Tuesday, December 11, 2012

The Birth of RestoFund: Your Opportunity to Run a Small Pizza Restaurant in Bangalore

This is not one of my typical blogposts, giving some gyan about the Restaurant business. This is about a rare opportunity for a passionate individual/team to set-up and run a small Pizza focused Restaurant/Cafe in Bangalore, thanks to the generosity of some well-heeled gentlemen, through an experimental initiative called "The RestoFund" to financially support passionate folks to become Restaurant Business Entrepreneurs. Here is a quick summary of the first opportunity offered through the RestoFund:

What you will get?
1) A 400 sft space on the ground floor in a prime location in Bangalore
2) Interiors, Furniture & Fixtures, the way you want it
3) All kitchen equipment needed for you to run a small Pizza & Ice-Cream joint including a fancy big Pizza oven
4) All statutory approvals needed to run a cafe/restaurant
4) Reasonable support to set-up and run your business both financially & operationally
5) All the money you need for doing the above (You are not dreaming), including a small fixed salary  to support you financially coupled with an aggressive profit share

What do you need to bring to the table?
1) Currently based in Bangalore
2) Strong passion for running a small restaurant/cafe
2) Willingness to spend the time and effort required to make the business a successful one
3) Strong interest in cooking with some experience making Pizzas and Baking. If you are chef/cook in a restaurant/hotel currently, that would be a huge plus
4) High energy levels and an ability to convince us that you are right person for us to invest in

If you are interested in exploring this opportunity, write to me at jayanth@jlnventures.in with a small write-up on why you are interested in this opportunity (a few lines will do). If possible attach your profile/resume. 

Sunday, November 18, 2012

How critical are the Interiors for a Restaurant?

Most people would agree that it is reasonably important. My assessment is that it is actually very critical – much more critical than you can imagine. Again the exact look and feel would vary depending on your concept and your price-point. The trouble with interiors is that getting a great look is very difficult and is not really dependent on the amount of money you spend. 

As an analogy, I have seen several of my friends buying an apartment for 50-60 lakhs, paying about 5-8 lakhs additional towards VAT, Service Tax, Registration, Khata etc. But most of them spend as little as possible on the interiors (say 3-4 lakhs). I have a complete contra view on this. My recommendation would be that you spend a large amount of money on interiors, because that will determine your quality of life in the house you buy. If your overall budget is 60 lakhs, you should spend about 20% of the budget (about 12 lakhs) on the interiors.

On the same note, when you are starting a restaurant, be prepared to spend atleast a reasonable amount of money on the interiors. This is what your customers will see, use and end up making an assessment of your business on. Getting the right look, feel and ambience for a restaurant without spending a lot of money is not an easy task. You will need a good interior designer who can give you ideas after understanding your concept. A lot of times, I have noticed that interior designers opt for solutions that they are comfortable with and ones they have executed in the past. Eg. Most interior designers will push for a false ceiling with lights embedded into the false ceiling. While this gives a “No Nonsense” look to the restaurant, it reduces the height of your restaurant and may make the place look smaller. Creating a great look without doing false ceilings is tougher and the final outcome is a little bit of an unknown. Similarly, on the wall paneling. Most interior designers will push for a plywood based panel with laminate covering. It is possible to create a better effect with paint on the wall – again this is tougher, the final outcome may be an unknown and getting access to the right labour may be difficult for the interior designer. If you go and see a few places that the interior designer has done already, you will notice that most of them will follow a similar pattern. Eg. One interior designer may use glass extensively, another may use laminate based panelling extensively. In my experience, pushing a interior designer out of his/her comfort zone is not easy. Whatever ideas you talk about, the final design will boil down to something that they are comfortable doing.

So to find a good interior designer who will deliver what you are expecting, you will need to go and take a look at few of the interior works the designer has completed recently. If the theme fits what you have in mind, sign up the designer.  

There are several components that are part of the Restaurant Interiors. I will use the use the next several posts to detail out each of the components:

1) Furniture - Tables & Chairs
2) Lighting Works
3) Restaurant Entry Area
4) Walls & Ceilings
5) Flooring
6) Operations Related Stuff - Cash Counter, Hostess, Waiting Area, Side Stations etc.
7) Air Conditioning
8) Kitchen Entry Area
9) Blinds/Curtains
10) Painting Works
11) Rest Room & Wash Area

Monday, October 8, 2012

Tip Adjustment on a Credit Card Machine

If you have paid at a restaurant using your credit card, have you wondered how the tip amount which you write on the credit card payment confirmation slip gets processed?

Once the waiter gets you the bill for your meal (say Rs.840 including all taxes), you hand over your credit card to him. He then takes the card and the bill to the cashier, who swipes your credit card for the amount (Rs.840) using the Credit Card Swiping machine (generally known as the EDC Machine or Electronic Data Capture Machine). The credit card payment receipt slip looks something like this, with the swiped amount shown and with a bank space for you to write the tip amount.

Once you write the tip amount (say Rs..60), write the total (Rs.900 in this case), you leave the slip in the bill folder, take your credit card and your receipt and leave. The waiter then goes back to the cashier, hands over the slip to the cashier. The cashier than presses the "TIP ADJ" or "Tip Adjustment" button on the EDC machine. The machine asks him for the Credit Card Bill Number. Once the number is entered, the machine shows the earlier amount swiped (i.e. Rs.840) and gives an option to the enter the new amount. Once the cashier enters the new amount (Rs.900), the EDC sends this data to the bank and the customer is charged Rs.900. The earlier charge of Rs.840 gets replaced with the new amount.

While chances of fraud using the "Tip Adjustment" option are technically possible, it generally does not happen for the following 2 reasons:
1) Even if the cashier were to charge the customer, the money goes into the restaurant's bank account. So it is not Cash that becomes available right-away (If the restaurant has the practice of taking the tip amount from petty cash, then it becomes a case of cash being available readily and the chances of fraud increases to some extent).
2) If a watchful customer notices a different amount on his credit card statement and complains to the bank about an additional charge, the banks typically place the amount in a suspense account and initiate an investigation. The banks are very strict about this and the investigation process is quite painful for the merchants and requires submission of the signed credit card receipt copy alongwith other transaction details.

For a restaurant, it is prudent to check the credit card transactions once in a week/fortnight (randomly) to ensure that no fraudulent practices occur.

Monday, October 1, 2012


Most people leave tips for the waiters after paying for their meal at the restaurant. The tip amount varies depending on the customer, the service provided by the waiter and the overall restaurant experience. No offence here, but in India, the tip amount left by customers at most restaurants is typically very small - essentially the loose change is left behind or if it is a credit card payment, the amount is rounded off to the closest 10's or the 100's.

Tips are a very integral part of the waiter's and the restaurant staff's work lives. Think of it as a discount you get on something that you buy. Though you may be spending a 1000 bucks for the product, the 5 or 10% discount makes you feel quite happy. The tip amount that a waiter receives has almost the same effect. How do restaurants deal with tips and how does the money go the waiter?

In most restaurants in India, contrary to popular perception, the specific waiter does not pocket the tips. All the tips received are collected in a common box and a formula is used to divide the total tip amount among the waiters, the clearance boys and the cooks. Typically the amount is divided and handed out before the staff leave work at the end of the day. In some restaurants, the cashier or the restaurant manager collects the amount and then the distribution happens once a week (typically on a dull day like Monday). For credit card payments, the tip amount is noted down by the cashier and the amount is taken out from petty cash (cash kept for petty expenses) and added to the tip pool and distributed.

Over the last year, most fine-dining/premium restaurants have started including "Service Charges" in the bill - Essentially this is a forced tip ranging from 5% to 10% of the bill amount. Most of these restaurants mention this in small print on the menu. In this case, the restaurant has the accurate data on the tip amount (Service Charge) collected during the day/week/month through their billing software and distributed to the waiters based on a pre-determined formula.

