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.

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. 

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. 

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.  

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. 

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".

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