The Story of Amit Jatia and McDonald's in India

You will hardly see him at retail conferences or read about him in print. He works silently and prefers it that way. But meet him in person and you just cannot help yourself being in awe of the magnificent persona he carries. Amit Jatia, vice-chairman, Hardcastle Restaurants Private Limited, the man behind bringing McDonald’s to India can leave you at loss of words when he gets talking. Strictly no nonsense and no going around the bush. He talks straight highlighting the finer nuances of business and life that makes him an achiever in whatever he undertakes. His biggest claim to fame is being the youngest McDonald’s partner across the globe but not to forget the various international degrees and fellowships he holds! Excerpts from the story I had penned for STOrai 7^th Ann special.

practically wasn’t really born with a silver spoon in his mouth but Jatia has no qualms in accepting that there were no financial struggles he had to face during his early childhood, “Basically I had a good childhood. Essentially we are a business family so I always aspired to get into business since early childhood. It was perhaps in my blood and imbibed in my mind that ‘industrialist’ was the way to go. Our area of expertise then was into manufacturing.” Jatia flew across to the West to complete his higher education but was sure to return to India. He was given an option of taking care of their international business but since he was keen to be a part of the manufacturing business, he opted to return to India. Jatia elaborates, “I had just got through with my graduation abroad. The time I returned was also the time when we had just got into a Joint Venture with an industrial lubricant business and it was a very high technology mechanism that goes into steel mills / mining etc.”

Adding further, he says, “This line was suggested to me by grand-uncle. At that time we weren’t event sure what we wanted to exactly do with the business. But I took it on me to make it a success. I must have been 21 (age) then. The product we were talking about was water based. Till then, oil based products were usually used. The idea was to replace oil to water and it was obviously a high safety and environmentally friendly product. Now in 1988, who cared about environment and besides my product was pegged expensive. I was too skeptical if it would meet with success and if I would really be able to sell. I dug deeper into its study and the market study as well and spent about three months with our collaborator. Based on all the studies I developed a line of products. A lot of raw material was not available in India then. I remember my R&D head always telling me that so and so is not working out and its not available in the country. My only response would be – business is not built by saying it cannot be done. You have to find a way to do things. We wrote to every international supplier, got samples and gave the samples to Indian companies saying – match the target. This is how we built the first line of products.” Jatia personally would go to every steel mill in the country showing his new product line and convincing them to try what he had to offer. Elaborating further, he says, “My main theme was – just tell me your problem. Our job is to solve your problem.”

As Jatia was getting himself comfortable with the business, the Jatia family went in for a structural re-organization though fortunately for them the lubricant business remained as part of their portfolio. This was in 1992. During one of the meetings that Jatia had with Walter Saldana for one of his businesses, Saldana casually informed him that McDonald’s was looking at setting base in India hence looking at a partner. Shares Jatia, “What happened was that for one of my marketing activities, I had a meeting with Saldana who was the chairman at Leo Burnett and McDonald’s uses Leo Burnett internationally. Now, they had written to him asking him to suggest potential Indian partners. Saldana asked me if I was interested. I snapped back saying – You know I am a vegetarian!” On second thoughts post the meeting, Jatia did feel it was a good business proposition, specially when they were looking at diversifying into new businesses apart from the lubricant business of theirs. Says Jatia, “McDonalds was looking for a young partner with a capital to invest and was willing to take the business as their primary business and drive it. We met, had a series of meetings and finally inked the agreement in 1995 and opened the first restaurant in 1996. I went and worked at one of the international McDonald’s restaurant for three days. We took our initial batch for training to Indonesia.”

Considering he had zero experience in the restaurant industry, wasn’t he scared of failure? Jatia is quick to say, “No! Infact being from another industry was an advantage because sometimes when you come from the same industry, you bring with you a lot of baggage. So for me actually not being from the industry in my view has helped the business. Like for e.g. in real estate – I had zero real estate knowledge. Now, the way McDonald’s does business – it is all long term. We do a 20-year lease. That time remember there were no malls and development for commercial spaces was very limited and it was restrictive too. Now when you go to Linking Road and you tell the owner of the building – that I cannot pay you heavy rent and I want a 20-year lease and you cannot enter the building when the renovation is on as we follow very strict terms and conditions. With all this, you can probably imagine that they would throw us out but since I wasn’t from this industry, I didn’t have any reservations in putting forth my terms and conditions. You may be surprised that we got the deal in our favor and we paid zero rent during the construction phase.” Jatia is a man full of patience when it comes to business and he completely accepts the fact that if you have to build something solid – it takes time. As he beautifully reminds us, “Rome was not built in a day. It takes time to set the foundation right. Normally all businesses are marathons and it starts at the bottom and then goes high…so the crux is to build the foundation. For me, my strength is in my people. I have always worked with people right from day one. We have built a very strong team. They are at the forefront to take care of things. My focus is strategy but ofcourse it has evolved over a period of time. In 1996, it was not just strategy that formed my core competence. In 1996, I got my hands dirty too… we went to Indonesia and were there for training for a period of nine months to understand the intricacies of the business.”

