The Covid-19 pandemic made online ordering a table-stakes feature for every quick-service restaurant (QSR) operator; Now the chains are taking their marketing and technology investments a notch higher to find new ways to reach customers and improve guest experience. Yum! Brands-owned Pizza Hut says it will fall back on its FCD (fast-casual delco) formula to push for the next phase of growth. To this end, the key focus areas would be valuable offerings, driving frictionless experiences and expanding footprint.

Pizza Hut, which has about 4% share of the organized QSR chain market, has been on an aggressive expansion spree since the pandemic slowdown. In the last year alone, it added as many as 212 stores to reach about 199 cities via 800 outlets. “We are serious about fast expansion to improve access. Besides expanding reach in metros, we will also take our products to smaller cities. The FCD plan will pivot this growth,” says Aanandita Datta, CMO, Pizza Hut India. The revenue of Pizza Hut, operated in India by Sapphire Foods and Devyani International, in financial year 2022 was about Rs 5.3 billion, a huge jump over Rs 2.8 billion in 2021.

The QSR market in India is growing by leaps and bounds. The total organized QSR market, as estimated by Technopak, stands at Rs 411 billion, of which chains make up Rs 231 billion and standalone QSRs about Rs 180 billion. However, the country’s organized QSR store density is way lower than that in developed markets, experts say. So the rush among QSR chains to expand beyond their comfort zones and reach out to customers is understandable.

Indeed, the FCD format is Pizza Hut’s baby so to speak. This format was introduced in India in 2016 and they offer debt-in, delivery, and takeaway services under one roof. This integration of channels improves customer convenience and helps the brand ensure better store rationalization. “The format optimizes reach and covers all the channels of reaching consumers, especially the Gen Z segment,” Datta adds.

All FCDs have an open kitchen format, allowing customers to see their food being prepared, enhancing confidence, which has become the needle-mover post Covid. Of its 800 restaurants in the country, 300 operate under the FCD format.

Given the vast young population beyond the metros, Datta believes tier-2 and tier-3 cities have a huge growth potential. “The brand already has a presence in cities like Chittorgarh, Jajpur, Palakkad, Gangtok, and Purnia; Emerging market segments have started contributing close to 50% of our business,” she adds.

Niraj Bora, founder, Surmount Business Advisors, says QSR brands are expanding across tier-2 and tier-3 because of two reasons. First the frequency of eating out/ordering in is increasing day by day, and second, real estate prices are lower and so setting up shop is cost effective. An understanding of local tastes and preferences, however, will be key.

Sweetening the deal

Currently, 50% of the brand’s business comes from delivery, about 30% from debt-in and the rest is takeaway. “This year, all channels will be pulling their weight,” Datta says. Food aggregator platforms have also grown big in terms of contribution in the delivery process.

Given that more than 70% of the QSR market is delivery-led, Bora of Surmount Business Advisors believes the brand would do well to focus on improving its delivery infrastructure. “Dine-in has limitations in terms of the number of orders that can be served in, say, an hour. In the case of delivery, the comparable number is at least 2-3x of religion-in with similar ticket sizes, and hence delivery infrastructure is also something that the brand should be looking to improve,” he adds.

That apart, with increasing competition, adding new options to the menu is imperative. “Regional players are doing a good job offering a range of products that cater to changing tastes and preferences,” Bora highlights.

Pizza Hut has been quite proactive in that department. It recently added 10 new pizza variants and backed it up with an ad blitz touting ‘Mood badle, pizza badle’. “Going forward, we will offer more consumer-driven value offerings, whether it’s in terms of just bundle offers or in terms of the offerings,” Datta adds.

It has also created the most brand associations. In 2021, it partnered with HUL to add Kwality Wall’s ice cream and desserts to the menu. The association helped the brand to increase its average order value by about 10%.

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