Leading fast-food chains are exploring opportunities to establish outlets at Indian railway stations, a move poised to revolutionize the dining experience for travelers. Following a recent government announcement, well-known brands like McDonald’s, KFC, and Haldiram’s are seeking clarification on the regulations concerning the opening of premium food and beverage outlets. The first such outlets are expected to launch by 2026, with railway stations potentially outpacing airport sales, according to industry experts.
New Opportunities for Fast-Food Chains
The Indian Railways has opened its doors for prominent restaurant brands to set up shop at over 7,000 railway stations nationwide. This initiative is a result of an amendment to the Catering Policy 2017, which now permits premium brand outlets to operate in railway stations. The government intends to grant five-year licenses through e-auctions, allowing brands to establish either company-owned or franchise stores. A senior railway official highlighted the objective of enhancing passenger experiences at railway stations to match those at airports, indicating a significant transformation in how food services are regarded in transit environments.
Potential for Strong Returns on Investment
Industry leaders believe that while airports might yield higher average order values, railway stations offer a distinct opportunity due to their scale. Sagar Daryani, president of the National Restaurants Association of India, pointed out that with the right operational model, railway outlets could provide substantial returns on investment. Essential factors such as volume-led sales and quicker turnaround times could contribute to this potential. The railway official noted that premium outlets must uphold high standards of food quality and service, in addition to paying a fixed license fee for occupying space at the stations.
Market Demand and Growth Prospects
A recent study by retail group IRHPL indicated that beverages dominate food and beverage sales at airports, accounting for approximately 70% of revenue. Executives from various food chains predict similar demand trends at railway stations. A spokesperson for Haldiram’s expressed optimism about the new policy, believing it unlocks significant potential for the industry. The brand is currently working with the government to finalize details, emphasizing that if executed effectively, this initiative could represent a major opportunity for quick-service restaurants (QSRs) catering to a varied demographic of train travelers.
Boosting Non-Fare Revenue for Indian Railways
The introduction of premium food outlets is anticipated to enhance Indian Railways’ efforts to increase its non-fare revenue, which currently constitutes only around 3% of its total income. A report by Niti Aayog highlighted the substantial untapped potential in this area, noting that non-fare revenue comprises about 30% of railway income in developed countries. In the fiscal year 2024, Indian Railways reported non-fare revenue of Rs 588.07 crore, which grew to Rs 686.9 crore in FY25. This growth suggests a promising future for the railway sector as it embraces new revenue streams through improved food services.
Digihunt is not a financial advisor and this is not investment advice.