Dunkin’ Donut has debuted in India through a Master Franchise agreement with Jubilant Foodworks Ltd. In an interview, Ajay Kaul, CEO, Jubilant Foodworks Ltd (JFW), shares the brand’s expansion plans and growth in India.
Namita Bhagat (NB): Dunkin’ Donut has made its debut in India. The chain has joined hands with your company. Kindly share the agreement details.
Ajay Kaul (AK): We have the Master Franchisee rights for India. Under the master franchisee agreement basically we will pay the parent company (Dunkin’ Donut) the royalty.
NB: Where does India stand in Dunkin’ Donut’s global operations? How do you think the partnership with JFW will benefit Dunkin’ in its expansion in the country?
AK: India is very important for Dunkin’ Donut. It is seen as clearly as along with China, one of the countries which will grow very fast. As a result, when Dunkin’ Donut’s have been in discussions in India with us for the last two and half years, they wanted to make sure that they had the right partner for India. Unlike most countries of our (India) size where they do multiple franchisees, in our case they have gone with just one franchisee which is us, the Master Franchise. We are the automatic choice of partner for them having created inarguably the most successful food service franchise in the country-in terms of number of stores. We are also the fastest growing for the last 3-4 years. We are the only public listed food service brand in the country and very profitable. We were in discussions with four other brands and had a lot of deliberation and ultimately choose Dunkin’ Donut against any other brand.
NB: Was there any specific reason for choosing Dunkin’ Donut?
AK: Yes, indeed. Indian food service market is huge. It can be anything from 50-60 thousand crore market. Out of this chained food revenue is only 10% which is growing very fast. With constant internalisation of Indian consumer and rising income level, discretionary spend of this disposal income on items like food is going to increase in future. And with double income no kids and more women working-we realise, this is going to grow very fast. Dunkin’ Donut are largest bakery and coffee company in United States and try to offer food solutions throughout the day which means for all day parts for all day along as per food requirements of the consumer. There is no westernised MNC operating in this space-all day food solution. There are also Indian people who are trying to do but in a very limited way--in Indian cuisine. This is one piece. Other thing is Dunkin’s signature product donut is a category which is still undeveloped / less penetrated in India. Globally in most markets donuts are hugely successful and India is a sweet tooth country-Donuts have a huge potential here. Dunkin Coffee and beverages are an absolutely a hit in most markets. I will give you an example-in US according to five year ratings -people have been most loyal towards Dunkin coffee. There is an ad campaign--America runs on Dunkin. So in this space too Dunkin has a lot to offer. The coffee space in India is still only four to five hundred crore market, small but growing very fast.
NB: What is the strategy regarding the brands’ expansion via franchise model across India?
AK: We do not intend to do sub franchising. In case of Domino we have not sub franchised at all. We believe in country like India and especially in format like ours-you have to build the brand and equity attached it on your own. We believe all investment will be made by us, people will be our own, the high standard of quality, sanitation and hygiene, people practices everything will be under our control and we will be able to create a very powerful brand like we have done in case of Domino.
NB: What would be the expansion strategy for the company in India?
AK: For first two to three years, we will go for Mumbai, Delhi and Bangalore. In period of five years, we will go for tier II state capitals like Pune, Ahmedabad, and Chennai and later to tier II cities.
NB: What sort of competition you foresee for the venture with a lot of international brands coming to India?
AK: The competition in my view is very central. In the early part of the development life cycle of any category of fast food or for that matter the space we are talking about right now-the space is only going to grow. We believe as more and more players come into the market-habits of people are going to change. We want more and more people to step out and eat all day along all outside. It is going to be good for the industry as it will grow on healthy pace. So, we do not for see competition as something which is going to harm us, on the contrary it will help build the market.
NB: What would be preferred locations for opening the outlets and no of outlets purposed?
AK: The model of Dunkin’ is purely footfall driven model. Typically they will be at high street locations malls, educational institutions, metro locations, hospitals and office spaces. In three years we aim 30 stores, in 5-6 years 100 stores and in 15 years time 500 stores. The beauty of the Dunkin’ Donuts is a lot of flexibility in formats. It can be 1500 sq.ft, 1800 sq.ft and 100 sq.ft. Dunkin’ is basically trying an all day part food solution with a lot of flexibility in localisation in the food. Apart from signature donuts, it would offer food catering to typical Indian palate.
NB: You had an IPO listing for JFW and nature of agreement with Domino has changed. What is in store regarding growth for Domino?
AK: Dominos is a fastest growing brand largest multinational food brand in the country. Growth is going to continue. In last two to three years we have added 70 new stores and we believe similar story should continue for the future also.
NB: Post listing, has the pressure to perform increased? Will there be any New Fund Offerings (NFO) to raise additional funds from capital markets to fuel further growth? Any plans to diversify into non food business?
AK: Indeed, there is pressure to perform for any company and it is there for us also. We have put some statistics there. We are growing at system level for first nine months of this year at 61 per cent, single store level at 37 per cent. If you follow other food brands this kind of growth is unheard of, which we are achieving. We are steadily growing our margins and improving our performance and that is reflected in our numbers.
There is no need for NFO. We are generating enough profits and cash. We are debt free company. We have enough cash surplus to fund our capital expenditure requirements, fund Dunkin’ Donut operations. We are a food company and we will stick to food. At Dunkin stores, we will be selling brand’s merchandise like mugs, CDs and T-shirts etc.
