Cafe Amul - What they need to get right? IMHO - In My Humble Opinion

The amount of interest and enquiries, I have got about Cafe Amul after my post on them (http://restobizindia.blogspot.in/2012/02/cafe-amul-is-this-truly-diamond-in.html) has been unreal. I think I may have conveyed a message that Cafe Amul is absolutely THE BEST franchise opportunity available in India today. Just to set the context right, my belief is that Cafe Amul has the potential to be THE BEST Franchise opportunity and I can see them doing 1000+ stores in India in the next 5-7 years if they want to. But they need to get a number of things really right before embarking on this aggressive growth plan. Again, these are just my thoughts and opinions - so please make your own assessment.

Their Customer Proposition:

They need to define this. It could be something like this:
1) Value for Money (VFM) all day Light Eats, Snacks & Desserts
2) Clean & Comfortable ambience (Air-conditioned to the extent possible) with tidy restrooms
3) Lower Cost option to Café Coffee Day and other Coffee based hangouts
4) An attractive & affordable place for families with kids, college going youngsters and others to hangout and have a light meal/snack/dessert
5) Leverage of the strong Amul brand (Trust, VFM/Affordable, Quality, Family Oriented)


Things they need to do:

1) Offer a better ambience & experience to customers

• –A highly inviting, attractive & family friendly Café design
• –Air conditioned atmosphere (unless excellent outdoor seating option is available) with Wifi access
• –Better seating (more comfortable) with kid friendly options where possible
• –Better leverage of  the iconic Amul ads in the Cafe design (Collage on the walls, tables, LCD Screen) & the Amul girl (a.k.a . The McDonalds  man)
• –Better presentation of food – Better quality crockery/cutlery and clever leverage of  the Amul girl in disposable/take-away cutlery & presentation items (e.g. Sundae spoons)

2) Prepare a more robust Financial Plan

• –Current Investment, financial projections and Operating expenses information need to be projected more accurately.

3) Improve Real Estate Leverage

• –Reduce Real Estate Space Requirement to about 800-900 sft (down from the current requirement of 1200 sft)
• –Reduce the space required for the kitchen & pantry area by refining the menu offerings, while maximizing the customer area

3) Make Operations simpler to manage

• –Fewer Menu Varieties
• –Lesser Staff
• –Better leverage of 2 shifts (unit can be open from 8 AM/10 AM to 11 PM)

4) Reduce Upfront Investment Commitment

• Set up a unit with a Capex of  around INR 30-35 Lakhs (down from 40 lakhs – 50 lakhs currently) – including working capital provision for the first few months
• –Smaller investment due to smaller real estate space requirement & lesser kitchen equipment

5) Refine Menu Offerings

• –Better leverage of a small kitchen with minimal equipment, while still offering reasonable variety to customers
• –Hot Kitchen Focus on Dosa, Paratha & Sandwich Varieties and offer consistent and great quality food. Consider adding Egg preparations (sensitive issue???)

6) Remove or clearly separate the Amul product sales counter in the Café

• –Do not offer low margin products inside the Café (e.g. Stick ice-creams)

7) Reduce Revenue Target to INR 7-7.5 lakhs per month

• –15% Operating Margins (EBITDA) Target (Cost of Sales / Food Cost < 50%)
• –Offer an attractive Return on Investment (RoI) – Investment Recovered in 4 years
• –Operational Breakeven under INR 5 lakhs monthly revenue

8) Create a strong Franchise support team with a focus on:

• –Recruiting & Setting up Franchise Cafes
• –Providing Ongoing support (Marketing, Operations, Best Practices sharing)
• –Ensuring Quality (Audits, Process Improvements etc.) & Brand Promise
• –Ideal model would be to set-up one company owned & operated unit in each new city/region before inviting franchisees
• –Reasonable Franchise fees can be charged to fund the Franchise Support organization (Not a revenue share)

What should their menu look like?

Hot Kitchen Menu Design Principles:

• –Dishes that appeal to customers throughout the day (Breakfast, Lunch, Snacks, Tiffin, Dinner)
• –Dishes that are prepared fresh using minimal kitchen equipment
• –Dishes that can support overall food cost at less than 50% (ideally <40%)
• –Dishes which allow offering reasonable variety and options to customers

All-Day Light Eats

• Dosa Varieties
• Paratha Varieties
• Sandwich Varieties (Grilled & Non Grilled)
• Omelette Varieties (Egg??)

Minimal Kitchen Space & Equipment needed:  Tava (2), Sandwich Griller, 1 or 2 single burners, Work Tables, Wash Area

Desserts & Beverages

• Ice-Cream Scoops & Sundaes
• Gulab Jamun & Shrikand
• Chai & Coffee
• Milkshakes & Ice-Cream Milk Shakes
• Buttermilk & Lassi Varieties

Mid-Size Pantry Area for Desserts & Beverages: Display Freezer, Blender, Dum Chai Boiler, Filter (Coffee), Small Milk Bain Marie, Work Tables