GST Rates for Restaurants - Analysis

GST rates for restaurants has been a hot topic over the last few months. The government is of the opinion that restaurants have not passed on GST benefits to customers and have used GST to increase their profits.

Here is a quick summary of who will gain and who will lose. Detailed analysis is provided below.

You can download the PDF file using the link below:

DOWNLOAD GST ANALYSIS PDF

Taxation at restaurants prior to GST rollout:

Prior to GST, restaurants were subject to VAT and Service Tax and they were able to adopt a model of their choice.

1)      Composite VAT Model: Restaurants paid a fixed percentage of sales as VAT. The percentage varied by state and ranged between 2% to 4% in general. Restaurants opting for the composite VAT model were NOT allowed to charge this amount on the bill to customers. i.e. if a product price was Rs.100, the customer would pay only Rs.100. The restaurant would need to pay 4% of this amount (i.e. Rs.4) as VAT. No input credits were allowed in this model

2)      VAT Extra model: Restaurants could opt for this and charge customer 14.5% VAT extra on the bill. They could also claim input credit for all purchases where VAT was charged.

3)      Service Tax: For all AC restaurants, irrespective of which VAT model they were on, service tax was applicable. This was 6% of the bill value and could be charged extra. Input credit was also allowed for this. This was applicable only for dine-in and not for takeaway and delivery (though there was some confusion around this).

Taxation post GST rollout Phase 1:

1)      Composite GST: All restaurants with annual turnover less than 75 lakhs could opt for the composite model (whether AC or non AC). GST was payable at 5% and this amount cannot be charged to customers on the bill. i.e. The model was similar to the composite VAT model above and effectively, the rate was pegged at a uniform 5% pan India.

2)      GST Extra model: In this model, restaurants could charge GST to customers on the bill. The percentage was 12% for non-AC restaurants and 18% for AC restaurants and was applicable uniformly across all sales channels – Dine-in, Takeaway and Delivery.

Here is where the confusion began:

1)      The government felt that restaurants were pocketing the gains from GST and were conveniently telling customers they need to pay extra (12%/18%) now because of GST and in some ways blaming the government for the price increase.

2)      The government was even more irked because the tax being collected by the government was now lesser than before.

3)      This “Customer pays more, Government gets less and the restaurants gain” situation did not sit well with the government prompting them to make changes and perhaps teach the restaurant industry a lesson.

4)      Unfortunately, point 1 above was true only for restaurants moving from a composite model to the GST model. This segment comprised primarily of value for money local restaurants and some QSR chains – we can assume that both of these put together would constitute over 80% of the industry. It would not be wrong to state that this segment did conveniently use GST as an excuse to charge customers more and pocket the gains. The alternate view on this is that these restaurants held off on raising prices this year (annual price increases are normally in the 5-10% range) because of GST

What the Government did?

1)      In a reactive mode, the government made a decision to lower the GST to 5% across all restaurants and disallow input credit.

2)     This change is more a populist move to appease the larger population that the government has taken steps to lower expenses for them. By increasing taxes to 12%/18% initially and lowering it to 5% now, it will seem that the government is helping the common man. The common man will still be shelling out 5% more than the pre-GST era for their regular dosas, rotis and meals.

3)      The folks most impacted by this move to disallow input credit are the professional restaurant chains who were on the VAT extra model (14.5% VAT chargeable extra to customers in their bills) and the ones who pay their taxes honestly. Now these restaurants would be able to charge only 5% extra to customers and not get input credit. They will have no choice but to increase prices by about 10% to offset the losses and maintain their net margins.

My previous post analyses the decision and long term impact for the industry. 

I have provided below the various scenarios for restaurants in the pre-GST era, in GST phase 1 and now in GST phase 2. 

You can download the PDF file using the link below:

DOWNLOAD GST ANALYSIS PDF

GST Changes for the Restaurant industry - Viewpoint

GST rates for restaurants has been a hot topic over the last few months. The government is of the opinion that restaurants have not passed on GST benefits to customers and have used GST to increase their profits. From the government's perspective they are correct. Restaurants (those who were earlier in the composite model - 80%+ of the industry I guess) have used GST as a way to charge customers more and have conveniently blamed the government for it. The alternate view on this is that most restaurants were waiting for GST before revising prices (which most restaurants do annually by about 5-10%) and have simply held off on raising prices because of the GST rollout. Thus in some ways by not increasing prices, the benefits have been passed on to the customers. In my opinion the real issue that irked the government was the fact that the restaurant industry by and large communicated to customers that the price increase is because of GST and they could do nothing about it. 

