1

Westlife Development Limited

May 2016

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The information and opinions contained in this presentation are provided as at the date of this presentation and are subject to change without notice. The
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McDonalds leads globally

Interbrand 2015
Worlds 9th most valuable brand

Highest Annual Sales Per Store

Fortune India 2011

Most Admired
Company Fortune 2014

recognized in India as well

Great Place to Work
Award Best company to
work for in Retail Industry 2016

16th Rank on Brand Equitys

MOST EXCITING BRANDS 2014

Make in India Award

Excellence award in the
QSR category for 2015

The Economic Times is an English-language Indian daily newspaper

published by the Bennett, Coleman & Co. Ltd. first published in 1961.
It is the world's second-most widely read English-language business
newspaper, after the Wall Street Journal
Brand Equity is a weekly color supplement that appears every
Wednesday, which covers marketing, advertising, media and market
research.

Number 1 in the QSR

Category

First Restaurant in
Mumbai, 1996
CONNAUGHT
PLAZA
RESTAURANTS
PVT. LTD.
(CPRL)
North and
East

HRPL BACKGROUND :
Started as a Joint Venture in 1995
Ownership status changed to DL* in May 2010
DL develops sites at their own cost and pays
a royalty

HARDCASTLE
RESTAURANTS
PVT. LTD.
(HRPL )

West and
South

MFA# KEY HIGHLIGHTS :

Right to own and operate McDonalds
restaurants in Western and Southern India
until 2030
HRPL pays royalty and fees to McDonalds
Corporation

*DL: Development Licensee

A Development Licensee, in the context of McDonalds, means an entity which is granted franchise rights, by McDonalds Corporation or its affiliates, to own and operate McDonalds restaurants, to adopt and use the McDonalds system to develop
and run McDonalds restaurants in a given area, and to advertise and use the McDonalds brand name and trademarks for products sold at such restaurants.
Map of India is indicative
# MFA : Master Franchise Agreement

ownership structure
Shareholding Pattern*

Westlife
Development Ltd
(BSE : 505533)

100%

Hardcastle
Restaurants Pvt. Ltd.

FII and Public

38%
Promoter Group
62%

*As at Mar 31, 2016

GROWING

the Category
2003-2012

1995-2012

Building the
FOUNDATION

Glocal

1997-2003

1995-96

building the eco system

1995-2012

building the eco system

glocal: cultural sensitivity

Only country to have

SEPARATE Vegetarian and
Non Vegetarian Kitchens

building the eco system

glocal: menu localization

Local tastes like Aloo
Tikki in a uniquely
McDonalds form

Adapting popular
forms like the
PUFF

McAloo Tikki
Pizza McPuff

Chicken McGrill

building the eco system

glocal: building a local supply chain

Developed a
cold chain

Global suppliers with

local production

Creating direct linkage

to the farms
10

Over 95%
localization


glocal: developing sustainable unit economics
building the eco system

Local supply chain for equipment

Right Sizing Restaurants
Optimizing Kitchen Capacity

Over 95% of produce locally sourced

Tax Rationalization
Increased supplier capacity through
3rd party business

11

Average Development Cost

* Graphs not to scale, for representational purpose only

-X%

1996

2003

1996

0.4x

2003

2240 basis points improvement

1x

Restaurant Operating Margins

12

creating the category

Quick Service Restaurants (QSR)

creating the category

nascent category in 2003

Eating out was an

occasion

Of the 100 eating

occasions in a month,
people were eating
13

out only 3

times*

* Source: Brand Track, Mumbai

Our

Number 1

competitor

Housewives

creating the category

driving up the average unit volume

VALUE

For driving new

users and
frequency

CONVENIENCE
For servicing all
occasions

MENU

To provide
modern choices
for all day parts
14

creating the category

value: building block approach

2004

Everyday
Affordability

15

2009

Filling
Affordable
Meals

2012

Place
to
refuel

creating the category

through new stores and brand extensions

Store Count

130

55
18
1996-2003

McDelivery

2004-2008

Across CUSTOMER
segments
16

Breakfast

Kiosk

2009-2012

And for all

For all OCCASIONS that

the customer eats out

DAY PARTS

creating the category

menu: modern choices with taste that consumers like

McAloo Tikki
2004

17

Breakfast
2009

Chicken
McNuggets
2010

McSpicy
2011

McFlurry
2011

Spice Fest
2012

McEgg
2012

Saucy Wraps
2014

creating the category

we drove the growth in the category

IEO Monthly Frequency, MUMBAI

7.8

1.74 x

1x

2003

HRPL Average Volume Growth

Per Annum
(INR Mio)