A number of restaurants, especially the ones which charge customers a forced tip (service charge), deduct a portion of the total tip amount collected towards breakages (e.g. glasses, crockery etc. that invariably breaks either due to the customer's fault or due to the restaurant staff's fault while washing/carrying). This amount could range from 10-25% of the total tip amount during a period.

In the case of home delivery, the delivery boys are typically allowed to pocket the tip, as there is no easy way to track the tip amount. Plus it is generally accepted by the rest of the staff in the restaurant, that doing door delivery is a very difficult task and they are quite comfortable with the delivery boys pocketing the tips.

In most western countries, the tip amounts are quite generous (10-15% of the bill) and in most cases the respective waiter gets the tip amount in full. While it is generally perceived that the specific tip amount depends on the quality of service the waiter delivers, the tip amount range stays between 10-15% of the bill, unless the waiter has done something to upset the customers. The upside is limited.

Thursday, September 20, 2012

Software for Restaurants

Over the last several weeks, I have been researching software and technology solutions available for restaurants. The results are not too encouraging - most of the vendors who offer solutions for the restaurant business have simply taken a product they have for the retail segment, made some changes to suit the needs of the restaurant industry and are marketing the solution currently. Plus, since they need to build a product that needs to work for every kind of restaurant, they have added a lot of features and functionality that are not mission critical. Above all this, the thing that really struck me was the poor User Interface and lack of focus on the "Ease of Use" factor. In my mind, whatever application is being designed for the restaurant industry has to be highly intuitive and exceptionally easy for the staff (waiters, kitchen staff, cashier, manager etc.) to learn and use. In some ways, the real requirement of the restaurant industry is a solution that can simply replace the pen and paper methods currently being used. As you can see, I have been spoilt by the iPad. For context, I hate "Touch", but have been fascinated by the iPad and am able to use it easily. The feature I love the most - If I get stuck anywhere, I can simply press the only button on the iPad and it brings me to the familiar home page.

Getting back to the topic under discussion, I have been quite disappointed with my research and have been surprised that I have not been able to find a single solution that I can intuitively see as being "PERFECT" for Restaurant Businsesses and does all the basics really well. No wonder all the big guys have developed their own software - McDonalds, Dominos, Pizza Hut etc. Not to take-away any credit from the existing vendors who offer Restaurant Software, they offer pretty good solutions for the price they charge (a one-time license fee between 15K and 30K), but not the kind that makes me go "Wow! This is Perfect". Maybe it can't be done at the price points the restaurant businesses wnat to pay.

I have initiated a project to create a solution that is designed specifically for restaurant businesses with the primary focus on "Ease of Use" for the restaurant staff, and have found a bunch of seemingly skilled programmers who are willing to develop this application for me at a ridiculously low price, based on the screen design, process flow charts and requirements I have given them, If I can actually get this solution developed at the price they are asking for, I will make it available for "Free" on this blog. Maybe, I am simply dreaming about the "Ideal" solution.

Tuesday, September 11, 2012

ESI Compliance for Restaurant Staff

ESI (Employee's State Insurance) offered by the ESIC (Employee's State Insurance Corporation), is a government run program that allows employees earning below Rs.15,000 per month, to access ESI hospitals and several government run hospitals for free treatment. For the restaurant industry, any business that employs more than 10 people (even if some of them are non-permanent and some of them earn more than 15K per month - essentially 10 includes all those employed by you, including the manager, chef etc. not just labour), is legally required to offer the ESI benefit to the employees. There was some confusion if the minimum number of employees needed for compliance is 10 or 20, but I have confirmed that for restaurants the number is 10.

While we always keep throwing brickbats at the government and complain about inefficiencies, the ESIC department seems to have made some significant improvements in the quality of services and the ease with which a company can enroll and comply to the legal requirements. I would urge business owners to visit www.esic.in. By visiting an ESIC office, you can easily enroll in the ESI scheme and pay your monthly dues and file your employee details statement online. There are some small fees payable during the enrolment process (both official and perhaps a small amount unofficially).

Once your business in enroled and you obtain a ESI number, you can enter your employee details and instantly generate temporary Pehchan cards (ESI ID Cards) with a unique number. The employees will then have to go to the ESIC office, get their photographs taken and collect their permanent Pehchan cards. The good thing now is that these Pehchan cards are now transferable - i.e. if a new employee joins your company and already has a Pehchan card, you can simply enrol him using his existing Pehchan number.

The cost to the business in providing this benefit to employees is equal to 4.75% of the employee's gross salary (Please note: The amount is based on the Employee's Gross Salary and not Basic like in the case of PF). In addition, you will need to deduct 1.75% of the employee's gross salary as the employee's contirbution towards ESI. The amount needs to paid on a monthly basis alongwith employee details statement that needs to filed online every month.

From what I have heard the quality of service at the ESI hopsitals has improved significantly and is a boon, especially for worker's who have had serious health issues.

For a change, it is time to congratulate the government (specifically the ESIC department) for some great progress made and I sincerely hope they keep and improve the services offered by ESIC. Hopefully business owners will slowly start seeing the benefits of the ESI scheme and will want to offer the benefit to employees rather than simply seeing ESI as another statutory obligation they need to comply with for the sake of it.  

Sunday, September 2, 2012

Getting Money for your Restaurant Concept

I have had several readers enquiring about where to get the money to start their restaurant. While I would love to say that you can go to a bank and get a loan easily or go to a particular angel investor group and get the money, the real answer is what you already know - you will need to find the money on your own.

For a concept on paper, you will need to dip into your own savings, get money from friends and family (either as debt or as equity - I prefer debt as it is clean and you are very clear in your mind that this is a loan that you need to pay back, preferably with interest). If you own a property, banks will lend you money not so much for your business, but based on the value of your property. Essentially the property will be the collateral for your loan. Even these loans are not too easy to get as banks will be worried about the usage of the funds and need to be convinced about your ability to payback the monthly dues. They may want someone to underwite the loan - i.e. someone else takes responsibility of paying the monthly dues if you fail. Of course, if you have a few wealthy friends, you can coerce them into funding your business idea or underwriting your bank loan.

VCs typically look at this space once you have established your business, are operationally profitable and have demonstrated execution and scaling abilities. So you will need to get to a 8-10 unit level before getting any serious interest from VCs. Angel Investors may not have the appetitie for large Capex restaurant concepts.

In summary, you are pretty much on your own to find the funds required for your restaurant business concept.

Tuesday, August 28, 2012

Onam Sadhya and the Leverage of Festivals as big Revenue Generators

I woke up today morning and my wife popped a question - which restaurant are we going for our Onam Sadhya lunch today? What? Do we even know what Onam is and is there a reason for us to have Onam Sadhya?

Rewind to a year ago: A new Kerala restaurant had opened right next to my office and last year on Onam, I had taken my wife there for lunch (she just happened to come to office that day and we decided to try this new place out, which had a big banner outside "Special Onam Sadhya Lunch (Pure Vegetarian) - Just Rs.249". We obviously liked the food. Now it looks like I had unwittingly set a precedent and a practice - we will go out for a Onam Sadhya lunch every year on Onam.

Over the last few years, I have seen a remarkable increase in the number of restaurants offering "Onam Sadhya" - essentially a special lunch to celebrate Onam, Kerala's biggest festival. I overhead a couple of folks at a Coffee Day yesterday planning where to go for the Onam Sadhya team lunch and discussing the pros and cons of the several options available. Zomato, Burrp, Mastmenu etc. all feature Onam Sadhya prominently on their home pages. Newspapers are loaded with Restaurant flyers offering a special "Onam Sadhya" lunch - not just on Onam day, but during the entire week "The Onam Week".