But the government's reaction to the situation is not something I agree with. Rolling back input credits is a reactionary populist move and is a big backward step, especially for this already cash heavy industry. By removing input credits, the government has shown immaturity and a poor understanding of the ground realities in the industry. The decision has been made without assessing the long-term implications. Or maybe the government wants things to function as before thus allowing a cash economy to thrive. Restaurants won’t complain, suppliers won’t complain, landlords won’t complain and now the consumers will also applaud the government that they have lowered costs for them (though they will actually be paying 5% more now than the pre-GST era). 

The decision creates a bigger problem in my opinion allowing the industry to once again gravitate towards cash collections and payments. Restaurants can show lesser sales and pay lower GST, pay off suppliers and landlords in cash without bills thus lowering costs. Landlords and suppliers are happy to do this as they don’t need to pay GST or can pay lower GST. This also lowers their income tax pay-outs as they can show lesser income now. Landlords, suppliers and restaurateurs can play with cash again like before - Their good days are back. The government has in some ways just given them a 5% bonus to play with. 

The GST rollout was a great opportunity for the government to push the fragmented restaurant industry and the supporting eco-system to move away from cash transactions, become more professional, tax compliant and gravitate towards digital payments.

To put this in context it is important to understand the key taxation related issue in the restaurant industry and the supporting eco-system: 

Lower Sales Reporting by restaurants (by conveniently siphoning off cash collections), thus resulting in lower GST and lower income taxes payable to the government. 

There are 4 big motivations for the restaurant industry to siphon off cash collections from sales:

1) Lower input costs: Suppliers are more than happy to offer products for cash (with no tax). For small suppliers, cash is a more convenient way of doing business and they don't need to bother about tax filings. It is also a way for them to compete better with larger/professional suppliers, who charge taxes.

2) Rental Payments: The biggest incentive to deal in cash is for landlords and they are very happy to take a large portion of their rental payments in cash. Cash payments are also a great way for them to reduce income taxes. They can also ask the restaurateurs to shell out more rent in lieu of the GST not charged to them (e.g. 18% GST gain split between the landlord and the restaurateur).  

3) Staff Salaries: If restaurants officially employ more than 10 people, they need to register for ESI and when the number crosses 20, PF becomes mandatory. They also need to pay annual statutory bonus, leave wages and double salary for working on holidays (NFH - National Festivals & Holidays). Both ESI & PF, involve deductions from employee salaries and all of the above implies higher costs for the restaurateur. The largely migrant restaurant staff population does not value long term benefits nor are they keen on going to a ESI hospital. What matters to them largely is cash in hand. Having cash available to do this means restaurateurs can pay their staff more and avoid PF/ESI registration & the related expenses and compliance requirements.  

4) Paying lower GST and income taxes - Direct benefit of reporting lower sales. I believe this is not a primary motivator for restaurateurs and is simply an added benefit that comes with the solution to address the above 3 issues. 

Issue number 3 above (Staff salaries) is not something GST could have directly addressed. But GST could have truly helped with issue 1, 2 & indirectly 4. 

Allowing input credits may not altogether solve the problem of lower sales reporting by restaurants, but would have atleast pushed them to ask for proper bills from landlords and suppliers in order to avail input credit, thus addressing issue 1 & 2 above. Rental collections by landlords through banking channels would have a significant positive impact on GST collections as well as on income tax collections. Smaller suppliers would also slowly gravitate towards digital payments and proper tax payments. Because of the above, the restaurateur’s motivation to siphon off cash would reduce and this will mean higher GST and income tax collections for the government. 

