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New Delhi, Fast food major McDonald's franchise for west and south <keyword id="19895063" type="General" weightage="20" keywordseo="india" source="keywords">India</keyword> on Friday said it is engaging with the "competent authorities" amid reports of <keyword id="19897316" type="General" weightage="20" keywordseo="maharashtra" source="keywords">Maharashtra</keyword> Food and Drug Administration taking action against it for using cheese substitutes in its products. Hardcastle Restaurant, a subsidiary of <keyword id="20701731" type="General" weightage="20" keywordseo="westlife-foodworld-ltd" source="keywords">Westlife Foodworld Ltd</keyword>, has the franchisee rights to own and operate McDonald's restaurants in west and south markets in India. "We are actively engaging with the competent authorities on this issue and awaiting their final clarification. We have always been adhering to stringent food standards and are fully compliant with all applicable food laws," said a statement from McDonald's India (West &amp; South) shared on BSE by <keyword id="20376658" type="General" weightage="20" keywordseo="westlife-foodworld" source="keywords">Westlife Foodworld</keyword>. According to media reports, the Maharashtra FDA has accused McDonald's of deception using cheese substitutes in burgers and nuggets instead of real cheese and the licence of an outlet in Ahmednagar has been suspended. The reports further said the action has resulted in McDonald's removing the word cheese from their menu in several locations, with the Maharashtra FDA asking the fast food chain to remove the usage of word cheese from its menu across India. "Amid recent reports about the removal of 'Cheese' from our menu at McDonald's locations in Maharashtra, we want to assure our valued customers that only genuine, high-quality cheese is used in all our cheese-containing products," the statement said. It further said,"Collaborating with suppliers adhering to global standards ensures top-quality cheese in our product offerings and not cheese analogues or any substitute." McDonald's India (West &amp; South) said,"Our commitment to transparency in our ingredients and dedication to providing delicious, high-quality meals to our customers remain unwavering."