A few years ago, the Onam lunch was a small affair among Keralites in the cities. Cooking the large variety was a tough task - so the homely Kerala restaurants started offering a special take-away Onam lunch pack. As the crowd increased, they intorduced a special Onam lunch at their restaurants. Today, the Onam lunch is a big revenue generator for all Kerala restaurants (infact a lot of south Indian restaurants, multi-cusine restaurants and the 5 star hotel restaurants have also jumped on the bandwagon). You now have Onam Sadhya buffets too for those who want the food, but also the luxury and the convenience.

With restaurants looking at ways to increase sales and drive additional footfalls all the time, the "Onam Sadhya" phenomenon could be used as an example to leverage religious/regional festivals to drive footfalls - A Diwali lunch, A Holi dinner with Bhaang Thandai (the non-narcotic variety), A special Christmas spread, a Krishna Jayanthi lunch targeted at kids, maybe even a Valentine's Day Lover's Candle Light dinner etc. I expect restaurant businesses to up the ante in leveraging religious/regional festivals and other occasions to try and increase footfalls and offer customers another reason to dine with them.

PS 1: For those interested in learning more about Onam Sadhya, you can check the following link out: http://blog.sigsiv.com/2011/09/onam-sadya-sadhya.html

PS 2: Onam is the harvest festival of Kerala, similar to Pongal in Tamil Nadu, Lohri in North India, Sankranti in Bihar and lot of other places, Bhogali Bihu in Assam etc. The way Restaurants have managed to carve out a nice business model out of this regional festival is interesting - Lessons for others to pick up, I guess.


Monday, August 27, 2012

Hiring a Chef for your Restaurant Business

If you are investing in a restaurant business, hiring the right chef is critical for success. Contrary to popular perception, most restaurant business don't need a chef who is a great cook (unless your aim is to do a Michelin Star restaurant - most of these restaurants tend to be chef owned and operated businesses). The primary role of a chef in most restaurants is not to cook the food, but to creatively design a menu, use ingredients that are easily available or ones that can be stored easily, train enough staff to consistently prepare dishes of the same quality quickly and present the dishes in a manner that customers expect.

So what you really need is someone who has spent 5-10 years in a professional restauarant kitchen, is very good in people management and knows business basics (costing, process improvements, managing the kitchen during busy times, wastage reduction etc.). Other than this the attitude and alignment with your operating style are important.

The role of the chef and the kind of person you need will also depend on what you are trying to do. If you are setting a stand-alone single restaurant, then the chef you hire can be extensively involved in the cooking process on a daily basis. But if your aim is to build a scalable restaurant business, then you need to hire someone who can set things up in a manner that the restaurant is be able to function as always even if the chef goes on a month long vacation.

A lot of the chefs nowadays are quite active in Monster, Naukri etc. You should be able to find resumes there. Another way is to ask some chefs you know to refer someone suitable for your business/context. A great poaching ground for chefs is young staff at the 5 star hotel restaurants - especially the Taj, the Oberoi and the ITC hotels. If you search hard enough, you should be able to find some young enterprising folks out there. For a restaurant chef, you should look at candidates who are currently at a Sous Chef/Junior Sous Chef level at these hotel restaurants.

Tuesday, August 21, 2012

What's in a name? Bakasura, Vaango & Graffitea

I am generally of the opinion that spending too much time on restaurant names and taglines does not make a difference. That's probably because I am not too creative and have strong belief that if something is successful, it will start sounding good - e.g. McDonald's, Saravana Bhavan, Subway etc. and Google, Cisco, Microsoft in the non-restaurant space.

But once in a while, I come across some names which makes me go "Why didn't I think of that?". A day ago, I saw a new restaurant just launched with a sign-board "Bakasur" with a nicely done logo. What a great name for a restaurant - especially if what they offer is a really big buffet all day, everyday (Those who have seen my previous posts know my keen interest in an all-day buffet place in India). When I mentioned this to a friend, he told me that this name was reflective of the evolution of the Indian consumer - a few years ago, no one would think of naming their business after a demon. But now being bad is cool.
A few other names I really like are "Vaango" - the South Indian brand of the Devyani group (which owns several franchisees of Pizza Hut, Costa Coffee, Svensens etc. in India).  "Vaango" in tamil literally means "Welcome". I also like the name for the quaint little Delhi cafe "Graffitea" - a great name for a cool cafe targeted at collee kids that has a huge graffiti wall and serves tea and snacks.
Maybe there is something to a Name.

Friday, August 10, 2012

The Great Indian Biryani Race

With the Olympics going on now, everyone is talking about races. There is a race in the Indian Restaurant industry that is now getting larger with big bucks starting to find its way and the key players beginning to press the accelerator - The race to create a large Biryani brand.

Why Biryani?

I believe that what happened to Pizza in the 1960s/70s in the US will happen to Biryani in India in the 2010s/20s.
  • This is a single product based (Biryani) model
  • Biryani is a complete meal in itself
  • Suits multiple sales channels - Dine-in, Take-away, Delivery, Party Catering. The product is easy to serve, pack, carry and deliver
  • Suits Indian palates
  • Cannot be made easily made at home
  • Based on the staple of Indian food - Rice (a.k.a Pizza - Bread)
  • The customer is willing a price that makes reasonable business sense - Even a road-side Biryani place is able to sell Biryani at 50-60 bucks.
  • There are no international brands in this space - So this has got to be a home-grown Indian brand
Who are the contestants in the race?

1) Paradise Hyderabad - The Usain Bolt of the race (though this is probably a 10 year marathon rather than a 100 day race). Has a great fan following, undoubtedly the most well known Biryani brand in India, based out of the Biryani Mecca - Hyderabad. They are starting to flex their muscles and expand with significant interest coming from Private Equity players. Expect to see an announcement soon about a Private Equity fund investing a significant amount of money in Paradise.

2) Ammi's Biryani, Bangalore - The new modern kid on the block rocked the boat with their exceptional packaging and marketing. Now with a 40 Crore investment from a PE player (Saif Partners), they have the means the press the pedal and surge ahead.

3) Thalapakatti Biryani, Dindigul - Born in a small town in Tamil Nadu, they are now expanding aggressively in Tamil Nadu. Their Biryani style may not appeal to customers across India as they use the smaller Jeera Samba rice and not the Basmati Rice, but their legacy & unique taste may create a fan following.

4) Jaffer Bhai's Delhi Darbar, Mumbai - They claim to be Biryani King of Mumbai. If they truly are, then they have every chance to replicate the model in other cities where cost of doing business is presumably lower.

5) Viva Hyderabad, NCR - While not making a lot of noise, they operate 12 outlets in the NCR region. Again like Jaffer Bhai's if they have a model that works in NCR, they should be able to replicate it in other markets.

6) Bawarchi, Hyderabad - While they have been stubborn about keeping themselves as a single unit and are not as commercially successful as Paradise, Biryani connoisseurs will tell you that they probably serve the best Biryani commercially available anywhere in India at ridiculously low prices. With the brand power and a formidable offering that they have, it shouldn't take them much time and effort to wake up from slumber and be a part of the race, if they choose to. Theirs is a case of them wanting to be a part of the race.

7) Hyderabad House - They have tried to expand geographically much faster than any other Biryani brand. It may be a case of them running a 100 m sprint, while the actual race is the marathon. Having said that, they should be able to get their act right in time as the race heats up.

8) Star Briyani Ambur - This little town on the Bangalore-Chennai highway is dotted with Biryani joints - all with the same name - Star Briyani (no typo on the spelling). The next generation of this 100+ year old brand is now starting to explore growth.

9) Several others across India attempting to qualify for the race - hopefully a few of them will end up participating in the race and who knows, maybe spring a surprise or two on the biggies.

This race is abolsutely exciting to me as all the racers are pretty much in the starting blocks with some having a reasonable upfront lead and muscle power to back them. It will be interesting to review this space in a few years to see how the race has progressed.