The government should have stayed with the GST framework, kept the GST rate at 12% for all restaurants (or stayed the course with 18%/12% rates as earlier) and allowed them to avail input credit. This would have ensured better collections and also helped clean up the supporting eco-system. Businesses would have been encouraged to move away from cash payments and gravitate more towards digital payments, deal with vendors who are professional and pay taxes honestly and also force landlords to show the real rentals they charge, pay GST & income taxes as per the rules. The GST regime with input tax credits would have slowly pushed the industry and the supporting eco-system towards becoming professional and paying taxes honestly. This would not have been a populist move though, but the long-term benefits would have been very impactful. As for consumers paying more, the government should have let market forces play their part. Why is the government trying to regulate whether a customer should pay Rs. 20.50 or Rs.22.40 for an Idly? Food is an essential need, eating out is not. 

GST Rates at Restaurants

With the GST roll-out effective July 1, the tax applicable on restaurant bills has been made quite clear. Yet customers seem to argue with the restaurant staff on rates applicable, especially for take-away and home delivery orders. I have provided below the specific clauses applicable and a copy of the advertisement issued by the department specific to restaurants for your reference. You can take a print-out of this and display/show it to customers who have queries on this.

Ad posted by the department in the Times of India on Aug 13, 2017

Ad posted by the department earlier in June 2017

There are 4 kinds of restaurants:

1) Any business with less than 20 lakhs annual revenues need not even register under GST nor do they need to pay anything under GST. So most small roadside eateries are fully exempt from GST.

2) Small restaurants with annual turnover less than 75 lakhs. Note that if a small restaurant has 2 branches under the same legal name with the same GST number, the total revenues of both the restaurants are taken into account to determine the 75 lakhs limit.
Such restaurants with annual revenues less than 75 lakhs can register under GST under the composition scheme and the applicable rate of GST is 5%. Like in the earlier composition scheme under VAT, the restaurant cannot charge the 5% to customers. i.e. If an item is priced at Rs.200, the customer can be charged only Rs.200. 5% of Rs.200 is then payable by the restaurant as GST.

Note: For restaurants in the following states, the annual turnover limit will only be Rs. 50 lakhs - Assam, Arunachal Prdesh, Manipur, Meghalaya, Mizoram, Nagaland, Tripura, Sikkim & Himachal Pradesh.

3) Restaurants without air-conditioning - the rules state that the restaurant should not have AC in any part of the premises. So restaurants with a non-AC section and AC section will still have to charge 18% GST. In practice some restaurants are charging 12% GST for the non-AC section and 18% GST for the AC section, if the AC section in a separate floor with a separate entrance. This seems to be incorrect as per the definition as the GST number is the same for the AC and the non-AC restaurant in the same premises.

4) Restaurants with air-conditioning (in any part of the restaurant) need to charge 18% on all bills for food prepared in the kitchen. The 18% rate is applicable for dine-in, take-away, delivery and even party orders from the restaurant. If the AC restaurant also sells pre-packaged food, such as Namkeens (e.g. Packed Chips in a Halidrams or Adyar Ananda Bhavan), the GST applicable on these items will be 12%

4) When customer order from third party websites such as Swiggy, Foodpanda, Zomato, UberEats etc., the respective restaurant's GST rates need to be charged. If any service charges are levied by these sites, GST of 18% is applicable on the service charges. E.g. If a customer places an order on Swiggy from a non AC restaurant for Rs. 200 and a delivery charge of Rs.40 is levied by Swiggy, then the GST chargeable should be: 12% GST on Rs.200 + 18% of GST on Rs.40 = Rs.24 + Rs.7.20 = Rs.31.20. Total bill with GST = Rs.200 +Rs.31.2 = Rs.231.20.


Google search throws up several results - have provided a few of those links for easy reference.

NDTV: http://www.ndtv.com/india-news/gst-how-composition-scheme-for-restaurants-small-traders-manufacturers-will-work-1717363

Business Standard: http://www.business-standard.com/article/economy-policy/gst-are-hotels-eateries-overcharging-you-how-to-get-the-math-right-117071200236_1.html

Cleartax: https://cleartax.in/s/impact-gst-food-services-restaurant-business

BGR: http://www.bgr.in/news/food-ordering-apps-uncertain-of-gst-slab-charge-customers-variable-rates-decline-orders/

"Start Up your Restaurant" - Book Review on LIVEMINT

The first review of our book "Start Up your Restaurant" by Sumana Mukherjee on LIVEMINT.