The challenge for the group began with the launch of their first restaurant. Says Jatia, “We were bringing in a new concept, people didn’t know about it well. Quick service restaurants were not famous…infact unknown. There was just one somewhere in Bandra which eventually lost public trust due to poor customer service. So when we came in, people weren’t too sure if we in true sense would be a quick service restaurant serving quality food. Another major challenge for us was to build the supply chain and maintain food safety standards as followed by McDonald’s internationally. These all obviously led to heavy investment and our customers then were ready to shell only a certain amount of money on our products. Also, over a period of time we realized that we needed to have more of a vegetarian menu. We had to quickly make changes but McDonald’s was very much responsive to our needs but it still took some time to convince them.”

Jatia explains the four phases the business went through. The first for him was Glocalization where they took all the international norms of McDonald’s and married those with the Indian knowledge and got the model out. This was in  1995-96. There on till 2002, it was the Built Phase. He says, “This was the time when the market also saw the opening of other brands. I remember getting a lot of flak from peers and media as to why our expansion plans were slow but for me, I wasn’t going slow. I was setting my foundation right. For me it has never been a number game. For me, it was always getting the unit economics right, which meant, that every McDonald’s we opened, I had to make money. It was about getting the customers value proposition right and the third thing was getting the right people on board. When we had all this in place, we moved to the third phase which was between 2003- 2010. This was our Growth Phase. This was the phase when what we were doing was building the foundation for ‘eating out’. All this while we were building our own foundation to survive and now we moved on to the next level.”

The model as Jatia very well says was very simple. Explaining it further, he shares, “It is all about value to customers, it is about accessibility and it is about the brand – which is menu, ambiance, look and feel and customer service. We believe if we get these three things right, then it is hitting the target bang on. We launched our Happy Price Menu  - the Rs. 20 burger in 2004 which was game changing for us. Customers found McDonald’s valuable, affordable and they also liked the product. So it was not about discounting a product that people did not like; it was about giving them value in what they liked. In 2009, we launched the Extra Value Meals once we realized that the customer understood our individual products. Recently we have launched our Extra Value Lunch. In our growth phase, we decided that from x number of restaurants, we now had to move to newer cities. I often had to hear why wasn’t I moving to places like Bangalore, Chennai etc. Our philosophy has always been – step by step. India is not going anywhere. It takes time. Whatever you do, do it solid and we did that. We made a lot of change in our ambiance and made the brand relevant to the Indian market. The name of the game is to keep evolving and being relevant to the market at that particular point of time. What worked for me 10 years ago, will not hold true today and similarly what is working for me now, shall be redundant in another couple of years.”

Adding on further, he says, “In 2011, we said that now is the time to accelerate. Now we have got the foundation right and we shall continue to innovate and innovate in every area. So now is the time to expand very aggressively. So what we have done in 15 years, we shall do in the next three years and what we do in the next 3 years; thereon we shall do that in the next one year. For me now, since I have a phenomenal team in this aggressive / accelerate phase, my role has changed; our challenges have changed. No more it is about dealing with things as they were before. Now it is about dealing with growth. Dealing with how can we see the business tomorrow…having a strong leadership in the pipeline. These are my challenges for the day. So I am just trying to make sure that I change fast enough or I will have to be changed. Basically, as long as you recognize that change is the only constant, you are good.”

Mentoring young entrepreneurs or brands which aspire to make themselves successful in the Indian market, Jatia shares, “Today people who are trying to get themselves in the Indian retail market are going too fast. I believe you cannot conquer the market no matter how deep is your pocket. The consumers are only going to evolve at their space. For e.g. if it took us 20 years to evolve customers in the US, India will take may be 5-7 years but it shall definitely not happen overnight. So all I want to share is that it is brick by brick. Be aggressive but at the same time don’t be in a rush to own the market, Get your unit economics right. There are different stages of development and in different stages, you use different strategies. My message is, see where your category is in terms of its evolution at that point of time. Get that right and trust me you will win. Don’t worry how fast others are going.”

Adding on to the business philosophy he follows, “My philosophy is that you have to face reality. Whatever the constraints, you have to develop your business around it. If you only keep crying and cribbing then you cannot move ahead. That is why to my mind there are no villains. You got to adjust to the environment around you and just move on.”

Sharing his views on the retail industry as on today (in India), Jatia minces no words, “I just feel we do not have enough talent and depth in retail today. It is not to do with the people. It is got to do with the age of the industry. So if your industry is just 5-7 years old, the maximum experience someone will have is only that much then. Bringing international talents is no solution as they do not understand the Indian market and by the time they do, the team gets restless and starts moving out. FDI is going to benefit Indian retail to quite an extent. It is going to structure the Indian supply chain. I do not see any reason for us to feat or stop FDI. Why do we need to be scared of them taking our market share? Instead, we need to compete with them and match their standards.”

 An avid reader, Jatia’s current favorite is – Great by Choice by Jim Collins. A firm believer of whatever Paul Coelho writes in his book Alchemist, Jatia strongly feels that you just have to take the step and doors shall automatically open for you.  As for this favorite author, its Jack Welch for him. As he says, “He is the man for me. His thoughts and mine resonate and I like the straight, no-nonsense approach that he has in all his writings. Welch says - Face reality as it is, not as it was or as you wish to be.” In my company, I encourage people to tell me how things really are because if you don’t see the real issues, it can impact the business. I also follow Ram Charan’s writing as well. Charan discusses eight important skills for a CEO. He says self confidence is critical; those with self confidence are the ones who succeed eventually. You should have courage in your own ability. But you should not be arrogant. He also talks about traits that can interfere with success. For a CEO, ambition is important but if you use it to win at all costs, it derails you.”