If I were to place my bets today, it would be on Paradise winning the gold medal, but they need to execute really well and not let their current stature and success get in the way. The field is open for the silver, bronze and possibly, several other medals.

Disclosure: I run a tiny Biryani business in Bangalore (www.manis.in) and we are like this small town kid with virtually no backing and resources, but with dreams of winning an Olympic medal. So we are one among the several others I have talked about above.

Thursday, August 9, 2012

Poll Results: Time within which customers expect delivery orders to reach them

The first poll I ran on this blog received 43 responses in about a week. Moving forward I am planning to run a poll every month and collect some emprical data on customer expectations, industry persepctives.

POll 1 Question:
If you order food for home delivery, what is the reasonable time in which you expect the food to be delivered to your home?

Though the sample size is small to make firm conclusions, it is apparent from the above data that 45 minutes is the maximum a restaurant business can take to deliver food to the customer's door-step, after the order has been placed, to create a good customer experience. This is not a easy thing to do consistently, especially during busy times (weekends).

Monday, August 6, 2012

Ammi's Biryani gets INR 40 Cr funding from SAIF Partners

SAIF Partners has just announed a INR 40 Cr investment in Bangalore's Quick Service Food brand "Ammi's Biryani". Ammi's redefined the Biryani space in Bangalore with aggressive and exceptionally well executed marketing and branding - large scale bill-board and road median boards advertising, call centre for customer orders, well designed & attractive store-fronts and of course a great name for their Biryani brand - Ammi's Biryani. Their highly convenient, attractive and hygienic packaging is still their main draw. While critics may still question their business model (central kitchen with simple sales kiosks and delivery), this investment will give a further boost in their arm to expand and build on their brand.

To me Ammi's represents a new breed of startup restaurant brands in India which want to create a brand of global quality and one that can stand right next to the McDonald's and Pizza Huts. The capital investment, operational expenses and the effort that has probably gone into their concept design, central kitchen, experimental stores, overall branding and marketing is significant. It is great to see investors backing such efforts. All the best Ammi's.

Image Sources:
1) http://www.crazeal.com/deals/bangalore/ammi-s-biryani/54158
2) http://halalfoodguideindia.blogspot.in/2012/04/halal-ammis-biryani.html
3) http://www.ammisbiryani.com/our_gallery.aspx
4) http://www.saifpartners.com/

Thursday, August 2, 2012


I just noticed that the blog has crossed 50,000 Pageviews. A Big Thanks to all of you for taking time out to read what I write and encouraging me with your kind emails & comments, providing the energy required to sustain the momentum with this blog. Thanks.

PS: A Reader just dropped an email telling me that it is also 500 days since I wrote the first post on March 20, 2011. Guess that's a nice coincidence.

Monday, July 30, 2012

Legacy/History associated with Restaurants

Over the last several years, I have been a big fan of restaurant businesses which have a legacy, a history - essentially a story of some sort behind them. I inherently seem to believe that you can convert these into hugely profitable businesses by making some minor tweaks.

During my last visit to Mysore a few days ago, I quickly researched for restaurants in Mysore and found the following to be interesting and checked them out over the weekend:

1) Vinayaka Mylari Hotel - #1 on the Tripadvisor list. Known to serve the best dosas in town.
2) Om Shanti at Hotel Siddartha - Supposedly serves some great meals.
3) Indra's Cafe Paras - A snack joint serving dosas, chaats etc.
4) Guru Sweets - Known for their Mysore Paks

Out of the list, Om Shanti and Indra's Cafe Paras were disappointing. No real specialty, history - just normal joints serving all kinds of food - probably hve become popular simply due to being around for a while and serving consistent food at OK prices.

I found Vinayaka Mylari (Sign board says - Hotel Original Mylari) to be very interesting. They serve one product - a dosa for 20 bucks. The Dosa comes with a veg stuffing (not the normal Potato Masala), but a gooey veg curry, served with a small block of butter and fresh coconut chutney. The dosa in terms of texture is close to the set dosas you get in a lot of places, but the taste is pretty good - soft and fluffy, and very light (very little ghee/oil) . Think of it as the Vidyarthi Bhavan Dosa without the ghee. The place is really small with a few bences and tables and does not appear very clean at first sight (because of the old building and worned out interiors). The interesting part is that the hnd wash area is in the kitchen - so you actually get to see the kitchen. With some minor interior changes, some nice old style painting, uniformed waiters and disposable paper placemats with their story will make this place rock. With the visibility the place is getting on the internet (tripadvisor, lonely planet etc.), the owners can churn this into a huely popular, must visit place in Mysore - especially given the dearth of eating options around.

Guru Sweets is even more interesting - this is a small corner shop at a very busy junction with two window counters for you to order your sweets. Their special Mysore Pak (300 bukcs for a kg) is the hot seller. The shop is loaded with all kinds of sweets, but in the 20 minutes that I watched, 80% of the orders were for their Mysore Pak and 10% for their Son Papdi. They make their Mysore Pak in limited quantitites everyday using ghee made using fresh butter delivered from a village nearby. They are a great business and with probably a small leaflet outlining their story dropped into every box of sweets they pack should do.

If the opportunity presents itself, I would love to buy out places like Hotel Original Mylari, Guru Sweets and similar such businesses in several cities (especially the touristy ones) - make some minor changes to make the customer experience better without taking away the legacy, tom-tom the story, and reap the benefits of their legacy.

Or maybe there is a case of building something like the "Small Hotels of the World" marketing model for such places.

Photos above from:
1) Guru Sweets - http://www.masthmysore.com/specials-mysore-pak-a-sweet-story
2) Hotel Original Mylari - http://thinditheerta.blogspot.in/2012/01/hotel-original-mylari-mysore-restaurant.html

Monday, July 16, 2012

How much Power (Electrical Supply) do you need for a Restaurant?

You obviously need sufficient power supply to ensure that all the electrical appliances in your restaurant are able to function simultaneously. As a general guideline, a typical restaurant will need atleast about 20 KVA power. 1 KVA is approximately equal to .8 KW.

The big power consumers are the following:

1) The Kitchen Exhaust System: The exact power requirement would depend on the motor capacity and the efficiency of the motor used. The capacity (power generated) would depend on whether the blower is kept right next to the exhaust hood in the kitchen or taken all the way to the terrace of the building. Most small restaurants will typically need a 2 HP or a 3 HP motor powering the exhaust system blower. 1 HP is approximately equal to .75 KW and assuming a motor efficiency (this is the efficiency of converting electrical power to mechanical power) of 50%, you will need 1.5 KW for every 1 HP. So a 3 HP motor (the most commonly used motor at restaurants) will need about 5 KVA power. Once running the motor may not consume as much power as the motors need an extra power surge during start-up.

2) Air-Conditioners: Depending on the number and type of ACs you install, you will need to calculate your power requirement. A typical 1.5 Ton Split AC will need about 2 KVA of power supply.

3) Freezers/Chillers/Water Coolers: The exact power requirement for these appliances are typically mentioned in the back of these appliances. As a guideline, most freezers and chillers need about 300-500 KVA of power supply.

4) Mixers, Grinders, Microwaves, Ovens, Electric Stoves, Beaters, Water heaters etc.: These small appliances you will use in the kitchen are large power consumers. Most of them need between 1 KVA and 2 KVA of power. Depending on the items you use in the kitchen, you will need to calculate your power requirements. For a typical restaurant you won't use all of these items at the same time - so can assume you will need about 2-4 KVA for these small kitchen appliances.

