Carl’s Jr. beefs up its Indian menu for Sri Lanka
Located in the Indian Ocean, island country Sri Lanka has a rich cultural history and an aggressive government program to develop small and medium enterprises—which traditionally has provided an opening for U.S. franchisors.
Carl’s Jr. already has units open in India, so they already have an idea of what doing business in the nearby Sri Lanka market should be like. But upon closer examination of the two markets, they found one small cultural difference that is a game changer — there are a significant number of beef eaters in Sri Lanka.
About 70 percent of the population is Buddhist, while only 12 percent are Hindu and 10 percent Muslims, according to the CIA World Factbook, which collects data on every country in the world.
In India, Carl’s Jr. has its complete menu, without any pork or beef products. To flesh out the menu, so to speak, they’ve added more vegetarian offerings. To accommodate the Hindu way of eating, they have dual kitchens, one for vegetarian offerings and one for non-vegetarian items, such as chicken.
This is good news for Marc Mushkin, vice president of sales and development for CKE, the parent company of Carl’s Jr. and Hardee’s. Not only will this lessen the need for completely separate kitchens, thus bringing down the cost of the buildout, but it also allows the fast-feeder to sell the item they’re best known for —hamburgers (you probably thought I was going to say ads with sexy models).
Since Hardee’s is the tamer version of the two brands, one might think it would be the vehicle to take to more conservative Eastern countries, but there’s a strategy as to which brand goes where, Mushkin says. When Carl’s Jr bought Hardee’s in 1977, the brand had footholds into various territories, and a loyalty factor to the brand that would be unwise to tamper with. So Hardee’s, for instance, is being developed in the Middle East because an American group in the Middle East already had opened stores there, but Carl’s Jr. will be the brand going into India and Sri Lanka.
It’s not arbitrary who goes where, Mushkin says, it’s all decided geographically.
For Sri Lanka the conventional wisdom at CKE is that it’s a 10- to 20-unit market. While much of the legwork on the market has already been done, Mushkin is heading there in early December as part of the International Franchise Association and U.S. Commercial Service’s trade mission to both Sri Lanka and India.
Unlike smaller companies going on these trade missions, “we have a big team,” Mushkin says. His job is to set up the relationships, collect information and begin to make inroads into signing an agreement with a well-qualified prospect. While someone else is dealing with the supply chain and quality control, Mushkin says the U.S. Commercial Service posts provide comprehensive briefings from experts in legal, marketing and governmental policies.
Most of the development will be Colombo-centric, he says, referring to the country’s capital. That’s not surprising since 82 percent of the residents are located in rural areas.
Colombo’s population is around 707,000 people, while the legislative capital, Sri Jayewardenepura Kotte, has just 128,000 residents.
Asia’s next tiger?
Located in the Indian Ocean, just south of India, Sri Lanka (the name was changed from Ceylon in 1972) is an island country just slightly bigger than West Virginia. It was under British rule until 1948 when it became independent.
The country is considered to occupy a strategic position in South Asia, according to a U.S. Commercial Service briefing report for the trade mission, and is enjoying an increase in tourism, which is always a boon to U.S. franchises. The country is going to be the recipient of several new luxury hotels, to accommodate that increased tourism, and upgrades to existing ones. Tourism has grown from 500,000 tourists several years ago to 2 million anticipated tourists in 2016, the U.S. Commercial Service reports.
A new government that took over in 2015 set policies that “drastically increased wages for public sector employees, which boosted demand for consumer goods,” according to the CIA World Factbook.
U.S. franchises already in the country include the two soft drink giants, KFC, Pizza Hut, UPS, Subway and TGI Friday’s.
While the market is small—about 22 million people—GDP per capita is $4,000. There’s an expanding middle class, also a prime motivator for international expansion, and a consumer electronics market of about $1.5 billion, all indicators of consumption growth in a country.
U.S. imports are at $310 million and appear to be on track to continue growing, leading The Financial Times to refer to the country as “Asia’s next tiger.”
Since the market is close to India, it made sense to make a stop in Colombo as well, says Josh Merin, director of international affairs for the IFA. India is a long plane ride away, so an additional market will be of interest as long as the mission participants were in the neighborhood.
To find out more about the trade mission, check out the registration site at www.franchise.org/SouthAsia2016.