How many times have you ordered a Pizza from Dominos or stopped by at Starbucks for your searing hot, no foam latte? Too many times to count. What’s great about these eateries is that you can quickly pick-up your order without the fuss of getting proper seating, using tablecloths and cutlery, or paying for an exorbitant bill. This is what the concept of a QSR is all about. 

What is the QSR Sector in the Food Industry?

The QSR Sector is a part of the Restaurant and Food Services Industry. QSR or Quick Service Restaurants churn out food quickly and efficiently. It is synonymous with fast-food restaurants. These restaurants generally do not provide table service, although they cook food exceptionally fast compared to a fine dine or a gourmet restaurant. 

3 Key Reasons why it’s a Massive Market

Targets age demographic that will elevate sales 

The QSR Market in India is a potentially massive market because the target demographic of the sector mainly comprises Millennials with an optimal age-group demographic between 15-35 years. This age demographic will elevate sales since India’s median age is much lower at 26.7 years in comparison with countries like the United States or China. 

Restaurant food consumption boom 

The per capita income is rapidly increasing in India with Millennials fuelling the country’s consumption boom. Also, Millennials have higher disposable incomes which they are spending heavily on outside food every month. 

Pan-India Internet Penetration

The Internet Penetration is deeply seeping into Tier II, III cities as well as villages. The market is slowly expanding to encompass a pan-India presence. As such, the market opportunity is massive in QSR. 

Why is it attracting Investors’ Interest?

Owing to the pandemic-friendly business model, QSR chains have tremendous opportunities to engage with big companies, especially in the fine dining sector. The Indian QSR sector is also being looked at as a hotbed of opportunities by Private Equity (PE) funds and Venture Capitalists (VCs). QSRs with well-established online and take away models have a chance of being chosen by big companies. 

The two key factors attracting interest from large PE funds and VC’s are:

Cheaper, versatile menus

Food churned out by QSRs is much more affordable when compared to fine dine restaurants. It is age, diet, and budget inclusive which will obviously attract a larger consumer base. 

Low investments

QSRs require low investments since the interior set-up costs are eliminated. Since they are mainly focused on delivering food at top speed, sophisticated high-paid staff and expensive infrastructure investments are not needed. Thus, the business model looks profitable for investors. 

Industry Forecasts and Expectations by 2025

The Indian QSR Market is estimated to be valued at INR 51000 Cr by the end of this year. It is projected to grow at a CAGR (compound annual growth rate) of over 18% between 2021-25. The Restaurant and Food Service Industry will record a rise in CAGR by about 10.4% in 5 years between 2018-2022. The QSR sector in particular will achieve significant growth while the industry as a whole is forecasted to be worth INR 5.5 Tn by 2022. 

The Growth of QSR Start-up Charcoal Eats

Charcoal Eats, a QSR start-up recently raised INR 1 Cr in Growth Capital from GetVantage, a Revenue Based Financing Lender. It’s a food tech brand that has completed over 2 Mn orders since its inception owing to its high-growth phase business model and high-speed execution in delivery of food. Charcoal Eats’ success is attributed to the fact that they are a digital-first food tech brand that’s steadily serving more plates across the country. 

It used to be a widely believed notion that for a brand to have national appeal and outreach, it needed to rely heavily on traditional strategies and physical structures more than anything. But the truth is that physical markets typically account for the highest expenditure shares towards rental and business expenses and pose different challenges in expansion processes.

When the COVID-19 pandemic started, many restaurants had to close because they could not pay the rental and administrative fees. And that is where cloud kitchens became the game-changers. Cloud kitchens are a reality today and will continue to exist for various profitable reasons such as accessible scaling capacity and low operating costs. The cloud cooking industry had also performed well in the pre-COVID era; the pandemic gave this idea the boost it needed.

What are cloud kitchens?

A cloud kitchen is a commercial facility explicitly designed for the preparation of takeout meals. Cloud kitchens are sometimes also referred to as virtual kitchens, ghost kitchens, or shared kitchens.