Link to the Review:

http://www.livemint.com/Leisure/A8cynEBMop4x5Z39SgUfSN/So-you-think-you-want-to-open-a-restaurant.html

Reproduction of the review:

So you think you want to open a restaurant?

Everything you wanted to know about the business but didn’t know whom to ask

Sumana Mukherjee

Mar 9, 2016

LIVEMINT.com

Photo: istockphoto (reproduced from livemint.com)

A restaurant cannot be a vanity project but needs to make business sense to survive.

It’s such a common refrain that it isn’t even funny anymore. How many times have you heard someone say that s/he really needs to chuck their day job and set up a restaurant? Or maybe you’ve said it yourself. The commonest setting for this observation is usually after a few drinks at the buzziest place in town, while waiters run around with the orders for the table and the music reverberates through the heart. Or, possibly, after a meal at home, when contented friends and family lounge around the dining table and talk turns idly to “wasting your talents” between burps of ghee roast or dhansak.

It’s on just such an occasion that someone should produce this book. If it wasn’t called Start Up Your Restaurant, it would be called a Reality Check.

The 10-page introduction, in fact, seems to have a single-point agenda: To shake up the reader and make him/her realize that to transform a daydream into a successful business is more elbow grease than greased lightning. So you think you understand the business because you eat out regularly? Or because you are a great cook? Or the entry barriers are low? Or just because you’re sick and tired of sitting behind your laptop all the time and want to be in a place where you can be with friends and have a whale of a time?

Get past these pages and then you face the hard questions.

Failed (and resurrected) quick-service restaurateur Jayanth Narayanan and food writer Priya Bala have done a remarkable job in breaking down every single process that goes into building a successful restaurant— and, let me tell you, it’s a LOT of processes, right from the conceptualization and raising funds to acquiring licences and advertising the restaurant. The authors are unambiguous and clear-speaking when it comes to the sticky points likely to bewilder a newbie—VC funds or own savings? QSR or cafe? Vast upper floor or tiny ground-floor – or roof top? Splash out on the interiors or on the kitchen? Wine or beer —or neither?—which may be just what the aspiring entrepreneur is looking for.

The authors are unequivocal about the fact that a restaurant cannot be a vanity project but needs to make business sense to survive—if only because it has real money sunk into it, be it one’s own or a venture capitalist’s. This takes away some of the romance associated with a dream project but it is perhaps an essential wake-up call. To that end, there are test cases, financial matrix charts, even job descriptions and staff allocation charts. Most inspiring are the first-person accounts from real-life entrepreneurs, both trained restaurant professionals and those who, one day, sat up and said, “I really want to open a restaurant”— and actually did it.

By addressing all levels of the restaurant trade, it is inevitable that the authors will lose some of the nuance required for each segment— more so because many aspects such as trade licences and alcohol permits are state-specific. Still, as far as it is possible for a book to be all things to all people, Start Up Your Restaurant has all the basics covered. It is the book you need to read when the idea strikes you, when you feel like giving up on the dream, when you’re on your way and when you’re there— by which time you could write your own book on the journey. But you won’t, of course, because you won’t have the time.

Book Launch: "Start Up your Restaurant" and an interactive learning session on the Art & Science of Running Restaurants

You are cordially invited for the launch of our book "Start Up your Restaurant" and an interactive learning session on the Art & Science of Running Restaurants with Manu Chandra, Chef & Partner, Toast & Tonic, Monkey Bar, Fatty Bao and Executive Chef, Olive Beach.

When: 6 PM to 8 PM, Friday, March 4
Venue: NUMA, Church Street, Above Social Bar & Pub, Opposite Empire Hotel.

Here’s the book you’ve been waiting for

It is inspired and encouraged by the immense interest this blog generated that we set out to write ‘Start Up Your Restaurant.’ The definitive guide for everyone who dreams of owning a restaurant, we’ve taken every effort to ensure it’s the one book aspiring restaurateurs will need to read.

It’s a step-by-step guide through the entire process – from exploring concepts, drawing up a business plan, funding, choosing a location, planning the interiors and kitchen, arranging supplies, creating a menu and executing food orders, hiring, getting licences and approvals, marketing, launching and operating.

This easy-to-read book also contains stories of restaurateurs who’ve made it big and their mantras for success. Whether starting your own restaurant is your big dream or you want to run your existing food business better, you’ll find huge value in this book.

