US fast food chain Wendy's is planning to expand its presence in India by establishing 400 cloud kitchens and traditional restaurants in the next 10 years.
As part of its expansion plan in India, Wendy's and its franchise partner Sierra Nevada Restaurants have formed a partnership with Mumbai-based Rebel Foods to develop and operate 250 cloud kitchens while opening up 150 traditional restaurants across the country.
Dramatic expansion in India
The plan is a huge step for the American fast food chain because currently, Wendy's and Sierra Nevada only operate four brick-and-mortar restaurants and five cloud kitchens in India.
This was significantly fewer than the more than 400 restaurants being operated by its rival McDonald's and its local franchise partners.
Satish Meena, an analyst with market research firm Forrester, mentioned that Wendy's growth in the country has been slow since it entered the market in 2015. Meena said: "Wendy's wants to use the multiplier effect of cloud kitchens and physical restaurants to tap into the Indian market."
According to Wendy's, the Rebel Foods partnership will allow it to grow its business in the country through digital innovation.
Cloud kitchens
Also called ghost kitchens or dark kitchens, cloud kitchens are facilities used to produce food intended only for home delivery. Since there is no need to attract dine-in customers, these kitchens are often located in buildings with lower rent rates compared to traditional restaurants.
According to market research firm Valuates Reports, the global cloud kitchen market is forecast to be worth approximately $71.4 billion by 2027, increasing by 12% from 2021 to 2027.
In a statement, Rebel Foods co-founder Kallol Banerjee explained that "Wendy's will get immediate access to rapid scale across the country, at far lower levels of capital" by taking advantage of a network of existing cloud kitchens in India.
Over 300 cloud kitchens are operating under Rebel Foods, which is backed by Goldman Sachs and Sequoia Capital.
The Indian market
News of the Wendy's expansion comes after India officially fell into recession for the first time in decades due to the impact of the coronavirus pandemic on Asia’s third largest economy.
According to official numbers, India’s gross domestic product (GDP) decreased by 7.5% in the July to September quarter, compared to the same period in 2019, when the GDP went up by over 4%.
This recent decline follows a record drop in the GDP of almost 24% in April to June, the first quarter of the fiscal year in the country. The two consecutive drops in GDP indicate that India has plunged into recession.
Shilan Shah of Capital Economics pointed out that while this quarter should mark the low point for India’s economy, there are signs that the recovery could be very slow despite the easing of lockdown measures.
Shah said: "The continued rapid spread of the coronavirus will dampen domestic demand. What’s more, the underwhelming fiscal response to the crisis will guarantee a legacy of higher unemployment, firm failures and an impaired banking sector that will weigh heavily on investment and consumption."
India has also further strained its relationship with China after the government decided to ban more apps. India announced that it was banning 43 additional apps, most of which are Chinese, drawing the ire of China and further increasing the tension between the two most populated nations in the world.
Among those included in the new ban were apps from China’s e-commerce giant Alibaba, such as the AliExpress shopping platform, workplace messaging tool DingTalk and the Taobao Live streaming app.
