QSRs need to choose value to sustain business, suggests IIM-A study

While the Indian quick service restaurant (QSR) industry might be growing rapidly, many players are still shutting shops due to lack of sustainability. In such a scenario, a working paper on the QSR industry by the Indian Institute of Management, Ahmedabad (IIM-A) has suggested that players should focus on the values sought by consumers.

Titled 'Indian QSR Industry – Opportunities and Strategies to Harness Them', the working paper by Piyush Sinha, a faculty member at IIM-A offers a framework for starting or scaling up of a QSR business by enterprises.

"In a country with more than a billion people, opportunities in India are abound. This has led to a rapid growth of the QSR industry. However, several outlets have been closed, a large number are struggling, still a large number are just about surviving. This indicates to the fact that just having a lot of opportunities is not enough. These opportunities need to be harnessed and converted into profitable enterprises," says Sinha.

To harness the opportunities, the study suggests enterprises should understand values that consumers seek in choosing a QSR rather than focusing only on market opportunities.

"Entrepreneurs who are already there and want to scale up or those who are entering into this high growth fast paced dynamic industry should follow a customer value based approach to build a sustainable business. The industry is fraught with replication but has lacked scaling up. What one needs is a business model to harness this opportunity. The ideal model covers three main processes – sensing value, creating value based offers and deliver value. Core of this model is company’s very own, the value proposition it promises to deliver and not the opportunity that lies out there," the paper suggests further.

As per the study, the total food-service market is expected to be Rs 43,000 crore, of which the organized segment of the restaurant industry is estimated to be at approximately Rs 7,000 crore to Rs 8,500 crore, forming 16-20 per cent of the industry. However, the QSR industry is said to be below two per cent of the total organised segment which is growing at 20-25 per cent per annum, the study states.

"Enterprises must choose one value on which the business would be built. The value could be build around the chef, the food, location, pricing and experience. In case it wants to address different value segment, it must choose different format that require a different business models, than a linear extension," suggests Sinha.