5) Lighting, Sign Boards, Billing System etc.: You will notice that most restaurants use low power consuming CFL lights and LEDs. As a guideline, you should budget about 1-1.5 KVA power for all your lighting, fans, sign-boards, computer/billing system and other small electrical stuff in the restaurant. If you use a Neon sign-board, the power needed will be higher (budget an additional .5 KVA atleast) 

Let's now take an example of a 2000 sft air-conditioned restaurant, with 4 split ACs of 1.5 Ton capacity each and a exhaust system with a 3 HP motor. The table below shows the calculation of the total power requirement for this restaurant. You will need to compute the power requirement for your restaurant based on the exact items you will need and will be using.

Tuesday, July 10, 2012

A 100 Cr Investment Vehicle for Restaurants!!!!

SAIF Partners, a large private equity firm (which invested in Mainland China in 2007 and made a killing on their investment during their IPO a month ago) has just announced a Rs.100 Crore investment vehicle focused on investing and managing a number of quick service and casual dining restaurant chains. I am trying to find more details about this fund and the nature of investments they will be making. Hopefully they will allocate atleast a portion of the funds for early stage investments. But this is great news for Restaurant business entrepreneurs. Hopefully SAIF's moves in this area will prompt other Venture Capitalists to take a more aggressive chance with restaurant investments and work with a longer horizon (7-10 years) for their investments to show results.

Tuesday, June 26, 2012

Why did Chili's in Old Airport Road, Bangalore, shut down? The Case for operating a Restaurant in a Mall gets stronger

I was driving through the Old Airport Road in Bangalore yesterday and saw that Chili's Bangalore had shut down  :-(.

An iconic brand like Chili's shutting down their first unit in India is not a good sign. When I tried to think through what may have gone wrong, the old saying that the Restaurant business is about "Location, Location & Location" came out on top. But the location Chili's had picked was actually not a bad one - just a little inconvenient and not very upmarket. The place was on the main airport road with great visibility, near a busy junction with a number of offices and residences in the neighborhood. Parking was a bit of an issue, even with a valet option available. On top of it, there was a hugely successful TGIF in the same area validating the market potential there. So I am thinking that there is more to the story than just the location.

Chili's today has 7 locations in India - all in malls across Mumbai, Delhi, Pune, Hyderabad & Bangalore. It looks like they have chosen to go the Mall route, like many other restaurant brands. Malls offer some big benefits to restaurant brands - they create and manage infrastructure suited for a restaurant - everything from providing AC points right into the unit, to taking care of power back-up, sewage and water connections, garbage disposal, centralized parking and great visibility options. On top of it, they have a maintenance team that is reasonably responsive to take care of any issues. With a movie theatre thrown in, malls become a weekend destination for families, creating a great captive customer base. 

This shift in strategy to move to malls, the operational hassles in a stand-alone unit with the place and a not-so-great business in terms of revenues may have Hope their new strategy works out well for them.

Wednesday, June 6, 2012

Air-conditioners for a Restaurant

If you are starting a restaurant, chances are that you will want your restaurant to be air-conditioned. Unless you are in a mall, you will need to invest in your own ACs. With the brands and varieties of ACs available in the market, it is quite easy to get confused.

My Recommendation:
1) If your budget permits, go for Cassette ACs. If not, stick to the wall mounted Split ACs.
2) Brands: Pick the Daikin Inverter ACs if you have the budget available. Go for Voltas 3 Star ACs, if you want the best bang for the buck.

How much will you need to budget for?
You will end up spending atleast 30-50K per AC (including the AC & stabilizer purchase and the installation costs) for each split AC and about 60-100K for each Cassette AC.

The Analysis and the Reasons for the Recommendations:
For a restaurant, you cannot use the same yardsticks that you would use for buying a AC for your home. You will pretty much need to run the ACs throughout your operating hours. Even if you are looking at only a lunch & dinner place you are looking at 7-8 hours of operations everyday. Secondly commercial electricity costs about 2 times more than domestic electricity - there is a slab based rate structure in place, but you can safely assume that your bill will be atleast double that of a residential electricity connection for the same number of units consumed, if not more. 

Secondly most ACs have a typical life-time of 3-5 years. Given that you will be using the ACs continuously, chances are that the ACs will last only 3-4 years. So it will again be wise to go for ACs that are more reliable and are known to be long lasting to help you squeeze out the maximum life out of them.

Given this background, it will be wise to invest in ACs that consume minimal electricity and are highly reliable to ensure that your investment is protected for a long time frame. Unfortunately, ACs that meet these requirements are typically quite expensive. Based on an assessment I did recently for buying ACs for a restaurant, here are the key things you need to assess:

1) Type of AC: You have 2 options available - the ceiling mounted Cassette ACs or the wall mounted Split ACs. The Ceiling mounted Cassette ACs are embedded into the false ceiling (without compromising the interior design of the restaurant), provide 4 way air-flow thus covering a larger area more efficiently and are available in higher capacities (upto 4 Ton). The only negative with the Cassette ACs is the cost. These tend to be almost double the cost of the split ACs, the installation is also more expensive (longer piping, wiring etc.) and will require a false ceiling. The Wall Mounted Split ACs are the most cost efficient option available today. The entire AC unit will be visible in the restaurant and in a number of cases, even the stabilizer and the wire from the power points will be visible. This will impact the interior design of the restaurant to some extent, even if you skilfully cover a couple of the components of the AC. Additionally, you will need to plan out the coverage area carefully and install the ACs accordingly. 
2) AC Tonnage required: While this will vary to some extent depending on the way your restaurant interiors are laid out, the guideline you can use is 1 ton for 150 sft carpet area. 
3) Star Ratings: These denote efficiency of power consumption with a 5 star rating being the highest. Most shops/dealers will quite rightly tell you to go for 3 Star ACs as they offer optimum efficiency at reasonable price points. The new Inverter ACs have efficiencies better than a 5 star rating.
4) Brands: For Split ACs you have several options today. The cheapest brand in the market today is Lloyd. Given that they have been around for a while and are beginning to press the pedal on their marketing now, Lloyd may not be a bad option. You will get a 3 star rated 1.5 Ton AC for under 30 K (with installation and a stabilizer). Next in the price point range are the LGs, Samsungs and Voltas. The LGs and Samsungs have really captured the home AC market and their service standards are quite good. Their pricing though is in the same league or a little higher than Voltas. The Voltas ACs are quite reliable, have been around for a while and have a nice support system for commercial installations. Blue Star and Carrier are also good options, but are more expensive than Voltas and seem to be more suited for large installations. If your budget allows it, go for the Daikin Inverter Split ACs (will cost about 50K per 1.5 ton AC including a stabilizer and installation). Check the ACs used by most retail stores and restaurants - especially in the newer stores they are opening. Chances are you will find the Daikins in a lot of them, primarily because of their lower power consumption, higher reliability and expected longer lifetime.

For Cassette ACs, you will be better off sticking to the commercial focused brands: Voltas, Blue Star, Carrier or Daikin.

Tuesday, May 29, 2012

If you have to buy a generator for your restaurant, what do you do?

First, see my post on Why you should push your landlord to take care of providing Power Back-up. If after all your attempts to negotiate with the landlord to have him/her provide power back-up, you still are in a situation where you will need to take care of this, what do you do?

Assuming you have the space to install a Diesel Generator (DG):

1) Buy a DG for the full power you will require - the cost differential between DGs of different capacities is not high, and typically a DG supplies only about 80% of the rated power consistently - i.e. a 20 KVA DG will generate only 80% of the rated power (i.e. about 16 KVA). For most standalone restaurants the power requirement will be between 10 and 30 KVA of single phase power - To determine your exact power back-up requirements, call a few DG suppliers and they will recommend the specifications of the exact DG you will need. 

