PE fund’s appetite for the burger category is intensifying with Everstone Capital making a provision of $250 million to build Burger King’s business in India.
Raj Varman, Chief Executive Officer, Burger King India, said: “Everstone Capital has already made a $80-million investment into the company and is willing to take it up to $250 million based on the needs of the burger brand in India.’’
Everstone Capital has picked by a majority stake of 80 per cent in Burger King India Private Ltd, the franchise company apart from its parent, Burger King Worldwide, with a 12.5 per cent stake.
The balance stake of about 8 per cent is held by Raj Varman, who has been an erstwhile employee of Burger King Worldwide and now the CEO of its franchise company in India.
“This is the largest commitment in Everstone’s food and beverage portfolio in terms of investment and scalability in India. We are building a new company in India from ground up with Burger King which is the second largest burger brand in the world,’’ said Jaspal Sabharwal, Partner, Everstone Capital.
Apart from India, Everstone has also invested in Burger King’s franchise in Indonesia.
With 16 outlets today, Burger King set up operations last November after making several attempts to enter the country in the past. It now plans to launch between 30 and 40 outlets this year.
Mc Donald’s continues to be the market leader having entered India in 1996, but of late a slew of other MNC burger chains like Carl’s Jr, Wendy’s and Johnny Rockets have entered the category. Unlike the slow growth in pizzas which is a bigger category than burgers, new launches of burger chains is ensuring growth in the category. “There is 70 per cent growth in the burger category as a result of new units and entrants into the category. Burger chains form about 2-3 per cent of the QSR category and this gives enough headroom for growth,’’ observes Varman.High rental costs
However, making money in the QSR segment is going to be a long haul for most MNCs including Burger King with high rental costs in the metro markets. Burger King has recently launched its largest 3,000 sq ft outlet in South Mumbai.
“Mumbai is a tough market in terms of high rentals. But we hope to make money by the end of next year with majority growth coming from the tier II & III cities,’’ added Varman.