Start Up Your Restaurant, published by Harper Collins, is now available for pre-order on Amazon. To get your copy, click here.

You can also buy it on Flipkart, Snapdeal, uRead or Infibeam

The Plastic Carry Bag and related ban in Bangalore - Impact on restaurants

Over the last few weeks, several localities in Bangalore have started banning plastic carry bags. The BBMP (Bruhat Bengaluru Municipal Palike) has been setting up meetings with retailers and food businesses advising them of the ban. It looks like the ban will come into full effect from Feb 27, 2015. How will this impact the restaurant business?

Businesses with an active take-away and home delivery business:
1) You will have to start using woven cloth-like bags. These cost almost the same as the plastic carry bags and all the packaging vendors have started stocking these.

Through some research into these woven cloth-like bags I learnt that even these bags contain plastic.There are 2 variants of these bags - Virgin and Non-Virgin. The Non-virgin ones are the cheaper option and contain plastic. The virgin ones are made with cloth and are more expensive. I don't expect BBMP to enforce this differentiation atleast in the short run.

A question: Banning plastic bags should really mean banning several products available in gorcery stores like rice, dal, biscuits etc. I assume the BBMP crack-down is focused on only the carry bags to carry all the other stuff that anyway come in plastic bags. While any reduction in plastic is a welcome move, for real impact, the government needs to go to the heart of the plastic consumption zone - the FMCG companies. Guess that will have to wait for now.  

2) Plastic & Aluminium Foil containers -  These are the containers in which is actually packed by the restaurants. These can be used for now.

3) Pouches - Plastic and aluminium: These are the small thin plastic and silver foil pouches in which restaurants pack side dishes (sambar, chutney etc.), condiments etc. Several restaurants use these to pack the actual food too (e.g. Biryanis). All of these can no longer be used. This will probably be the biggest impact to restaurant and food businesses.  The pouches are cheap, very convenient to pack and are leak proof when tied with a thread or rubber band. Plastic container alternatives to these are expensive (over Rs.2 per container) and are prone to leaks. There are thicker aluminium foil pouches too available which can be used, but these again are expensive. To put this in perspective, bakeries will no longer be able to pack bread in the transparent plastic foils. Not sure how practical the enforcement of this can be.

4) Cling wrap and aluminium foil:
Plastic cling wraps can no longer be used. Aluminium foil rolls can be used. Plastic cling wraps are the cheapest and easiest way to cover food containers. Without these, the cost of using aluminium foil will be prohibitive. Every restaurant uses cling wraps extensively to store pre-cooked ingredients and pre-processed foods. These are used only in the kitchen so may not catch the attention of the BBMP officials when they come to inspect. But technically, usage of any of these will make business liable to pay fines and even have their licenses canceled for non-compliance.

While reducing plastic usage is a good thing, I feel that the BBMP is taking a measure that significantly affects small & local retail businesses, but ignores the larger problem of FMCGs and large companies using plastic extensively. Infact without the simple plastic bags, small retailers will find it difficult to sell loose products (e.g. rice, sugar etc.) which are cheaper for the consumers and the margins are better for the retailer. They will now have to sell branded pre-packaged products which anyway come in plastic bags (except that they look nicer and have branding on them).

For the restaurant business, this will be a pain to deal with. The biggest pain will be felt by the street food vendors and low cost food joints who extensively use the low cost pouches. For others, not being able to use cling wrap in the kitchen will be an operational problem. They will slowly have to get used to container with lids. 

Service Tax - Applicability for Restaurants

The cloud over the applicability of service tax in restaurants seems to have finally passed and clarity has now emerged.

1) Service Tax of 14% is applicable only for dine-in bills at restaurants which are air-conditioned. The 14% needs to be levied on 40% of the bill value.
2) Service Tax is not applicable for take-aways and home deliveries; This is the final resolution and the one that was causing the most confusion
3) If a restaurant levies service charge, the full 14% service tax is applicable on the service charge component of the bill.
4) Input credits for service tax can only be off-set against the revenue component on which service tax has been collected. E.g. If a restaurant is paying service tax on the rental, say 14% on Rs. 1 lakh per month, the Rs.14,000 service tax can be off-set only against the service tax collected on the dine-in component of the revenues. i.e. if 50% of the revenues of the restaurant are from dine-in, then only 50% of the input credit (i.e. Rs.7,000 can be offset).
5) Service tax will not be applicable for non-AC restaurants.

