Restaurant Industry

Market Size

Rs. 75,000 Crores in CY12

Organized Segment

Rs. 10,500 Crores in CY12

Expected Annual Growth Rate

Overall: 7% Annual

Organized: 16% Annual

QSR: 21% Annual

Average Eating Out

India: 2 times a month

Singapore: 40 times a month

 

Indian Restaurant Industry | What’s On Your Menu?

The Indian restaurant industry is worth Rs.75,000 crores and is growing at an annual rate of 7%. The industry is highly fragmented with 1.5 million eating outlets, of which a little more than 3,000 outlets form the organized segment. However, the organized segment is rapidly growing at an annual rate of 16%. Quick service segment is the clear winner in the eating out market with a growth rate of 21%.

Organized Segment is expected to reach Rs.22,000  crore by 2017, driven by:

  • Rising disposable income
  • Nuclear family structure
  • Increasing working population
  • Rapid urbanization and consumerism
  • Increased private equity interest
 Segment Market Size (Rs Cr) Expected Growth Rate
 Quick service Resturants 4675 21.5%
 Casual dining 2365 11.9%
 Cafes 1265 12.3%
 Fine dining 1045 12.0%
 Pubs, bars, clubs and lounges 963 11.0%

"Indians on an average eat out lesser than 2 times a month, compared to 40 times in Singapore. Even a small increase in this number   provides a huge market opportunity for restaurants in India."

Brands By Segments

  • Quick Service Restaurants (QSR): Domino's, KFC, McDonalds
  • Casual dining restaurants: Pizza Hut, Yo! China, Sagar Ratna
  • Cafes: Cafe Coffee Day, Barista Lavazza, Costa Coffee
  • Fine Dining Restaurants: Mainland China, Sahib Sindh Sultan, Copper Chimney
  • Pubs, bars, clubs, lounges: Hard Rock Cafe, Xtreme Sports Bar, TGIF

Key Private Equity (PE) & Venture Capital (VC) Firms which have invested in the Restaurant Industry

  • NSR: Coffee day (360cr), Adiga’s (200cr), Ohri’s (200cr)
  • India Equity Partners : Sagar Ratna (180cr)
  • SAIF Partners: Specialty Rest. (120cr), Ammi’s Biryani (40cr)
  • Everstone Capital: Pind Balluchi  (110cr)
  • ICICI Venture: Devyani Intrnl–Pizza Hut, KFC, Costa (250cr)
  • Aditya Birla PE: Olive Bar (54cr)
  • Premji Invest:  JSM Corp-HRC, Shiro, CPK (130cr)
  • TVS Capital: Om Pizza (50cr), Indian Cookery-Yellow Chili
  • Helion Venture: Mast Kalandar (33cr), Booster Juice (16cr)
  • Sequoia Capital: Faaso’s (28cr)
  • VenturEast: Goli Vadapav (26cr)
  • IncuCapital: Steammo (40lakhs)
  • Matrix India: Yo! China (27cr)
  • Accel Partners : Kaati Zone

For a 30-40% stake, a typical PE investment is Rs.150-200 crores and a typical VC investment is Rs.20-30 crores. Funds are used for brand building, to open new outlets, standardize, and to expand to other geographic locations. 

 
Valuation Multiples for the Indian Restaurant Industry | Publicly Traded Restaurant Companies
 
Apart from the positive macro outlook, lack of listed pure play restaurant companies in India driving up valuation multiples
 

India

Segment

Companies

EV*/Revenue

EV/EBITDA**

Fine Dining Restaurants

Speciality Restaurants

3.8x

19.6x

Quick Service Restaurants

Jubilant FoodWorks

5.8x

31.7x

 Worldwide

Segment

Companies

Median EV/Revenue

Median EV/EBITDA

Fine Dining Restaurants

China Bistro, Cheesecake Factory and 3 other restaurants

0.9x

7.7x

Casual Dining Restaurants

Darden Restaurants, Buffalo Wild Wings and 15 other restaurants

1.0x

7.8x

Quick Service Restaurants

Domino's, Yum! Brands, McDonalds & 7 other restaurants

2.1x

9.9x

*EV: Enterprise Value (measure of company's value)
**EBITDA: Earnings Before Interest, Taxes, Depreciation & Amortization (measure of company’s profitability)
CY: Calendar Year Ending December
 Source: India - TTM Multiples as on 14 March 2013