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Burger King IPO Analysis: Know the Pros and Cons Before Investing

Updated: Dec 1, 2020

Burger King, as most of you know, is a fast food chain of restaurants that operates in what we popularly call the "QSR or Quick Service Restaurants" industry in the food services market.

Before we delve into the company itself, it may help to learn a little about the broader food services market structure in India.


The food services market is broadly divided into two segments: (1) organised and (2) unorganised.

The unorganised segment consists of dhabas, roadside small eateries, hawkers, and street stalls.

The organised segment, on the other hand, consists of (1) chains, (2) standalone outlets, and (3) restaurants in hotels.

Within chains, we also have 6 sub-segments. These are primarily (1) fine dining restaurants or FDR, (2) casual dining restaurants or CDR, (3) pub, bar, club, and lounge or PBCL, (4) quick service restaurants or QSR, (5) cafes, (6) frozen desserts and ice cream brands.

Since the subject of our analysis is the QSR industry within which Burger King operates, we will focus on that. The size of India's food services market was Rs 4.2 lakh crores in 2020. Of this, only 4 per cent or Rs 16,950 crores was contributed by the QSR segment.

The biggest segment of the food services market was the unorganised sector, which accounted for more than half of the market.

Source: Burger King Red Herring Prospectus, pg. 97


As you can notice in the table above, the unorganised market made up of dhabas and road side eateries comprised as much as 68% of the food services industry in 2015.

Owing to a host of both microeconomic and macroeconomic reasons such as higher disposable incomes, shifting tastes and preferences, preference for better hygiene standards, and government policies such as demonetisation and GST, the share of unorganised sector has since reduced to 59.5% in 2020 while that of organised standalone and chain segment has increased. The trend is further expected to continue in the post-pandemic economic order.

Notice another piece of data: While the unorganised food sector has grown at a CAGR of only 5% over the past 5 years, the organised segment has growth much faster. For instance, the standalone outlets have grown at 13% every year and chain restaurants have grown at a staggering 18% every year.

Will the organised food services sector continue to maintain this growth over the next 5 years?

Given the reasons discussed above, I reckon yes. The post-pandemic economic order is only going to accelerate the shift of economic pie from unorganised to organised sector, not just in the food services market but others such as real estate, banking, paints, autos, or chemicals too.


Within the organised food services sector -- which has been growing at 18% in the past 5 years -- the QSR segment has been growing the fastest at 17% every year.

From a market share of 19% in 2015, its share has increased to 22% in 2020 and is expected to reach 25% by 2025. Though casual dining or CDR accounts for 57% this year, its market share is expected to remain stable over next five years.