Item 4 above is the most complicated rule to follow for restaurants and needs careful computation by your accountant.

The Food Tech wave in India - is it for real?

Over the last few months, the term "Food-Tech" has been in the news because of the extensive venture capital funding activity in the space. The larger players in this space are Foodpanda (which has acquired both Justeat and Tastykhana), Tinyowl, Swiggy, Freshmenu, Roadrunnr and of course Zomato. There are several smaller players such as Yumist, Holachef, Spoonjoy, Dineout, Delyver, Opinio, Limetray, Pickingo, Grab, Jomaange etc., who have all raised some sort of funding.
I have been grappling with food tech in the same manner brick & mortar retailers have been grappling with e-commerce. First off, calling these companies "Food-Tech" seems very misplaced to me - there is nothing these folks are doing with respect to technology related to food. All they are doing is enabling consumers to order food/transact with a restaurant.

They are really providing a computer/mobile device channel for consumers to do 4 things in a loop - search for info on food joints, transact with them (order food for delivery, book a table etc.), handle logistics (i.e. deliver the food) in some cases and provide feedback for everyone else to search better. For convenience and to go with the flow, I am also going to use the term "Food Tech" to refer to these companies, but in the above context.

I do believe that tech & "e" in the food space is different from other segments because of the following reasons. I will explain each of these reasons in detail in separate posts. I will also try and evaluate each of the companies in this space and provide my perspective on their business models.

1) This is a segment where the entire transaction needs to be completed within a very short time frame - i.e. the food needs to be delivered to the customer within 30-45 minutes. This makes it virtually impossible to achieve efficiency in logistics since orders cannot be easily clubbed based on just the delivery location as both the source and the destination are variables. I am not sure how technology (other than something like drones) can really make a significant difference to this. Having a Uber style model where you have delivery boys on standby in the local locations to go the restaurant, pick up the food and deliver it, seems unsustainable because of the dependencies involved with the restaurant and the concern mentioned in point 2 below. If companies like Roadrunnr, Swiggy are able to crack this, I expect them to be more like a on-demand delivery staffing firm with a lot of staff in every local area. Restaurants would love this as they don't need to employ delivery staff, buy bikes, maintain them etc. The trouble will be with the economics - the cost of delivery is estimated to be upwards of Rs. 80-100 per order, when you average it out over a week. This means that the delivery companies will need to charge restaurants over 25% of the bill value as their fees for the service for the model to make economic sense.

I will write a separate post evaluating the business model of the specific companies mentioned above. The trouble is that this becomes more a staffing business (like what a Group4 is to the security space) and managing labour on the ground will not be easy.

2) The orders are clustered in short time blocks - Lunch & dinner times account for 90% of a restaurant's business and within this the window for orders is about 90 minutes. Majority of customers eat lunch and dinner around the same time - in a block of about 90 minutes. This makes staffing and the associated logistics of delivery impossible to manage in an efficient manner. For e.g. if a restaurant has 4 delivery boys, it will be great if they receive lunch orders sequentially between 12 noon and 330 PM. The problem is that the orders come in a bell curve pattern - 10% of order between 12 and 1 PM, 80% of order between 1 and 2 PM and the remaining 10% post 2 PM. The restaurant needs only 1 delivery boy between 12 and 1 PM and post 2 PM to deliver the food promptly. But they would love to have 10+ delivery boys between 1 and 2 PM. This problem cannot be solved using fancy tech - whatever analytics, clustering you do, the only real solution is to have more staff available between 1 and 2 PM.  

3) The product has a very short shelf-life - therefore cannot be stored in a ware-house and shipped upon receiving the order like with a product such as a phone or a digital camera. This again makes the opportunity to use central warehouses, logistics planning, optimisation etc. ineffective.

4) The product needs to be prepared and packed only upon order - cannot be shipped right away. The moment of truth in food retail is at the retail unit. This means that the restaurant needs a minimum of 10-15 minutes to keep the product in a manner that is ready to be shipped. Companies like Freshmenu have cut down this 10-15 minute period by having a small fixed menu everyday, allowing them to prepare and pack in advance and upon receiving an order, simply handle the delivery process.

