China and India are perhaps the most talked-about international expansion markets for U.S.-based chains, but researcher Michael Schaefer said restaurants also should consider Colombia and Russia, among other countries.
Schaefer, who heads the consumer foodservice research group for research firm Euromonitor International, recently participated in a presentation on international development at Nation’s Restaurant News’ Multi-Unit Foodservice Operators, or MUFSO, conference.
He spoke this week with NRN about his research and what operators considering an international move should know.
Which international markets show the most potential for restaurant companies?
There is enormous potential in India. A great deal of growth is already underway there, with a large and growing consumer class. Yet there are other markets of comparable size with much higher average incomes and better-developed infrastructure.
Colombia is a market that has grown quite impressively over the last five years, yet remains somewhat under the radar. Overall foodservice outlet penetration remains relatively low compared to markets with similar average incomes. Yet several local chains — Juan Valdez Cafe, Crepes and Waffles — have done extremely well.
Continued from page 1
What growth do you project in Western Europe?
The overall picture is not positive. There is the real possibility of another recession, which would likely result in further contraction in consumer demand and overall spending on eating out. Yet there are pockets of growth there, particularly as the search for value makes consumers more agnostic about brands and formats. It’s not about fast food versus full service. It’s about decent quality at an affordable price.
A McDonald's unit in Madrid, Spain, above
Chained players — McDonald’s, Quick in France, Domino’s Pizza, Subway and KFC — have done well, largely by letting consumer demand drive the format. There’s been menu localization, but the real key has been format localization, which has allowed them to compete not just with other fast-food chains, but with the whole universe of affordable eating-out options.
Top-line growth is limited, but chains that can really effectively promote an image of quality and affordability with an attractive outlet experience are seeing growth and are taking share from independent operators, and that’s a process that will continue going forward.
How will China fare over the next five years? 
I suspect there is a slowdown coming, at least from the kind of dizzying growth rates we’ve seen. Yet you also have a government there as committed as any in the world to maintaining a certain minimum level of economic growth, and I don’t expect that to change in the next five years. And there’s this ongoing process of real income growth among Chinese consumers, and that’s kept profits and sales growing for the biggest chain operators there, even as wages and other costs have continued to rise. Broadly speaking, that process will continue, as there’s significant untapped demand still for branded quick-service, home delivery, and other similar options. China absolutely remains a growth market for the next 10, 15 years.
KFC in Shanghai, China, above
Continued from page 2
What concepts are growing around the world?
Coffee, doughnut shops, ice cream, anything offering that combination of social space and affordable indulgence. That’s truly in demand everywhere. On a global level, there are literally billions of young people with money to spend, yet in many cases with limited options for entertainment. Foodservice chains can fill that need by providing places to meet friends, to study or simply to “be seen.” Even in higher income markets, there’s demand for options across every daypart and price point, and chains with a strong snacking component can take share there.
Which markets are driving growth in casual dining?
The Middle East, particularly the Gulf states, Latin America and Central America. In these regions in particular, there’s been strong demand for an upscale experience through casual-dining brands, like Applebee’s or Chili’s. There is ongoing demand for these brands as a modern, relatively affordable alternative to fine dining that is appealing to a relatively young, high-income portion of the population.
What’s also interesting is the way fast-food chains and pizza chains have looked to target the “family-dining” portion of the market. There’s enormous flexibility inherent in the fast-food format to pursue that broader market for affordable eat-in dining, and that’s something we’re seeing not just in markets like Brazil or India, but even in Western Europe.
Contact Alan J. Liddle at [email protected].
Follow him on Twitter: @AJ_NRN