2012
2003

18
* Source: Brand Track, Mumbai
IEO : Informal eating Out

2012

19

grow and dominate

2013 onwards

changing profile of category

As a Fad

As a
status symbol

As a
necessity

QSR moved

2003

20

2009

2014

from being an
occasion to a
destination to
refuel


IEO is growing, will continue to grow in the future as well
grow and dominate

IEO Monthly Frequency

Estimated
Growth in 2016

IEO
$ 112 Bn

2003

8%

2013

18

QSR
$ 18 Bn

8.6

7%
IFF
$ 16.7 Bn

WFF
$ 1.3
Bn

Source: Euromonitor
IEO : Informal Eating Out; IFF: Indian Fast Food;
WFF: Western Fast Food

21

7%

12%

10

3
Mumbai

Benchmark Asian
City

Source: Brand Track, Mumbai

Macro factors will drive further growth

60% of the population below
the age of 30
Western fast food driven by
Teens and YANKS

1.7x

2008

2013

1x
1y
IEO
*YANKS Young Adults No Kids

22
22

1.8y
1z
IFF

2.8z

WFF

Source: Euromonitor
Graph not to scale, for representation purpose only

23

levers for growth

over the next 5 years

levers for growth

1.

3.

Margin
Expansion

Broadening
Accessibility

2.

Growing
Baseline
Sales

24

4.

Growth
through
people

25

Grow store
footprint
Unit
Economics

broadening accessibility

broadening accessibility

grow responsibly
149 STORES

Includes 2 Franchisee stores

As of March 2016

7
YEARS

7 YEARS

18 STORES

1997 - 2003

2004-2010

BUILD REAL ESTATE

COMPETITIVE ADVANTAGE
Balance between quality
real estate and pace
Portfolio Approach
Long Term Deals
26

6 YEARS

69 STORES

2011-2016

GROW RESPONSIBLY
Getting the business
model and profit formula
right before scaling
Keep evolving with
changing cost realities

Malls
High Streets

broadening accessibility

building unit economics

Average investment of
INR 23-25 Mio

Stores typically need 2-3

years to establish,
depending upon the brand
awareness in the city

Developed new Restaurant Operating

Platform (ROP) 2.0

27

Year 3:

Sales: INR 40-50 Mio

Cash ROI: 20%+

Encouraging early results delivered by ROP 2.0

Average Development Cost*

Cash breakeven*
Cash on cash ROI* to 20%+ in 24 30 months

* Can vary basis restaurant type, region and presence of brand extensions
** Graphs not to scale, for representational purpose only

2016
ROP 2.0

12-18
months

300 350 bps improvement for

new restaurants

2012-14

2012-14

0.8x
2016
ROP 2.0

2012-14

1x

2016
ROP 2.0

24
months

Restaurant Operating Margins*

broadening accessibility

improve brand access

Basis Global Index of
an Asian city
1.32 restaurants per
100,000 people

Balance
Potential of
600+ stores

190 Cities untapped in

our region, since
current presence in 30
cities

1/3 of Key,
Core and Non
Core Cities Unpenetrated

Significant potential in existing towns

and cities

Most cities and towns significantly

under penetrated
Gujarat
29
Restaurants

Madhya
Pradesh
3 Restaurants
Chhattisgarh
1 Restaurant

Maharashtra
110 Restaurants

Telangana
21 Restaurants

Karnataka
52 Restaurants

Kerala
7 Restaurants

30

Indicates the number of

stores in each state as
of Mar 2016

Tamil Nadu
13 Restaurants

450 - 500 restaurants by 2022

1997 - 2003

6 YEARS

7 YEARS

7 YEARS

18 STORES

2004-2010

2011-2016

Years denote fiscal years

31

NEXT
YEARS

149 STORES
69 STORES

6-7

214 264 Stores

2016
Onwards

32

Value
Menu
Brand
Extensions

growing base line

33

Adding NEW USERS to the brand in

EXISTING markets

providing VALUE FOR MONEY, not a price point

Making the brand ACCESSIBLE in NEW MARKETS

growing base line

new menu platforms

Platforms that leverage EXISTING

INVESTMENTS and capacity

Providing modern choices to

consumers of today

34

growing base line

contemporary menu choices

Chicken McGrill

McEgg Burger

Reduction in sodium
content of French fries
and McNuggets
Reduced fat sauces

35

growing base line

brand extensions
Brand extensions will continue
to add to the baseline as our
offerings and reach grow

110-130 McCaf's by FY17E

Brand extensions add

another touch point with
the consumer and a new
occasion for customer to
walk-in
36

Dessert Kiosks

Breakfast

McDelivery Service

24/7

growing base line

brand extensions
McDelivery Sales

FY14
Strong operational processes
and systems

Evolving customer interface and

digital enablement

FY15

FY16

Role of Brand extensions Increases

addressable base

Total market segment exposure for McDonalds*

$0.6b

$0.45b
$2.35b

$1.75b

1,723

New market segment

exposure

Coffee and Specialty

beverages

$1.3b

Past market segment

exposure

Delivery market

* Source : Euromonitor International - QSR Food Service Market, HRPL proprietary third party market segmentation study
Past market segment Chicken, burger, pizza, other cuisine fast food + Ice cream parlors