In summary, I believe that food-tech companies will be better off focusing on static restaurant activities like information services and pure technology related components such as order taking (with payment). Handling logistics at the last mile is going to involve dealing with ground level and labour management issues.

Folks who have figured it out - Rajdhani

In my assessment, there are a few restaurant concepts/businesses in India, who have figured out a scalable model (i.e. create a chain of restaurants), have got their basics right, have executed well and are on the path to becoming a really large and successful restaurant company. I will talk about one such business in each posting under this title.

Rajdhani - A single product offering (A Gujarati/Rajasthani Thali) served in a comfortable ambience - they seem to have made a decision to try and open all their new units primarily in malls. 

Why I like their model:

1) In general have a strong liking/bias for single product models - It makes the operations very easy to manage, customers exactly know what I will try and explain this in a separate post.

2) Whenever a customer walks into their restaurant, the APC is given (Rs. 325 to Rs. 400). From a customer's perspective, it is unlikely that he/she will go unsatisfied after the meal, simply because of the variety of food on offer and the great desserts. Feels like an Indian wedding lunch.

3) From an operational perspective, the local chef has some flexibility to choose which dishes to make based on the cost of the ingredients/vegetables in season. Plus there is no order taking - so saves a lot of time and confusion in the kitchen, but helps them rotate the seats in the restaurant a few times without the customer feeling rushed.

4) All Veg model - Attracts a lot of customers who simply won't visit a restaurant that also serves non-vegetarian food.

I believe that their concept can be tweaked to make it a very successful international brand. 

Challenge: Their service levels need to be kept in check as with their aggressive growth, they seem to be focusing less on training heir front-line staff to be polite to their customers.

Rajdhani is experimenting with a premium version of their offering "Rasovara". The early reads of this is that the same Rajdhani food is served in a slightly more elaborate manner and in courses. The service levels, the ambience and food quality differences are very minimal. In my assessment, additional effort needs to be put into their premium brand to allow customers to clearly understand the additional value they are getting from the premium brand.

The big case for small menus

As a restaurant critic, I’ve always favoured restaurants with small menus. I found my reasons for this bias reinforced during my recent interaction with MasterChef judge, chef and restaurateur George Calombaris. His top-rated Melbourne restaurant, The Press Club, lists just 12 dishes on the menu and guests can turn these into 4-, 6- or 9-course meals. At the other end of the market, he has the Jimmy Grants chain which serves just Souvlaki, Salad and a few sweets.

Narrowing down the range of their offerings is something many of our traditional food businesses do really well. Take, for instance, Brahmin’s Coffee Bar in Basavangudi, which has just four dishes on its hugely popular menu, or Tamil Nadu’s favourite Murugan Idli Shop which thrives by selling idlis and, at the most, dosas.

It’s the casual dining and so-called fine dining restaurants that seem unable to give customers the pleasures only a small, highly specialized menu can offer. So, we have Andhra restaurants serving hakka noodles and sweet corn chicken soup; even chefs who set out to deliver gourmet class can rarely settle for a menu that has less than several dozen dishes.

The concept of small menus can work for both customers and restaurateurs. For the diner it means an assurance of freshness; long menus mean many dishes that are cooked ahead and stored. When a kitchen cooks fewer dishes, these can be prepared with greater care and attention to detail and the dining experience is enhanced.

For the kitchen team, it certainly means less stress. The chef and his assistants need to master fewer dishes and have a better chance of perfecting them. Inventories are smaller and restaurateurs can pay for better quality ingredients. Serving staff, too, can have a better understanding of, say, 60 dishes, rather than trying to remember what goes into 120 menu items.

And still, even the smartest chefs and restaurateurs are wary of cutting down the number of dishes on their menus. They worry that it will evoke that constant complaint of ‘Not enough choice’. The worry is justified, for Indian customers do indeed want to see huge menus and find satisfaction in the notion that they are spoilt for choice. They don’t seem to grasp that restaurants that attempt too many things, do not get most of them right.

 Clearly, we are still some time away from diners patronizing restaurants with small, specialized menus. Meanwhile, I’d love to see at least a few adventurous restaurateurs have the confidence to present small menus, backed by the belief that they are putting out their very best.