2) To minimize the ongoing hassles, I would strongly recommend going in for a branded DG. The four most popular and branded options available in the market are Cummins, Kirloskar, Ojus (Ashok Leyland) & Powerol (Mahindra). The price points are not too different between the 4. Cummins (these are the green colour generators you see everywhere today), is considered to be the best of the lot. Kirloskar markets a generator under the brand name "Bliss" - these are the light blue colour generators you see. Kirloskar also sells only their engines and local suppliers use the engine, assemble a generator and sell them under the Kirloskar name too - these are the off-white and light green colour generators you see. These are among the most popular ones in the market today as a lot of customers assume that these are Kirloskar generators and buy them for the lower price. But essentially these are locally assembled generators with the Kirloskar engine. The warranties are offered by the local supplier from whom you buy the DG.

Out of the lot, my research and feedback received from users tells me that you will be wise to invest your money either on the Cummins or the Kirloskar Bliss DGs. But do invite quotes from all of them and decide for yourself.

Now, if you do not have enough or appropriate space to install a DG, what do you do?

1) You can go in for a large capacity UPS (Uninterrupted Power Supply) option - these typically tend to be very expensive - about 5-6 lakhs for a 20 KVA UPS that will give you power for 3-4 hours. The big cost in the UPS is not the UPS system, but the battery bank. You will also need to pretty much replace the entire battery bank once every 3-4 years. In addition, the amount of time you get the power back-up for is restricted. For more back-up time, you will need more batteries and the costs will spiral. Typically UPS power back-up is used in IT server rooms and mission critical applications, where un-iterrupted power rather than power-back-up is required. The battery bank also takes up quite a bit of space (you will need to keep this inside your restaurant in a suitable area - maybe in a loft area created or under a staircase). My recommendation for restaurants would be to not consider the UPS option as a primary power back-up. You can always have a small UPS for a few lights and your billing system and forget about full power back-up.

2) The other option is go for compact small capacity generators (such as the Honda Portable Gensets) to ensure power back-up for only the key electrical appliances and lighting - i.e. for the billing system, lights in the restaurant & kitchen, sign-board, TV/Audio system, Fans, fridges, Chillers and deep Freezers and other small electrical appliances. The big appliances you can't use using these portable gensets will be your kitchen exhaust system and the Air-conditioners. Each AC alone will require one portable genset dedicated for it. Clearly the best portable genset available in the market are the Hondas - They have a fabulous compact genset generating 3 KVA (EU 30) and another one generating a little over 5 KVA (EU 65). These run on petrol engines, but are very quiet and do not generate fumes, are ultra compact and portable with built in wheels. You do not approvals from the Electricity department to use these gensets. You could buy 3 of the smaller EU30s and set-up one for the restaurant area - lightining, TV/audio system, billing system and the sign-boards. The other EU30 could support the fridges, chillers, freezers, kitchen lighting, small kithcen equipment and maybe even a small exhaust fan in the kitchen. Each of these small gensets will cost you about 80K. The large Honda will cost about 150K.

Having said all this, I would still push really really hard to get the landlord to install and maintain a DG for the entire building, which you can tap into. 

Monday, May 21, 2012

Why should you push your landlord to take care of arranging for Power Back-up for your Restaurant?

Given the number of power cuts in most parts of India, it has become mandatory for a restaurant to invest in a generator and/or a UPS. Do you need a generator or a UPS? What logistical issues will you face with each one of them? What are the options available in the market?

You will pretty much need full power back-up for a restaurant. i.e. If the total power available and needed for your restaurant is 20 KVA, you will need to plan for a power back-up of 20 KVA. My strong recommendation would be to negotiate with the landlord at the time of signing the lease and have him/her install a generator for you or for the entire building. Installing a generator is not as simple as buying a generator and placing it. It involves the following:

1) Investment to buy the generator: You are looking at 2-4 lakhs depending on the capacity (KVA) - most standalone restaurants will require between 10 and 30 KVA of power) and the brand of generator you are buying. This investment is just the tip of the ice-berg. 
2) You need to find a suitable space in the premises to install the generator. You will require a clear flat surface (where concrete can be laid - so storm water drain areas won't work) within the site/land, where the building is located. Generators in the 10-30 KVA capacity range need a minimum clear area of 3m width x 6m length and 6 m height. You will notice a lot of generators are installed in the terrace area of the buildings currently - electricity departments in most states no longer give approvals for installing generators in terraces (due to safety reasons). The vendor will tell you that they will take care of this by installing the generator in a not so visible space and do the installation in the early morning hours - but you need to be prepared to deal with any issues that may come up because of this. Also, if you are installing the generator in the terrace, you will need to hire a crane and this alone will cost you about 10-15K. 
3) You will need to get approvals from the electricity department and pollution control department. Thankfully most generator suppliers/installers will get these for you for about 10-20K. Any generator above a certain capacity (varies by location) will need this approval. You can pretty much assume that you will need this approval for generators 10 KVA and above. 
4) You will need to take care of some civil work - laying a concrete base where the generator can be installed. You are looking at a spend of 5-10K for this. Also remember that you cannot build this concrete base on the area meant for storm water drains. You will need a clear space within the site where the premises is located. 
5) You will need to get electrical earthing work done at the place where the generator will be installed, as per the specifications of the generator manufacturer. You will also need to get the wiring done from the generator to your distribution box (electrical panel box) and install a change-over switch. All this will probably cost you about 20K. 
6) You will need to create exhaust piping (outlet for fumes generated). Depending on where you are installing the generator and what is in the surroundings, you may need to do the piping all the way upto the terrace (similar to what you would do for your kitchen exhaust piping). If additional piping needs to be done, this can get quite expensive - about 800-1000 bucks per metre. You may also need to install a scaffolding to enable to guy to do the piping work. Renting a scaffolding will cost you about 6-10K (rental is typically for a week). If you are doing this, you may want to consider doing this alongwith the kitchen exhaust piping work. 
7) Once the generator is installed, you need to figure out a way to switch it on when the power goes. An Automatic switch-over system will cost you about 40-50K extra. The Auto-Switchover is also known to be prone to problems. Even if you have the auto-switch-over, there is a 5-10 second gap between the time the power goes and when the generator takes over.  
8) You also have the hassles of filling fuel in the generator, maintaining the generator (Annual Maintenance Contracts or AMCs will cost you about 10-20K per year), taking care of repairs etc. You will also realize that the AMC covers only standard service and labour for repairs - all parts that needs to be replaced need to be paid for.  

Given all of this, I assume you are more than convinced on why I would strongly advocate paying a higher rent and the associated higher deposit, but getting your landlord/building owner to take responsibility for the generator. 

Tuesday, May 15, 2012

Own a piece of Mainland China - Speciality Restaurants IPO

Speciality Restaurants, the owners of the brand "Mainland China", is currently doing an IPO (Initial Public Offering) on the Indian Stock exchanges. This is the second "Restaurant Business" IPO in India, after Jubilant Foodworks (Dominos Pizza India). Jubilant was a super hit IPO (the initial offer price was Rs.145 per share - Feb 2010 and the current price of the share is Rs.1149 per share).

If Speciality is able to replicate the success of Jubilant, then investors can expect reasonable returns on their investment. Clearly the investment climate is a little different now, plus the company operates in the fine-dining segment.

Where are they currently?
They currently have 69 restaurants - 40 Mainland China units, 8 Oh!Calcutta units, 5 Sigree units, 6 Machaan units, 7 Flame & Grill units and 3 Haka units. They also operate 13 Sweet Bengal units (all in Mumbai) - a Bengali sweet shop as the name suggests.

Their forays into the QSR area have not been successful - Just Biryani, Mostly Kababs.

Their reported revenues as on Mar 31, 2011 were Rs.173 Crores (assuming they had 65 restaurants and 13 Sweet Bengals at that time), their restaurants are generating about 2.5-2.7 Crores annually with a 22% Operating Margin (EBITDA). Mainland China accounts for a little over 60% of their revenues.

What is the company valued at?
The valuation of the company is 4 times their revenues (i.e. around 720 Crores).

