In an exclusive interaction with Restaurant India, Atulya Mittal, Director, Avan Projects, which recently merged with Pizza Corner, shares what makes restaurant brands to merge and lots more.
We see that lately restaurants in India have also started the M&A process. What according to you is driving the trend?
I think there are a few basic rationales for M&As in our industry. One is the consolidation where a franchisee for a particular brand buys the shops of another franchisee running the same brand. The driver here is economies of scale, where you have the same brand, so the negotiating power with suppliers improves and overheads such as marketing and corporate expenses can be spread over a big number of units creating efficiencies.
The second type is where people are consolidating different brands under one roof to create an attractive vehicle for investors. Here each brand may have its own marketing and overhead expenses, but one is able to possibly create synergies in areas like real estate leases and create value for investors by diversifying into different categories. The rationale here is to provide a multi-product food company that may have a greater value as you aren't reliant on one brand.
What’s the current scenario in restaurant M&As in India? What made you merge with Pizza Corner?
We were thinking of ways to grow the brand to reach a critical mass of stores. We want to reach a good number of customers to deliver our better Ingredients, better Pizza promise and create the preferred pizza brand within the country. So, this opportunity made sense. However, there are a lot of softer issues that attracted us to Pizza Corner. The strength of its management team as well as the strength of GFA, our new partner, really convinced us that this was the right company to work with.
I don't think there is a big need to do acquisitions and it’s important to do a transaction only when the rationale is simple to understand and easy to implement.
What does a buyer look at when merge with a particular brand?
I think the basic underlying theme from the point of view of the buyer is to achieve fast growth.
According to you can we see consolidation in process in the sector occurring in near future?
I believe there are a few companies or restaurants of certain brands that are up for sale. I am sure that the large franchisees of these brands will consider buying them out.