The National Restaurant Association of India (NRAI) has been calling all restaurants to make their own alternative channels for food delivery to customers. This is because online food delivery has replaced in-house dining as the prime source of revenue. As such, restaurants cannot continue paying costly commissions to food delivery apps on a per-order basis. By roping in food delivery technology partners, restaurants will have their own platform to list their menu and directly market to consumers. 

Restaurants battling it out with Food Delivery Aggregators

Restaurants are evading Food Delivery Aggregators. Standalone restaurants in association with the National Restaurant Association of India (NRAI) are prioritising the establishment of alternative channels to reach customers over mainstream food delivery apps. 

NRAI has a vision for restaurants to obtain more leverage over their food delivery consumers. They also want the delivery operations business to be viable instead of being ‘loss-making’ for restaurants. 

Initiatives by NRAI to raise awareness

• NRAI recently came up with a number of bootcamps inviting restaurant chains and food tech solution providers to come together. They are working to bridge the gap between restaurant brands and the end consumer by facilitating a collaboration between restaurants and D2C tech solution providers. 

• They launched the #orderdirect campaign on twitter to encourage restaurants across India to choose D2C channels of food delivery. 

Why take the D2C Route?

The commissions charged by food delivery aggregators in India range between 15-23% of the Average Order Value and may even shoot up to 30% at times. But taking the D2C route, commissions range only between 14-17% for a typical Average Order Value. D2C platforms do not charge for deliveries unlike aggregators who take high cuts as commission. 

By selling through D2C channels, the logistics fee is mostly pushed on to the end consumer. The restaurant partner gets to decide the delivery fee. Restaurants will also be able to incentivize consumers by saving on aggregator commissions and offering them as discounts to consumers. 

Euphotic Labs, a Bengaluru-based AI start-up has unveiled an autonomous robot called ‘Nosh’ which can prepare more than 200 dishes. Some of the noteworthy dishes on the menu include Kadhai and Matar Paneer, Chicken and Fish Curry, Carrot Halwa, and most importantly, Potato Fry. 

Nosh’s menu is quite impressive. It claims to be able to cook Breakfast, Veg and Non-Veg curries, Sautéed Veggies, Dry Non-Vegetarian Dishes, Rice Based items, Sweets, Continental dishes, Asian dishes and Soup. 

AI Cooking – Market and Consumer Base

The urban consumer base of corporates living in Tier I and II cities have a major lifestyle problem pertaining to home-cooked food. The ideal customer profile for ‘Nosh’ are corporate employees and married couples with fast-paced lifestyles belonging to the median-high income segment. Nosh is solving the major urban consumer problem of access to fresh, home-cooked meals. 

The market is relatively new and the product is still a novelty for the urban consumer base. Nosh belongs to a new product category which combines AI, home sciences and robotics. Euphotic Labs is currently targeting two prominent markets with the highest market demand, India and the United States. The product is priced on the expensive side with a median pricing point best suited for the upper middle class consumer base. 

How the product works

Euphotic Lab’s product is an app-driven automated cooking robot which is designed to make one-pot cooking dishes. Technically, this means that it’s still not on par with full-fledged Indian home cooking. The recipes can be customized which is a much-needed feature for consumers with varying taste palettes. 

Classic Indian home cooking involves the use of spices, alongside the generic base (onions + tomatoes) and an addition of protein (meat/tofu/veggies) for a typical side gravy or curry. Nosh can make all kinds of basic stir fry recipes. The product has slots to add in the spices and condiments. The Artificial Intelligence (AI) in the robot is trained to emulate human cooking by using an AI-enabled camera to add ingredients in an orderly sequence. 

The Indian food and beverage industry has had a hard time adopting the direct consumer (D2C) category, mainly due to a long tradition of regular consumer visits to supermarkets and the lack of better online options. However, this tradition is changing. The latest figures show that D2C’s food businesses and beverage brands invested 24.8% in 2019, increasing from 12.5% in 2015, making this segment the fastest-growing category in D2C.

With the development of digital infrastructure, there has been an increase in the number of conscientious consumers ready to try new products and intervene directly and personally with the brand.