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The restaurant franchise business is growing in India.  Old and traditional restaurants are being transformed into franchising models and are branching out in various parts of the country.  Surprisingly, they are keeping up with western brands like McDonald’s and Pizza Hut.  BusinessInsider.com reports “local upstarts have begun to attract deep-pocketed financiers in the bid to build nationwide fast-food chains of their own”.

At the DLF Place mall in the upscale South Delhi neighborhood of Saket, shoppers and employees sit more or less side-by-side in a new “desi” food court, digging into traditional Indian dishes ranging from biryani to dosas to seekh kebabs.

There’s something for everybody — at many tables three generations are sitting down together. But that’s not the reason these traditional upstarts have succeeded in storming what was once the bastion of western brands like McDonald’s and Pizza Hut.

Some of the city’s most famous restaurants are represented here — some of them a century old — transformed by smart uniforms, cheery signage and shining show kitchens to look every bit as clean, efficient and modern as their multinational competitors. Welcome to the future of Indian fast food.

“[Quick Service Restaurants or] QSRs are quite successful in India,” said Arun Chanda, founder of New Delhi-based Mint Hospitality Consultancy. “Over the last five years, a lot of Indian companies have started getting into the franchising model and expanding into different cities.”

Credit marketers at DLF for inducing popular brands like Karim’s, Nizam’s, Moti Mahal, Nathu’s Sweets, Rajdhani and Sagar Ratna — which had already launched multiple sit-down restaurants around New Delhi — to experiment with nascent fast-food franchises.

But the revolution is already underway across the country, as global chains seek to woo a broader cross-section of customers by incorporating traditional spices and ingredients into their menus. And local upstarts have begun to attract deep-pocketed financiers in the bid to build nationwide fast-food chains of their own.

“Even people who are into the five-star hotel business are thinking of getting into the QSR concept,” said Chanda.

According to Euromonitor and market-research firm RNCOS, India’s $13 billion fast-food market is already growing 25-30 percent a year, and global players like Domino’s, McDonald’s and Yum Brands (KFC and Pizza Hut) are pushing into second- and third-tier cities.

Hardcastle Restaurants, development licensee for McDonald’s in India, is planning a massive expansion, doubling its India stores over the next three years with an investment of $100 million. Meanwhile, Yum Brands plans to open 1,000 outlets — half of them KFC restaurants — on its way to $1 billion in revenue from India over the next four years.

Other multinationals like Burger King, Cinnabon, Dunkin Donuts, and Starbucks are not far behind — with stores already on the ground or aggressive launch plans underway.

With 60 percent of the Indian population currently under 30, it’s no mystery why.

Call it irrational exuberance if you want, but this summer Indian investors judged Jubilant Foodworks — which owns the franchise rights to Domino’s and Dunkin Donuts in India and sold about $150 million worth of pizzas last year — to be nearly as valuable as the U.S.-based parent company.

“We’ve now been in India for over 15 years, and we’ve actually seen the change right before our eyes,” said Amit Jatia, vice chairman of McDonald’s India. “The market is changing very significantly. People are eating out far more often than before, and I think the availability of international QSR brands has brought about that change.”

But as the success of DLF’s “desi food court” suggest, the future of fast food in India isn’t about pizza and burgers.

In deference to Indian religious sentiments, McDonald’s doesn’t even offer its signature Big Mac here, or any other beef or pork products. Instead, it offers the Chicken Maharaja Mac and items like the McAloo Tikki burger (a mashup of potatoes and peas, deep-fried and served in a bun), the McVeggie and the Paneer Salsa Wrap — along with the Filet-O-Fish, McChicken sandwich and Chicken McNuggets.

Similarly, Domino’s and Pizza Hut don’t offer any beef toppings, and offer a wide range of pizzas that incorporate traditional Indian ingredients and spices, such as the Domino’s Keema Do Pyazza pizza, with onions, spicy minced goat meat and jalapenos, or Pizza Hut’s Kadai Paneer pizza, with onions, green pepper, paprika, coriander and tofu-like unaged farmer’s cheese. Food industry experts say these flavors are here to stay.

“We believe that we must respect the local culture. Therefore, around the globe we do products that are relevant for the local consumer,” said Jatia. “But we want uniquely McDonald’s products. For example, we don’t anticipate making a McDosa, but we have a Spicy Paneer burger. That has resonated very well with the Indian consumer. I feel that for global brands, a blend of local and international is the way forward.”

At the same time, Indian entrepreneurs are cracking the fast-food franchise model.

“We wanted to get the fundamentals right before we started expanding,” said Kiran Nadkari the CEO of Kaati Zone, a Bangalore-based chain. “Once you’ve got the back-end in place, you can expand rapidly. But during those early stages there’s not much investment capital. So, for example, I bootstrapped for three years, from 2004 to 2007.”

Now, though, homegrown fast-food companies are expanding rapidly, and some are beginning to attract funding from venture-capital and private-equity firms. For instance, Kaati Zone — which sells Kolkata-style kathi rolls (spiced goat, chicken or vegetarian fillings wrapped in fried flatbread) — plans to add 80-plus new outlets to its 17 existing stores by 2013, with venture capital financing from Accel India, Draper Investment Company and Erasmic Ventures.

Mumbai-based Jumbo King — a 43-store franchise business that offers Maharashtra’s famous vada pav (spicy, deepfried mashed potato on a bun) — plans to open 250 outlets this year. And Sagar Ratna — a 25-year-old South Indian food chain which bridges sit-down restaurants and fast-food outlets — recently sold a controlling stake in the company to New York-based India Equity Partners for $36 million. It plans to add 200 outlets to its 70 existing restaurants over the next three or four years.

Photo by sour doll