McDonald’s: Lessons learned from India

But McDonald’s is gradually finding its way in India.

The global quick-service giant hasn’t exactly taken the country by storm: The 32,000-unit chain opened its first restaurant in the country in 1996 and has since expanded to just 210 units.

“So you can see we took our time,” said Amit Jatia, managing director of McDonald’s India with responsibility for the southern and western parts of the country.

McDonald’s spent that time building infrastructure and corporate culture, and developing the menu, he said.

Jatia was speaking in Mumbai to a group of potential American franchisors on a trade mission to India.

“When we opened, we had just one vegetarian product,” Jatia said. “Half of our customers are vegetarian. Did we have the right value proposition? No.”

But to introduce its first local burger, the aloo tikki burger, which is a patty of potatoes and peas flavored with Indian spices, McDonald’s had to develop 130 ingredients and use 50 suppliers, Jatia said.

Now all of the ingredients are domestically sourced, he said.

McDonald’s also had to build brand awareness and teach customers how to act. The golden arches didn’t mean anything to Indian consumers, for example. The signage needed to say “McDonald’s Family Restaurant” just so customers knew it was a restaurant.

“They didn’t know what self-service was, or that they were supposed to walk up to the counter,” Jatia said.

McDonald’s also learned that to market locally it had to use local celebrities and sponsor local events and festivals.

But now with the infrastructure in place and the brand established — though small by global standards, Jatia said McDonald’s India is the largest restaurant brand in the country in terms of sales volume — the chain has set the goal to grow to 450 restaurants in the next three years.

Jatia spoke with NRN’s Bret Thorn, who is on the U.S. Commercial Service-organized trip this week to India for American franchisors. Follow Thorn’s reports and observations on NRN.com, as well as on his blog, Food Writer’s Diary, and Twitter (hashtag #nrninIndia).

How did you end up working for McDonald’s?

McDonald’s was working with [advertising firm] Leo Burnett for help in finding partners in India. I was running our family’s lubricant business, and I was meeting with Leo Burnett to talk about one of our product launches, and they introduced me to McDonald’s.

I just loved their thought process, that they wanted to respect local culture. I saw that they valued local management and culture.

Are there any Americans managing operations in India?

No.

McDonald’s India doesn’t serve beef or pork. How do you maintain the company’s brand identity?

There’s the Filet-O-Fish and the McChicken. We launched Chicken McNuggets a few years ago. The French fries are the same, and the shakes and ice cream are the same. And we have variations, such as the Maharaja Mac instead of the Big Mac, for which we use chicken instead of beef.

We believe there is a global core of McChicken, Chicken McNuggets, Filet-O-Fish and so on. If you visit McDonald’s you will find something familiar, and I find that most of our international visitors love it. They recognize the format. It’s familiar to them. But they are just a tiny fraction of our market.

With such a different menu from most McDonald’s, how does McDonald’s India benefit from being associated with the national brand?

We get the benefit of global learning. So McDonald’s in Singapore is good at distribution. We are good at maintaining affordability. We can all learn from each other. Singapore also has a spicy chicken that is doing extremely well. So we are bringing it to India.

You spoke about the value proposition and the importance of that to Indian consumers. How do you maintain that?

We did research with our consumers and asked if they found value for the money they spent with us. We found that our Happy Price menu, which is like the dollar menu, should start at 20 rupees [around $0.54].

What’s your average check per person?

A little over $2.

And your best-selling items?

The McVeggie, the McChicken and the aloo tikki burger.

What’s your biggest challenge to the company’s growth?

It’s very challenging to get quality real estate. And all the other normal business challenges are there.

How do you find skilled labor?

Basically we hired people when we started out and exposed them to global processes. We entered them into our advanced leadership development program, which gets kicked off in [Oak Brook, Ill., McDonald’s global headquarters].

Everyone in our corporate office has to go through an executive development program, so we’ve been able to expand their horizons differently, and now their ability to do a much bigger job is higher than it was a few years ago.

And every manager has to be a graduate of Hamburger University. We send them to train in Australia and China for that.