Total market segment

exposure

growing base line

re-imaging with brand extensions

Modernize the customer experience through

restaurant re-imaging initiatives
Providing contemporary
restaurant designs & relevant
experience to our consumers

39


through occasions, day parts and customer segments
growing base line

Base Line

Value

Menu

Brand
Extensions

QSC

Graph not to scale, for representation purpose only

40

Increased
Base Line

41

margin expansion

margin expansion

operating leverage
McCaf

Menu
Management

Adding brand
extensions helps
grow sales, while
optimizing assets

24 Hours

In-store
Business

McDelivery

Breakfast

Bulk of the cost incurred for operating In Store

Diagram representative, not indicative of size of impact

Leverage cost
through scale
via effective
supply chain
management

margin expansion

levers

Building block on margin

EBITDA

Gross Operating Royalty

Margin Leverage

Graph not to scale, for representation purpose only

43

G&A

EBITDA

All levers of the

business model
coming together

44

people

people pipeline
Engaging

Strong LEADERSHIP
TEAM providing
strategic direction
backed by an
experienced CROSS
FUNCTIONAL TEAM
managing execution

7,000+
people

across 30

cities

Leadership team
committed to TALENT
MANAGEMENT,
investing over 20
days each year for
building pipeline

45

Investments in
LEARNING AND
DEVELOPMENT ,
especially in mid
management to
build skills for the
future

people
Vice Chairman

Legal & CS

Business
Operations

Regional
Directors

Regional
Marketiing

Information
Technology

46

Business
Excellence &
People Resources

MD

Marketing &
Menu
Management

Development

Finance &
Accounts

Supply Chain &

QA

People
Resources &
Administration

Marketing

Internal Audit

Supply Chain

Restaurant
Solutions Group

Menu
Management

Investor
Relations

Quality
Assurance

New Product
Development

Financial
Planning

Corporate
Communications

Accounting &
Taxation

Brand
Extensions

McOpCo
Accounts

Consumer &
Business Insights

Focused on Talent
Management

A deep
organization

in summary
450-500 stores by
2022
Growing baseline
Margin Expansion

People

47

48

financial summary


store growth, sales and comparable sales trends
Total Stores
250

10

20

14

21

24

New Stores
32
29

27

Sales ( INR Mio)

30

44%

40

9,000

200

20

41%

8,000

31%

150

7,000

100

50

55

74

87

107

130

161

184

209

236

FY10

FY12

40%

-40

-60
4,000

FY13

FY14

FY15

FY16

3,000

2,000

1,000

35%

6,810 7,384

6,000

-80

FY11

45%

-20

-100

FY09

32%

50%

37%

5,000

FY08

Sales Growth %

1,604 2,104 2,772

3,793

5,445

25%

8%

7,640
3%

8,334
9%

30%

25%

20%

15%

10%

5%

0%

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

23% CAGR
19%

FY08

9%

12%

FY09

FY10

17%

FY11

22%
6%
FY12

Comps%

49

FY13

2%
FY14

-6%

FY15

-6%

FY16

margin trajectory
Gross Margin %
61.0%

56.7%

57.1%

FY10

FY11

60.0%

59.0%

58.0%

57.0%

56.0%

54.7%

56.0%

55.6%

56.0%

57.6%

58.4%

60.0%

55.0%

54.0%

53.0%

52.0%

FY08

FY09

INR Mio

10.5%

800

EBITDA
4.8%
700

600

EBITDA %

500

400

300

200

100

76

FY08

50

2.5%
52
FY09

FY10

FY13

FY14

FY15

400
FY11

FY16

12.3%
14.0%

9.2%

12.0%

6.6%

4.4%
120

FY12

672

627

488

5.9%
2.7%

10.0%

8.0%

6.0%

488

4.0%

2.0%

FY12

FY13

FY14

205
FY15

0.0%

FY16

general & administration (G&A)

10.00%
9.00%
8.00%
7.00%

6.00%
5.00%
4.00%
3.00%
2.00%
1.00%
0.00%

FY09

51

FY10

FY11

FY12

FY13

G&A

FY14

FY15

FY16

Outlook for FY17

Consumer sentiment expected to improve over next

6 months

Differentiated experience for our consumers through

Re-imaging
McCaf
Web & mobile platform driving significant growth for

McDelivery

ROP 2.0 driving better RoI & efficient P&L on newer

restaurants

52


established model for tapping into the potential
Indigenous

Supply Chain for competitive

advantage

Real Estate

portfolio array

Farm to FORK

Provides competitive
differentiation

Worlds

Brand connect

Brand

Favorite Place and way

to eat

Largest QSR

with the target audience

54

thank you