I'm back

My blog train got derailed a little bit over the last 2 months. While I can think of several reasons for my temporary pause in writing posts on my blog, the honest reason is simply laziness. It took emails from about a dozen readers enquiring if all was well and why I had stopped blogging, to wake me up from my slumber. With my post on the impact of inflation and increase in various input costs, I am hoping to restart posting regularly. Hope I don't doze off again.

PS: The pic above is from the telugu movie "Eega" (dubbed in hindi as "Makkhi" and also in several other languages). This is one of those movies I really enjoyed watching. 

Impact of increasing food costs on the restaurant business

Over the last 3-4 years, food costs have consistently been spiralling upwards. Most food items are now atleast 15-20% more expensive than they were 3-4 years ago, with a number of products almost at double the prices (e.g. Paneer - I remember having bought Milky Mist Paneer at Rs.95/kg at Metro in early 2009. Today the price of the same is Rs.185). Same story with good quality branded ghee and several other products.

The impact of such high increases is severe on the restaurant business, especially the value for money affordable food joints. Let's assume a local north indian joint. If the cost of the raw materials for a curry was 38 bucks earlier, the joint could price the item at around 100 bucks. The net sale price would be 96 bucks (after taking out 4% VAT). So the food cost would be 40%. Now if the cost of the raw materials go up by about 20% = 45 bucks. To maintain the food cost @ 40%, the new selling price would need to be 117 bucks. Now it would not be easy for the affordable food joint owner to suddenly increase prices by 17-20 bucks. This is just for a 20% increase in the cost of the raw materials. Given the prices have gone up by over 40% on an average, the local affordable & VFM food joints are no doubt in trouble.

What do I foresee for the industry in the next year? 
NOT GOOD STUFF
I can see a lot of the VFM affordable businesses struggling to stay alive. The market will slowly start accepting increased prices, but a lot of the businesses may not be able to hold on till that happens. This is because of the high increase in the food costs, plus an equally high increase in labour costs. Rentals, utilities etc. have also been very high, but even there the increases over the last 3-4 years have been significant (e.g. LPG cylinders now sell at 1700 bucks. 4 years ago the prices were at the 800 bucks level). Most businesses can absorb high cost increases in one or two of the key factors. Today, all the cost factors are coming into play, and the prices can only be increased by so much and may offset one or two of the factors.

The ones who manage to stay afloat?
GOOD STUFF
The businesses which manage to survive and sustain longer should be able to grab a larger share of the customer's wallet. While the increased sales will not lead to increased profits, it should help offset the increased cost of all the input factors.

So all the affordable VFM food joints need to get their seat belts on and survive the turbulence. As the famous dialogue in "The Dark Knight", the night is darkest just before the dawn. I sure hope that this is true for the restaurant business in India.

A 100,000 Thanks

A big heartfelt thanks to all of you for getting this blog to cross a significant blogging milestone - 100,000 pageviews. This gives me the energy and motivation needed to continue posting content that will hopefully  be useful.

Our Restaurant "Mani's Dum Biryani" now open in Indiranagar

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

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

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

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

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

How critical are the Interiors for a Restaurant?

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

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

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

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

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

1) Furniture - Tables & Chairs

2) Lighting Works

3) Restaurant Entry Area

4) Walls & Ceilings

5) Flooring

6) Operations Related Stuff - Cash Counter, Hostess, Waiting Area, Side Stations etc.

7) Air Conditioning

8) Kitchen Entry Area

9) Blinds/Curtains

10) Painting Works

11) Rest Room & Wash Area

Happy Deepavali