My Assessment:
They have clearly cracked the fine-dining business model with Mainland China. I am not too sure if they have really been able to replicate the model with other brands in the same manner - maybe to some extent with Oh!Calcutta, but the rest are simply experiments still.

With the funds raised from the IPO (expected to be about 170-180 Crores) about 145 Crores will used for opening 48 new restaurants (average investment per restaurant will be 3 Crores), a bulk of which (around 35) will be Mainland Chinas. So they will use some of the money for experimenting with their other brands. They will be using 15 Crores to invest in a food plaza in Kolkota (they have already invested about 2 Crores in this project). The remaining 10-20 Crores will be used for repayment of debt and for general corporate purposes.

They are proposing to use around 33% of the funds raised to experiment (with their other brands, the food plaza etc.) and 67% for doing what they are doing really well (Mainland China). As an investor, you need to hope and pray that they are able to create yet another successful brand like Mainland China. I am a little concerned that they are getting distracted with the Food Plaza, Haka (Chinese fast food - Casual Dining segment) and Sweet Bengal, rather than simply focus on what they do really well - fine dining.

Final Thoughts:
I am really hoping the IPO does well and the company delivers stellar returns to the investors. This will pump in some more confidence amongst venture capitalists to seedfund new ventures in the restaurant business in India. Speciality has taken 21 years to do an IPO. Imagine if an investor had pumped in 20 lakhs in 1991 to own probably 30-40% of the company. The value today would be over 200 Crores. The returns are astronomical.  

Tuesday, May 8, 2012

Dunkin Donuts launched in India - How will they do here? My Analysis

Dunkin Donuts opened their first two stores in India yesterday (Connaught Place & GK, Delhi). I haven't visited the store yet, so my analysis is based on news reports and their menu available on Zomato (these guys are quick). They have been brought to India by the really smart folks at Jubilant Foodworks - the ones who have successfully cracked the business model with Dominos Pizza.

The Positioning:
In the US, Dunkin Donuts is like your neighborhood Halwai shop/Darshini with seating. The food and coffee are probably the cheapest ones available in the US and the place is essentially no-frills. In India, the positioning seems to be a little premium - similar to McDonalds in India (Guess we always value western brands at a premium). This is a smart business move as they can focus on offering good quality products at prices where they will make money, rather than trying to fight it out with the local Halwais. Plus they can charge customers VAT extra (14%), while showing lower prices on the menu card. Imagine the customer response if the local Samosa fellow charges 14% VAT on a 10 rupee Samosa.

The Indianization of the Menu:
The big coup they have pulled off is by offering the entire range of donuts as eggless (except for the Cake donuts). This broadens their customer base significantly and will appeal to a larger section of the customer base - Fantastic move.
I almost expected Dunkin Donuts to offer Indian snacks (Samosas and the types). Again they have been really smart about this and are offering an international menu with the tastes tweaked to suit Indian palates. This way they are positioning themselves as an international food joint, not competing with the local kirana joints and can charge reasonably premium prices at which they can make money as a business. Their menu is essentially sandwiches with various breads. They are taking on the Coffee Days and the Costa Coffees head on with their food menu, but I expect their offerings and taste to be better than the ones offered at the competitors.
Their Coffee is where I am most disappointed - Dunkin in the US is known for their coffee - freshly brewed all the time and served from the glass kettles. In India, they are offering only the mixed coffees - Cappucinos and the likes. Guess their assessment is that the Indian consumer is not yet ready for light dicoction based coffee and will definitely not pay a premium for it. They also offer Cold Coffees, Coolatas & Smoothies. The price points are head on with Coffee Day.

How I think they will do in India?
My assessment is that their Donuts will be a big hit in India - they will make Donut Baker and Mad Over Donuts feel that they missed a trick in the bag. Not being the first mover in the space will actually give them an advantage here. Expect the place to be packed in the evenings and weekends with families, teenagers and college kids.
As a coffee and hangout place, they will compete to some extent with the Coffee Days and the Costa Coffees. I haven't seen their interiors, but my assessment is that they will not be able to move the "Meeting Place" crowd from the Coffee Days.
I also expect their food menu (outside of Donuts) to undergo significant tweaks as they analyze customer behaviour and purchase patterns. My expectation is that Sales figures for their sandwiches will not be great in absolute terms, but will be far better than the other coffee shops.

Their Possible Master Stroke:
Other than opening new stores, the master stroke I expect them to pull off would be to leverage the Dominos Pizza stores and the super-strong delivery model to start selling and delivering Donuts. Essentially announce a partnership between Dominos and Dunkin Donuts in India, have a small Donut Kiosk in the Dominos stores and sell and deliver Donuts from those units. If they can get this partnership model right, they will be hugely popular and successful very quickly. Imagine families having the option to order Pizzas and Donuts from the same place with one call and getting it delivered promptly. This will become the default for Birthday parties and kiddie get-togethers. I am simply speculating and an actual partnership like this may not be possible for them to execute. 

Tuesday, May 1, 2012

How does the Restaurant Industry in China compare with the industry in India?

This single piece of data below from YUM Brands (the owners of the brands KFC, Pizza Hut and Taco Bell) will illustrate why China is an Elephant and India is, well, a baby elephant. 

The total for China above is from their Q1 earnings release. When you add the individual numbers, it comes to 4647. The missing 2 are probably Pizza Hut Home Delivery units.

According to YUM Brands, as stated publicly on their website, "We Consider China to be the greatest Restaurant opportunity of the 21st century" - http://www.yum.com/brands/china.asp

YUM added 168 new restaurants in China in Q1, 2012. The equivalent number for India is about 25. 

YUM has also created a local Chinese brand - East Dawning (Chinese food QSR). They also acquired a restaurant chain "Little Sheep" in 2011. The 300 Little Sheep restaurants are not included in the numbers above. 

Both China and India are fast growing markets, but it looks like despite the already large size, China is galloping faster than India and is on the way to become a Restaurant Industry Dinosaur. According to YUM's CEO, "We believe our new unit potential in emerging markets is the best in the restaurant industry and we’re still on the ground floor of growth".

Thursday, April 26, 2012

Vegetarians eating at a Restaurant serving both Veg & Non-Veg food

I saw a news article in the Times of India - "McDonald's goofs up on veg order". The article is quite dramatic and ends with a BBMP (equivalent to the Corporation of Bangalore) diktat - Restaurants must have separate kitchens for Veg and Non Veg food. 

The BBMP diktat is highly amusing - I can bet that all restaurants (there may be a handful of exceptions I may be unaware of) including those within the 5 star hotels do not have a separate Veg and Non-Veg kitchen. They may have carved out a small section , a small area, but it will essentially be one kitchen area and one washing area. If this is the case, and you are a strict vegetarian, what should you do? My recommendation: Visit only Pure Veg restaurants. 

