Burger King, one of the world’s top fast-food companies, will soon enter India through a franchising partnership with a company that will be headed by the present CEO of its UK operations and majority-owned by private equity firm Everstone Capital, a rare instance of a PE fund partnering with a fast-food chain.
In a departure from its usual global practice, the US chain will also hold a minority stake in the Indian franchisee, said a person familiar with the development. The India venture will be spearheaded by the chief executive of Burger King in the UK.
Varman, who has been associated with the burger chain for more than a decade, recently spent a few weeks with the Everstone brass.
Franchise Agreement may be Signed Soon…Varman spent time with Everstone’s founder Sameer Sain and partner Jaspal Sabharwal in India, studying the local market and meeting potential vendors.
Two persons with direct knowledge of the development said Burger King and Everstone are expected to sign the franchising agreement shortly. A Mumbai-based real estate developer will also pick up a minority stake in the franchisee company. “Everstone (and its partners) plans to invest $100 million to set up 500 outlets in the country over the next 7-10 years,” one of the persons said, asking not to be named.
India will be among very few markets where the Miami-headquartered burger chain will also own a stake in the local venture. “Unlike most such deals where only the franchisee invests in the business, Burger King will invest in the venture and hold a minority equity. The deal is more like a partnership, though the operations will be run entirely by Everstone Capital,” the second official said.
Burger King, which is famous for its signature Whopper sandwich, will be among the last big global food chains to enter India. Its arrival, ironically, will happen at a time its global rival McDonald’s is involved in a bitter legal battle with one of its franchise partners in the country.
The ownership of Burger King has changed several times since it opened its first outlet in 1954, and it is currently owned by Brazilian private equity firm 3G Capital, which bought it for $3.3 billion in 2010. One of the world’s top hamburger chains, along with McDonald’s and Wendy’s, the company again went public on the New York Stock Exchange last year, but 3G remains the largest shareholder with a 71% stake.
Since its takeover, 3G Capital has re-franchised stores and raised the percentage of its total franchisee outlets from 90% to almost 99%. At present, 13,000 outlets are franchisee-operated.
Everstone owns a controlling stake in Pan India Food Solutions, which operates a host of restaurants, including Noodle Bar, Copper Chimney, Spaghetti Kitchen and the local franchisee of US-based Coffee Bean & Tea Leaf.
Samir Kuckreja, president of the National Restaurant Association of India, says Everstone’s experience in earlier food ventures would come handy in its new partnership. “Now, they have to hire the right management, position it well, and get the menu right in India to be successful with Burger King,” he says.