U.S. fast-food chains bet on India to drive growth

By Nandita Bose

MUMBAI (Reuters) - The scramble by global food companies into India's fast food sector intensified on Monday as several U.S. chains announced plans to enter the country, hoping to tap the surging spending power in Asia's third-largest economy.

Restaurants like Denny's Corp <DENN.O>, known for serving pancakes and sausages all day, and Rita's Water Ice, which would be the first foreign competitor to local water ice brands like Gola, which operates out of little stalls placed mostly on streets, plan to enter India over the next two years.

Pollo Tropical of Carrols Restaurant <TAST.O>, known for Caribbean-flavored chicken, Applebee's and Johnny Rockets, known for its hamburgers, are also looking to cash into the Indian quick-service restaurant market worth $13 billion.

All brands will face challenges as they compete with incumbent McDonald's and Yum Brands, not the least of which would be adapting a meat-centric menu to a largely vegetarian palate.

Denny's Corp, which plans to make an Indian foray in 2012, has set up a supply chain network and customized its offering to suit local palates, William Edwards, chief executive of EGS, which handles the company's international expansion.

He said the menus would be stripped free of beef and pork, and would focus on fish and vegetarian dishes instead.

"In India we are planning to have regional licensees with 10, 25 or 50 units," Edwards said, adding that every 10 units required an investment of about $5 million.

Others wanting a foothold include Wendy's, Arby's International, CKE Restaurants with Carl's Jr and Focus Brands with Schlotzsky's Deli, all known for sandwiches and burgers.

BannaStrow's Crepes and Coffee, Moe's Southwest Grill and Carvel Ice Cream are also in line.

"We are excited about the opportunity in India and are hopeful that the franchises we have brought with us will see an opportunity for expansion here," said Nicole Y.Lamb Hale, the assistant secretary for manufacturing services, U.S. Department of Commerce, who accompanied the franchises into India.

Starbucks Corp <SBUX.O> and Dunkin Donuts recently announced plans to enter India, taking advantage of a growing preference for coffee and a culture that is increasingly socializing in cafes.


India caps foreign ownership in single brand retail at 51 percent, forcing all foreign chains to seek partnerships to do business in the nation of 1.2 billion people.

The franchise owners plan to meet the Ministry of Commerce and Industry and the Ministry of Corporate Affairs in the coming days.

The franchise market in India, estimated to be worth $3.3 billion, is growing at a rate of 30 percent.

Casual dining chain Applebee's and Johnny Rockets also said they were in talks with several players in the country as they sought franchise partners.

"We are still in talks and will probably start our operations with Mumbai, Delhi," Phil Crimmins, president of Applebee's international division said.

Johnny Rockets said it was also open to joint venture opportunities.

"We are hoping to sign a deal in the next 6-8 months and after that start operations in the next 6-9 months," Steve Devine, senior vice president, international development at Johnny Rockets said.

(Editing by Jui Chakravorty)