Strategic Management

Indian Restaurant Chains Have Overseas Expansion on Their Menus

Indian chefs aren't very welcome in the United Kingdom these days. New immigration rules have put several stringent restrictions on the hiring of chefs from outside the European Union. "[This] is likely to hit the £3.2 billion (US$5.24 billion) Indian restaurant industry," reported business daily The Economic Times.

Indian restaurants, however, are only too welcome in the U.K. According to food industry estimates, there are more than 10,000 Indian restaurants across the region and the number is growing. Chicken tikka masala regularly emerges on top of U.K. polls as the nation's favorite dish; former foreign secretary Robin Cook anointed it "Britain's national dish."

Across the world too, the popularity of Indian food is growing and Indian restaurant chains are following the taste buds. The companies are small compared to the large U.S. chains. But with the diaspora as a captive customer in the beginning, the Indian companies are testing the waters. "Some domestic [restaurant] companies, after having a successful and stable operation in India, are looking for joint ventures," according to a 2010 National Restaurant Association of India (NRAI) white paper. Among the names mentioned are Moti Mahal, Bikanerwala, Bukhara and Sagar Ratna.

Making a personal foray is Sanjeev Kapoor, India's celebrity chef whose book, How to Cook Indian, was launched in the U.S. in April. But the book is really a sideshow. The events are a prelude to the imminent U.S. debut of Sanjeev Kapoor's own chain of restaurants. He already has three chains with locations in West Asia: Sanjeev Kapoor's Khazana ("fine dining"), Yellow Chilli ("casual dining") and Options ("rich dining"). In the U.S., these will be launched through franchised operations. "The expansion is a regular progress," says Sanjeev Kapoor. "When business matures, you have to look beyond your home market."

If Sanjeev Kapoor is seeing bright prospects for his food business beyond India, so are others. Even as the domestic consumption story is sizzling, overseas expansion has become a recipe for growth for many Indian food companies. After building a Chinese restaurant empire in India, the country's largest restaurateur, Anjan Chatterjee of Speciality Restaurant, has lined up a public issue and plans to take his hugely successful chain of Mainland China eateries to -- where else? -- Beijing and Shanghai. After Vienna, Prague and Karachi, Café Coffee Day -- India's largest coffee chain -- is serving steaming beverages and snacks in other European nations. And Chennai's favorite fast food joint -- Saravana Bhavan -- is churning out authentic South Indian fare in 10 countries, and is hungry for more.

From joint ventures to franchisees, Indian food chains are setting up their kitchens in Singapore, West Asia, the U.S., Canada and the U.K., all regions with large Indian populations. "There's a huge opportunity to be tapped there," says Samir Kuckreja, president of NRAI, an industry body. For instance, as Sanjeev Kapoor's assorted restaurants are going places in West Asia, he has partnered with a Mumbai-based corporate multi-brand entity Better Value Brands (BVB). The deal, signed last year, envisages a global chain of Indian restaurants branded Indii ("trendy Indian food goes chic"). After establishing an Indii in India, there are plans to take the brand to "reach out to the Indian diaspora in different continents," according to Sanjeev Kapoor.

Experimenting Beyond Curries

The overseas journey for Indian restaurateurs has been triggered by a host of factors. Business owners see a lot of potential because of the Indian diaspora, consultants note, and Indian food is also gaining acceptance worldwide. "People are willing to experiment beyond curries," says Pratichee Kapoor, associate director at Technopak, a New Delhi-based research and consulting firm that released a white paper on the food industry last year.

Along with China, the Indian economy, too, has been the global flavor of the season; Restaurateurs want a piece of the action. While Chinese food has long been internationally accepted, Indian cuisine was often dismissed as nothing but "oily curries" and "tandoori chicken." Not anymore, according to Hemant Oberoi, group executive chef at the Tatas' Taj group of hotels, and the first Indian chef to be nominated to the World Gourmet Club. "There is life beyond tandoori chicken and biryani in Indian food today," he notes. "Now people travel far more, and are familiar with our cuisine."

This is a change from the early 1990s, when the food chain traffic was from the opposite direction. After India opened its doors to economic reform, McDonald's was one of the first to set up shop in the country. Since then, brands like KFC, TGIF, Subway and Pizza Hut have made India their home. The latest is Starbucks, which brewed a deal with Tata Coffee in January, while others like Dixy Chicken [a British-owned chain specializing in halal chicken], Hooters, Grand Canyon Coffee and Burger King are also investing in India.

The entry of foreign players obviously impacted Indian food chains in a big way. The homegrown brands spruced up their menus and upgraded their standards in food, hygiene and service, besides refining the art of marketing eateries. This has given them the heft and confidence to embark on a global expansion. "India is the toast of the season, and restaurateurs want to leverage the popularity of Indian cuisine abroad," notes Pinakiranjan Mishra, partner & industry head (retail and consumer product practice) at Ernst & Young.

Just sprucing up wasn't enough, however. As the food industry became cluttered, it had to expand. But with saturation in the major metros, growth and expansion meant smaller towns, or going overseas. For example, after being in the business for 76 years, the family-owned Nirula's, one of New Delhi's original fast food chains, went national only a decade ago. It had opened three outlets in neighboring Nepal in the 1980s, but closed shop a few years later due to political instability. In March, the company announced that it was stepping on the gas. The next year will see 50 new outlets (half owned and half franchised) in tier II cities such as Patna, Baroda, Pune and Udaipur. An overseas drive -- initially to Sri Lanka, Nepal and West Asia -- will follow.

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