Thanks

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.

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

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.

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.

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.

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.