Exclusive interview with George Calombaris of Masterchef Australia

Draw from your culture, don’t set out to be the next Blumenthal or Redzepi, says MasterChef judge George Calombaris

Announce that you’re off to meet George Calombaris and you’re suddenly in an enviable position. In his role of MasterChef judge he’s become a celebrity, particularly in India, but he is primarily – by his own admission -- a chef and restaurateur. George was in Bangalore over the Independence Day weekend to present a taste of his highly acclaimed Melbourne Restaurant, The Press Club, and I got to chat with him at a tasting session here.

Chef or TV star, I ask him? ‘I’ll always be close to my kitchens,’ he says. George’s restaurant collection currently includes the swank Press Club, The Press Club Projects – which creates exclusive dining experiences on request – Gazi, which is a more approachable, affordable restaurant, the Hellenic Club, Mastic Café and Jimmy Grants, the fourth branch of which opens this month, serving souvlaki, salads and sweets in a casual setting.

All the menus find their origins in the chef’s Greek roots and he pushes them to the next level with his imagination and skill. Especially at The Press Club, the food is ultra-modern, but George abhors the term ‘molecular gastronomy’. ‘It’s a made-up word that means nothing,’ he says, adding that he’s all for experimenting and pushing boundaries in the kitchen. The master of such experiments is, of course, Heston Blumenthal and the two are friends. In fact, when George conjured up a rendition that resembled a clothes line with chips and crisps hanging from it, as if in a lawn, he wanted to infuse the presentation with the smell of cut grass. ‘We tried and failed several times, when Heston suggested using a rotting banana whose components give off the same smell. It’s about understanding those elements,’ George says.

It’s all about the food for this passionate chef. ‘As a restaurateur, I’m lucky that I have a great team that looks after the stuff I don’t particularly like doing,’ he says. So, George can continue to work on elevating the meal experiences he creates, sometimes borrowing an ingredient from another cuisine, at others, using a revolutionary new technique. While the imagination can run wild in George’s kitchens there is no compromising on the basics. ‘It’s about the freshest produce and the best ingredients,’ he says. That insistence was on display when, at the cooking demo-cum-tasting session, he swapped the salmon for Indian sea bass in a dish, because the former didn’t make the quality cut. He also used naan as the souvlaki wrap and made the observation that ‘You have to respect where you are’.

For George, it’s about celebrating the very essence of local culture and its culinary traditions. ‘India has such a wealth of cuisines and such a rich food heritage. That’s what young chefs should be drawing on, rather than aspiring to be the next Blumenthal or Rene Redzepi,’ he says with conviction. ‘On my visits to Delhi, I’ve seen these street stalls that do just one thing, say, jalebis, and do it so well,’ he says.

He’s a firm believer that specialization is important. At the Press Club, for instance, you wouldn’t see more than a dozen dishes on the menu. ‘It has to be that way if you want to deliver quality,’ he says. ‘It’s 12 dishes, 34 diners and 20 staff.’ I tell him that in most restaurants here anything less than 100 dishes on the menu would evoke howls of ‘no choice.’ ‘You come to my restaurant to be in my hands, right?’ asks George. Clearly, the Indian diner has some way to go before he appreciates that sort of specialization and the quality it can deliver.

Besides the food, George’s restaurants are known for their superb service and earn high ratings on customer review sites. ‘I’m not particular about whether they drape the napkin correctly over their arm or pour the water from the left. I enable them only to create a warm, fuzzy feeling for the customers who walk into my restaurants. My staff is my family, I love these guys,’ he says.

His faith in his staff doesn’t mean he’s not watching every move. Can he never stop looking at his phone? ‘Have you been talking to Matt Preston?’ he laughs. ‘Well, I wouldn’t say I’m a control freak, just a very controlling person.’

Among the things he controls is what he feeds his guests, himself and his family. Is it true that when his 4-year-old son James goes to birthday parties at fastfood restaurants he’s given a packed meal?’

‘Would you give a child drugs and alcohol? Junk food – processed, over-refined, bleached  -- is just as bad,’ George says. ‘People have religions, mine is food and I will not have it desecrated.’

Interview & Post by Priya Bala