Tier II, III Cities will become Growth Hubs in Years to come for Restaurants

Tier II, III Cities will become Growth Hubs in Years to come for Restaurants
With disposable income on the rise, people are willing to spend on food that appeals to their taste buds.

By Prateek chaudhary , Managing Partner, Diablo club, Dragonfly Experience & One8 Commune Delhi

05 May 2023 | 9 min read

The post-pandemic era continues to be fruitful for the restaurant industry, which suffered huge losses during the last two years. The industry has gone from survival to revival and is ready to thrive in 2023 and beyond. In this regard, the restaurant chains have gained ground in India and are delivering not just eateries to fill the bellies but also addressing their taste cravings.

With disposable income on the rise, people are willing to spend on food that appeals to their taste buds. The dynamism and buoyancy of Indian consumers are driving a preference for restaurant chains. Looking at the growth prospects, there are going to be several new trends that could shape the future of restaurant chains in India.

QSR will be on the rise: Time has become a critical constraint for people today, and they expect their food to arrive early in a restaurant. In this regard, QSR comes into play, which has become popular in India in the last few years. QSR has not only catered to the need to deliver food faster but has turned out to be economic for the pockets as well. Which is the reason why millennials and Gen-Z are the prime customers of QSR. With a rising young population in India, it is anticipated that QSR will gain more traction in the Indian subcontinent. According to a report by Research and Markets, the Indian QSR industry is projected to reach $32.22 billion by 2028, growing at a CAGR of 14.2 percent 

Tier 2 and Tier 3 cities will be growth hubs: The opportunities for new enterprises to generate tremendous revenue in Tier II and Tier III cities today are surging, and restaurants are not an exception. People who live in these cities have recently developed an interest in fast food and casual dining. An increase in people's purchasing power is a major factor in this. According to a survey by Francorp and restaurantindia.in, middle-class households' annual expenditure on QSR in India's Tier II and Tier III increased by 108 percent in the previous two years, from Rs 2,500 to Rs 5,400. Therefore, these cities are expected to be a growth hub for the Indian restaurant chains as people are shifting towards picking up leisure activities on the weekends.

Kiosks will become the norm: Restaurants can now offer services outside of their billing boundaries thanks to the kiosks. The pandemic and the demand for contactless services are major factors in its appeal in the restaurant chain market. The capacity of customers to self-serve at self-ordering kiosks and their knowledge of contemporary technology have also contributed to the surge in demand for this technology. Kiosks have been very helpful in managing heavy foot traffic and numerous customer orders. They are therefore anticipated to replace menus and service personnel in the restaurant and become a norm. Mordor Intelligence predicts that the Indian kiosk market will expand at a CAGR of 13 percent by 2028.

Way forward

Today, casual dining establishments and QSRs (quick service restaurants) hold more than 74 percent of the market and are rapidly expanding. More QSR will target Indian youth, with global influences dictating the fashion. It is predicted that the menus will be more condensed and the approach will be more Indianised. With changing customer preferences, restaurant chains in India will try to cope with variety of food, an ambient location, and a pleasant dining experience.

Tier II and Tier III cities are also expected to become major hubs for the financial growth of these restaurant chains as people are willing to spend more owing to their increasing disposable income. Furthermore, with more and more people getting used to the technology adaptation of restaurants, they will prefer ordering from kiosks to save themselves from fuss and get the order earlier. As a result of these trends, India will witness a proliferation of restaurant chains that will cater to the population's changing food habits. All the franchise owners can do is pounce on this amazing opportunity and please the ever hungry market.

The post-pandemic era continues to be fruitful for the restaurant industry, which suffered huge losses during the last two years. The industry has gone from survival to revival and is ready to thrive in 2023 and beyond. In this regard, the restaurant chains have gained ground in India and are delivering not just eateries to fill the bellies but also addressing their taste cravings.

With disposable income on the rise, people are willing to spend on food that appeals to their taste buds. The dynamism and buoyancy of Indian consumers are driving a preference for restaurant chains. Looking at the growth prospects, there are going to be several new trends that could shape the future of restaurant chains in India.

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