Engaging with competent authorities, use only genuine cheese, says McDonald's

<ul><li>While QSRs have been growing aggressively in the last two years, few have been concentrating on dine-in experiences.</li><li>Only McDonald’s run by <keyword id="15483921" type="General" weightage="20" keywordseo="Westlife-Foodworld" source="Orion">Westlife Foodworld</keyword> in India has gained from the trend as it focussed on omnichannel strategy.</li><li>The pizza category – where the product is designed for delivery – suffered the most as dine-ins gained popularity.</li></ul>Indians are wanting to step out for their meals, and that’s hurting quick-service restaurants (QSRs) as well as delivery apps equally. So much so that Swiggy has recently announced that it’s integrating its dine-out offerings onto its platform across 24 cities, allowing users to access discounts as they book via the app. While QSRs have been growing aggressively in the last two years – with a large number of new store openings – few of them have been concentrating on dine-in experiences. And only one chain – McDonald’s run by Westlife Foodworld in India – has gained from the trend as it focussed on the post-pandemic retail trend of an omnichannel strategy. “McDonald’s (Westlife) reported a 20% y-o-y same-store sales growth (SSSG), largely driven by higher guest count and average order value, due to its meals and omnichannel strategy,” said a report by BNP Paribas on the company’s third quarter results. A Credit Suisse report had said last month that McDonald’s offers more meals – across breakfast, coffee and chicken apart from burgers and sides. A larger menu is best suited to bring in footfalls through the day. “Westlife/McDonald’s reiterated their preference for the larger-size, longer-lease store model, which they have successfully figured out; the rest of the listed universe has pivoted to a smaller -store format,” said Credit Suisse. Pizzas: Undelivered growth The pizza category – where the product is designed for delivery – suffered the most. The franchises that run Pizza Hut – Sapphire and <keyword id="142256" type="General" weightage="20" keywordseo="Devyani-International" source="Orion">Devyani International</keyword> – saw a sequential fall in SSSG by 4% and 6%, respectively. Jubilant that runs Domino’s showed almost flat SSSG growth sequentially. “Softer demand continued in the pizza category owing to larger delivery salience, relatively higher penetration and elevated competitive intensity. Pizza Hut posted a q-o-q (quarter-on-quarter) decline in sales, while Domino’s reported flat like-for-like growth of 0.3% y-o-y,” said BNP Paribas. Like-for-like or LFL growth is a metric that indicates revenues of stores with similar characteristics, omitting outliers. KFC witnessed a decline in its ADS (average daily sales per store) both sequentially and year-on-year (y-o-y) due to weak consumer spending and incremental store additions in non-metro cities that typically have lower ADS. While 35% of sales for Domino’s comes from on-premises, for McDonald’s that percentage stands at 52%, for Pizza Hut it’s 41% and for KFC it’s 54%. Moreover, almost all QSRs have been expanding their store numbers but reducing store sizes to make them delivery friendly. So much so, even Pizza Hut, which had started off as a dine-in brand, had changed its strategy to focus on delivery in the last few years to catch up with its closest competitor Domino’s. <div type="image" title="QSR report" msid="98201473" hostid="261" sizebytes="29596"></div> Then there is the slowdown… Apart from changing preferences, Indians also seem to be re-thinking their discretionary spends – which is also eating into <keyword id="6517640" type="General" weightage="20" keywordseo="QSR" source="Orion">QSR</keyword> business. “The slowdown in discretionary consumption, especially post Diwali, has dampened the strong demand sentiment that QSR players witnessed in the past few quarters. This is attributed to rising inflationary pressures, a cut in household expenses and consumers’ down-trading behaviour,” said a report by BNP Paribas. Moreover, the growth that a majority of consumer companies have foreseen might turn out to be a mirage. “The growth rate for food delivery has slowed down versus our projections (along with many peer companies globally). This meant that we needed to revisit our overall indirect costs to hit our profitability goals,” said Swiggy co-founder and CEO Sriharsha Majety on <a href="https://www.businessinsider.in/business/startups/news/swiggy-co-founder-says-over-hiring-a-mistake-as-he-fires-380-employees/articleshow/97171514.cms">firing 380 employees </a>in January. To control its falling revenues, Zomato too has exited 225 small cities,<a href="https://in.mashable.com/tech/47163/zomato-exits-225-cities-after-massive-loss-of-rs-346-crores#:~:text=Zomato%20has%20exited%20225%20cities,comes%20from%20its%20loyal%20users."> where performance was not very</a> encouraging according to its CFO, Akshant Goyal. According to a report by IIFL, as many as 820-920 such restaurants will be added every year as most franchises that run the aforementioned brands are looking to double their store count in the next four to five years. “We believe store expansion targets might need to be toned down if the growth remains weak. Owing to the demand and margin softness, street earnings estimates have come off in the last few weeks,” said BNP Paribas. Moreover, there are other challenges dogging them too – rising wheat and cheese prices have been biting into their margins. Muted sales also give them little room for price hikes, which could further pressure sales and margins. With tightening competition, QSRs are chasing a shrinking pie that could get smaller as <a href="https://www.businessinsider.in/business/corporates/news/india-incs-q3-earnings-largely-meet-analyst-expectations-but-consumption-slowdown-a-worry/articleshow/98154526.cms">consumers watch how much they spend</a>. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/personal-finance/news/presumptive-taxation-the-scheme-that-eases-burden-on-small-businesses/articleshow/98183636.cms">Presumptive taxation: The scheme that eases burden on small businesses</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/india/news/elephant-will-not-march-but-run-powered-by-private-consumption-union-amc/articleshow/98182584.cms">Elephant will not march but run, powered by private consumption: Union AMC</a>

Indians now want to eat out instead of delivery – a move that’s hitting pizza makers the most

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Engaging with competent authorities, use only genuine cheese, says McDonald's

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Indians now want to eat out instead of delivery – a move that’s hitting pizza makers the most

Bhakti Makwana

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