Sep 05, 2012 11:50 AM EDT
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McDonald's Plans First Vegetarian Restaurants in India

By Donovan Jackson
McDonalds
(Photo : Reuters)

McDonald's has 33,000 outlets across 119 countries, serving 69 million customers everyday, but nowhere else has McDonald's been so flexible with its menu as in India.

The world's second-largest restaurant chain will open its first vegetarian-only McDonald's restaurant at the foothills of the Vaishno Devi shrine at Katra in Jammu & Kashmir, next year.

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"We see a huge potential (for veg outlets) as, by nature, Indians are religious," says Vikram Bakshi, who manages McDonald's restaurants in east and north India as a joint venture partner of the US giant.

The attempt to draw religious Indians shows how the Oak Brook, Illinois-based company is trying to boost sales by appealing to local tastes outside its home market and compete with other chains such as Yum! Brands Inc. (YUM)'s KFC and Pizza Hut. McDonald's, which gets more than 60 percent of its revenue (MCD) from international stores, said last month that it was exploring and evaluating opportunities in Vietnam, where it doesn't have any stores.

The vegetarian restaurants will sell items such as the McAloo Tikki burger, a sandwich with a mashed-potato patty, and the Pizza McPuff, a vegetable and cheese pastry.

India, the world's second most populous nation, is important for McDonald's as it increases sales overseas. The country's large population, growing urbanization and increasing number of people joining the workforce may help the fast-food industry expand from 47 billion rupees ($840 million) in 2010 to to 146 billion rupees in 2014, according to estimates by researcher RNCOS E-Services Pvt.

"The new restaurants in pilgrimage areas will be vegetarian-only because of the specific area and customer base," Becca Hary, a McDonald's spokeswoman, said in an e-mail. McDonald's kitchens have always been divided into separate sections for cooking vegetarian and non-vegetarian items in India, she said.

Opening no-meat stores "speaks to McDonald's efforts to cater to local tastes," she said.

McDonald's,  opened its first restaurant in India in 1996, operates as many as 271 stores there now through partnerships with two local Indian companies, Connaught Plaza Restaurants Pvt. for the north and east, and Hardcastle Restaurants Pvt. in the west and south.

McDonald's isn't alone in trying to capitalize on the market in India. Louisville, Kentucky-based Yum, which also owns Taco Bell, has about 479 stores in its India division, which includes Bangladesh, Mauritius, Nepal and Sri Lanka, and plans to open 100 stores there this year. Domino's Pizza Inc. (DPZ) has about 500 stores in India and has said the nation can be its second-largest market in three to five years.

Other global chains such as sandwich giant Subway - which last year surpassed McDonald's as the world's largest restaurant chain - and pizza major Domino's - India's largest quick-service restaurant chain - too have been hit by this wave of vegetarianism in India.

Subway opened its first vegetarian-only outlet at Amity University at Noida last year, followed by another at Ghatkopar in Mumbai two months ago. It plans at least four more in the near future.

A Subway spokesman said the chain has received several franchisee inquiries for vegetable-only restaurants in recent months. "We are looking to tap this opportunity aggressively," he said.

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