2321: The week that was

This week, the restaurant industry has experienced significant news regarding increasing costs and challenges faced by various establishments. Burger King India, for instance, reported a wider fourth-quarter loss due to rising costs of essential ingredients such as cheese and milk. However, they have also responded by launching a value meal priced at Rs 99, including a burger, fries, and a soft drink. This reflects the current situation where companies are under tremendous pressure to manage food costs while still attracting customers with affordable offerings.

KFC, operated by Devyani International, witnessed a decline in same-store sales growth for the second consecutive quarter, indicating a drop in consumer demand. Like Burger King, KFC has adopted an aggressive approach by introducing a latest item called the ‘Chicken Roll,’ starting at Rs 99.

McDonald’s, operated by Westlife FoodWorld, also faced challenges due to inflation. They have already positioned themselves with aggressively priced products starting at Rs 50. In response to the inflationary pressures, McDonald’s has implemented a portfolio expansion strategy, specifically targeting incremental customer visits for their coffee selection.

While major quick-service restaurants (QSRs) grapple with inflation and low demand, an interesting development comes from a small iconic café in Bangalore. Rameshwaram Café, located in Indirangar with a store size of just 10×15 sq ft, has been generating impressive numbers, processing around 7,500 bills per day and achieving monthly revenue of Rs 4.5 crore with a 70% gross margin. It will be intriguing to observe how they scale up their operations while maintaining these figures.

Some analysts maintain a positive outlook on the industry, expecting inflation to peak and eventually taper off later in the year, which could potentially benefit these companies in the medium to long term.

In the face of these challenges, the supply chain management (SCM) teams of these restaurant chains must play a crucial role in managing costs. Embracing local and sustainable sourcing practices, establishing relationships with local farmers and communities, renegotiating contracts, implementing menu engineering strategies, and exploring ingredient substitutions are some of the key measures that can be employed to combat rising inflation and mitigate its impact on the bottom line.