Small town India reveals big appetite to eat out

Restaurants find sweet spots in Tier-II, Tier-III cities

- VAISHALI DAR

INDIA IS EATING out more. Spending at restaurants and eateries shows a 34% rise in Unified Payments Interface (UPI) transactions to 14 billion in the first half of FY26, up from 10.4 billion a year ago. The value of these payments rose to ₹1.9 lakh crore from ₹1.5 lakh crore in the same period. On average, Indians spent ₹1,056 crore daily on eating out in H1FY26, compared with ₹810 crore in the same period a year ago.

And, small towns are equally caught up in this phenomenon. Restaurants are responding by moving their expansion beyond saturated metros into the heart of Tier-II and Tier-III cities. The once-overlooked markets like Indore, Kasauli, Meerut are now brimming with opportunity for the restaurant industry, driven by rising incomes, digital penetration, and an aspirational consumer base.

A recent report by the National Restaurant Association of India and Grant Thornton Bharat, titled “Course Beyond Metros: Recipe for Growth” reveals that 94% of restaurant operators are actively planning to expand into smaller cities. The shift is not just a trend, it’s a strategic business imperative. “India’s F&B growth story is shifting decisively beyond metros. Tier-II and Tier-III cities offer lower costs, faster breakeven, and digitally savvy consumers,” said Naveen Malpani, partner & consumer industry leader at Grant Thornton Bharat.

The appeal of Tier-II and III markets lies in cost-efficiency, faster returns, and a young, brand-aware population.

AS PER THE report, 78% of operators expect to break even within two years, a timeline significantly shorter than what's typically seen in metro markets. These cities are emerging as vibrant consumption hubs too.