, the co-founder of Rebel Foods, said that the American burger model is easy to scale and thinks India has an appetite for about ten times the number of existing chains.
Price Action: QSR shares closed 2.86% higher at $60.50 on Friday.
Source: Yahoo Finance