Why do I say this?
  • The staff in the restaurant are generally careful about Veg orders and in 99.9% of the cases you will not see any non-vegetarian food mixed with the Vegetarian food. But like in every process, there will be a rare occurrence that a piece may get mixed. The McDonald's issue above is clearly an exception - infact they are pretty good in separating Veg and Non Veg food and take extensive care that such incidents do not happen. It was simply a case of one of the employees have a momentary lapse in attention.  
The bigger problem is with what you don't see:
  • Soups: Most restaurants prepare soup using Stock. Stock is essentially water in a pot that is on sim (i.e. getting heated slowly), with veggies and flavour enhancing pieces (e.g. Bones). In most cases, the restaurant will have one stock pot and it will of course have the bones in them. So when a soup is prepared, the same stock water is used. 
  • Entrees: All entrees are prepared upon order. The cooks have a few sauce-pans in which they prepare the dishes. In a busy restaurant, the same sauce-pan gets used for preparing veg and non veg dishes. If you are expecting the cooks to be so careful as to use different utensils during busy hours, suit yourself. Having said this, most good cooks atleast wash the sauce-pan a little before preparing a new dish. Even if they use different sauce-pans, the ladles etc. are the same. Again, expecting them to wash each time is impractical. Check where the closest washing area for the cook is and you will know why washing the ladles, sauce-pans and utensils after each order is virtually impossible. 
  • Frying: When you order fried dishes, most restaurants, use a "Kadai" that has hot oil on boil to fry the specific dish. In most restaurants, the same Kadai of Oil is used to fry everything - from French Fries to Paneer Pakodas to Chicken Wings. So you are not served non-veg pieces, but your dish is fried in the same oil.
  • Handling of Food: Most cooks use their hands (in some cases with disposable gloves) to handle food. Do you believe they will have the time and luxury to wash their hands or change the gloves everytime they prepare a new order? So even if they wear gloves, the same gloves which picked up a chicken piece for the previous order, picks up the Paneer piece for your order. 
  • Cutting boards and knives: All orders which require cutting fresh veggies and meat (salads for instance) are done in the same area. While the cutting board is probably wiped with a cloth and even the knife may be cleaned with a cloth, they are not really washed for every new order. So the same cutting board and knife used to cut boneless chicken pieces for a curry are the same ones used to chop the cauliflower for your order. 
  • Washing: Find me a restaurant which has separate washing areas for Veg and Non Veg food - I would say it does not exist. So all the plates (different colours or now), spoons, forks, bowls etc. are cleaned in the same area. The same area is also used for cleaning all the utensils used to prepare the food. 
In summary, if you are extremely finicky about Veg and Non Veg food, simply go only to restaurants which serve pure veg food. If you go to restaurants serving both Veg & Non-Veg food, be assured that the staff will in 99.9% of the cases ensure that you do not have any non-veg food/pieces in your order, but all the back-office kitchen activities that happen as described above - you really don't have a work-around. 

The Article below talking about the McDonalds goof-up was published in the Times of India, Bangalore, Friday, April 27

McDonald’s goofs up on veg orderBBMP Penalizes Eatery After Family Served Chicken BurgersTIMES NEWS NETWORK 

Bangalore:A global restaurant chain’s outlet on New BEL Road, near MS Ramaiah College, has been slapped a fine of Rs 15,000 and shut down for a day and a half after it allegedly served non-vegetarian food to a family that had ordered vegetarian fare. 
Vikram, 45, businessman and resident of New BEL Road, and three of his family had gone to the McDonald’s food joint on Tuesday. The family, strictly vegetarian in food habits, ordered for four veg burgers, paid Rs 246 towards the bill and were served the food. But after eating the burgers, the family 
suspected that something was amiss and that they mighthavebeen suppliedwith non-vegetarian burgers. 
Vikram went to the supplier at the counter, who admitted that he had by mistake served the family chicken burgers.Thebusinessman insistedthat he be allowed to record his complaint in a complaint register. The staff failed to produce a complaint register. He immediately called up the BBMP control room and was asked to give a written compliant to the zonal medical officer. 
Dr Devaki Umesh, medical officer, BBMP west zone, said Vikram complained to her about the incident. “We are a vegetarian family and had performed Lakshmi Pooja on theoccasion of Akshaya Tritiya on Tuesday. But due to no fault of ours we were cheated into eating chicken burgers. This has hurt our religious sentiments,” she quoted Vikram as telling her. 
BBMP personnel swooped on the restaurant on Wednesday. “We found out that there were problems with the serving of veg and non-veg food from the same area. We have asked the restaurant to have separate kitchens for veg and nonveg food and also supply them in trays of different colours. A fine of Rs 15,000 was levied on the restaurant. We have locked the restaurant and the keys are with us. We will inspect the restaurant again on Friday for compliance,” she said. 
The restaurant remained closed on Thursday too. When contacted, a restaurant employee only admitted that the BBMP had inspected their premises. “We closed down because of technical issues,” the employee, who did not want to beidentified, said. 
A McDonald spokesperson said she had no details of the incident but claimed that the outlet was operational on Thursday. 
Restaurants to be checked BBMP will now inspect premier restaurants in the city. “We will pay surprise visits to restaurants and see if everything is in order,” said Dr Devaki Umesh. 
BBMP DIKTAT: Restaurants must have separate kitchens for veg and non-veg food

Wednesday, April 25, 2012

New Silk Route Buys Into Fast Food Chain Adiga's

Adigas (www.adigas.com), a homegrown Quick Service Restaurant brand in Bangalore with 11 units and a catering business (estimated revenues of 80-100 Crores totally) has managed to attract a Private Equity investor to cough up (according to Rumour mills) about 100-150 Crores for a majority stake (51%+). That means the company has been valued at 200-300 Crores. Fantastic stuff for a small home-grown business and potential hope to a number of budding QSR entrepreneurs. This investment and the valuation of the business underlines how difficult it is to build a sustainable restaurant business and the premium investors are willing to pay once you get your act together. 
For those unaware, Adigas started out as a neighborhood joint "Brahmin's Coffee Bar" in Chamrajpet in the 1960s - still operational. The second generation of the family scaled up Adiga's. 
Article Credit: VCCircle.com; April 24, 2012

NSR is looking to invest $100 million or Rs 500 crore in a portfolio of food & beverages (F&B) formats

Private equity firm New Silk Route has completed its fourth control transaction by picking up a significant stake in Bangalore-basedVasudev Adiga’s Fast Food Ltd, which runs a chain of South Indian restaurants. The deal came following the private equity firm’s plans to create a platform in the food & beverages (F&B) sector. New Silk Route is looking to invest $100 million or Rs 500 crore in a portfolio of F&B formats.
“Certain factors like liberalisation of the economy, growing income of the middle-class population and macro-economic conditions have had a positive impact on consumer spending and consumption in both rural and urban areas, thus boosting the growth of this sector,” a statement from NSR said.
The deal with Adiga’s marks NSR’s second investment in the F&B space after backing the holding company Cafe Coffee Day, India’s largest coffee chain, along with Kohlberg Kravis Roberts & Co (KKR) and Standard Chartered Private Equity.
Cipher Capital was the sole advisor to the transaction.
Vasudev Adiga’s currently has 11 restaurants in Bangalore and one on the Bangalore-Mysore highway. Adiga’s is an offshoot of the famous Brahmin’s Coffee Bar at Basavangudi (Bangalore), which was started in 1965 by late KV Nageshwar Adiga. The company is now run by second-generation entrepreneur KN Vasudev Adiga who is also an engineering graduate.
Besides restaurants, Adiga’s also has presence in event catering business. Its corporate clients include marquee names like SAP, NDS, Ingersoll Rand and Honeywell.
“We see tremendous potential in Adiga’s as it has combined the strengths of two different and popular formats – restaurants and event catering. Our aim is to help Adiga’s expand, initially in Bangalore and eventually across India, so that it can become India’s first homegrown national chain of restaurants. Since there is an unmet demand for good quality south Indian food even in other parts of the country, achieving our goal should not be a challenge,” said Jacob Kurian, partner at NSR Advisors.
NSR Eyeing Significant Stakes
The deal is the third investment announced this year by New Silk Route, an Asia-focused private equity and growth capital firm with $1.4 billion assets under management. It recently invested Rs 175 crore in VRL Logistics Ltd and also picked up a significant minority stake in Hyderabad-based education support services provider Varsity Education Management Pvt Ltd.
It had earlier picked up controlling stakes in companies like Ascend Telecom Infrastructure (telecom tower), 9X Media Pvt Ltd (which runs the Hindi music channel 9XM) and Destimoney Enterprises (financial services).
NSR also acquired minority stakes in companies like Nectar Lifesciences, Reliance Infratel and Rolex Rings.