While many international restaurant brands are already in India, a host of others are lining up to commence operations. But almost every CEO B&E met for this story lamented the over-policing by the government... We take a quantitative stock analysis! by Vareen Gadhoke Ray & Swati Sharma
The Conspiracy Theory
In spite of the importance of the restaurant sector to the Indian economy and its immense promise, it has still not fulfilled its potential. While some of the factors responsible are intrinsic and hence can be addressed, but fact that the industry does not get its share of support and encouragement either by way of legislation or by way of enabling infrastructure, is turning to be a huge hindrance to the growth of the sector. “I think logistics and back-end have been always a problem for Indian restaurant players and probably that has stopped us from creating a pan-India brand. But having said that in India the franchisee level is very strong and that often helps for proper expansion,” says Ashish Kapur, MD & Co-Founder, Yo! China. Ajay Kaul, CEO – Indian subcontinent, Domino’s Pizza, further divulges, “Having a strong Indian supply chain does help a lot in cutting down costs and at the same time, what becomes important is to have strong logistics." Some of the key weaknesses that are hampering the growth of the sector are infrastructure (including lack of organised supply chain solutions, cold chain, power & water supply), supply of quality, trained & employable manpower, difficulty in restaurant financing and lastly the complex maze of licensing & taxation laws, which differ from state to state. States Samir Kuckreja – President, NRAI and CEO, Nirula’s, “In spite of the importance of the restaurant sector to the Indian economy and its immense promise, the industry still faces some challenges, which are related to government policies such as over licensing, service tax on commercial rentals & antiquated laws. A restaurateur has to go through the complexity of obtaining multiple licenses for one restaurant – between 10 & 15 in different cities. In fact there are separate licenses needed for playing music, serving liquor, et al. Apart from that the license fees vary across states.”
Although their operational dynamics are different, restaurants have always been clubbed with the hotel industry and do not get the exclusive treatment it deserves as a sector. Be that as it may, industry status to a sector results in a major transformation in terms of outlook, generates investments and instils corporate culture and discipline, which is immensely beneficial to both the economy as well as consumers. Still, it'll be quite sometime before we see India's first foodie billionaire... quite some time!
Sanjay Coutinho
COO, Barista Coffee Company
“Not Chasing Numbers”
B&E: How is Barista different from Café Coffee Day, Mocha & the likes?
SC: Each brand has its own uniqueness and a different set of audience; we are targeting a totally different segment mostly 25 and above, which is a more mature audience while others are targetting youth. Our ambience appeals more to our TG – people on-the-go. The music is somber, the colours are soft, board games like scrabble and chess again target a very mature audience.
B&E: Why is Barista operating a separate niche format?
SC: We have two formats – the Espresso Bar and the Crèmes. In Crèmes we have a lounge format and provide table service. Here everything is different, from locations to menu and ambience. Espresso Bar on the other hand has self service. We launched Crèmes because we had to upgrade a brand a bit.
B&E: How many outlets do you currently have & what are your plans going forward?
SC: Right now we have 210 in India & 20 overseas – 11 in Srilanka, 5 in Middle East, 2 in Oman and 1 in Bangladesh. There is a lot of scope in India and last year we managed to open around 40 outlets. This year also we are targeting the same, however we are not chasing numbers. In tier II cities, we're present in 26 cities. Every brand wants an outlet in tier II cities, so the demand there is of course more than the supply. In a lot of these cities where we have 2 outlets, we do plan to operate 4-5 now.
The Conspiracy Theory
In spite of the importance of the restaurant sector to the Indian economy and its immense promise, it has still not fulfilled its potential. While some of the factors responsible are intrinsic and hence can be addressed, but fact that the industry does not get its share of support and encouragement either by way of legislation or by way of enabling infrastructure, is turning to be a huge hindrance to the growth of the sector. “I think logistics and back-end have been always a problem for Indian restaurant players and probably that has stopped us from creating a pan-India brand. But having said that in India the franchisee level is very strong and that often helps for proper expansion,” says Ashish Kapur, MD & Co-Founder, Yo! China. Ajay Kaul, CEO – Indian subcontinent, Domino’s Pizza, further divulges, “Having a strong Indian supply chain does help a lot in cutting down costs and at the same time, what becomes important is to have strong logistics." Some of the key weaknesses that are hampering the growth of the sector are infrastructure (including lack of organised supply chain solutions, cold chain, power & water supply), supply of quality, trained & employable manpower, difficulty in restaurant financing and lastly the complex maze of licensing & taxation laws, which differ from state to state. States Samir Kuckreja – President, NRAI and CEO, Nirula’s, “In spite of the importance of the restaurant sector to the Indian economy and its immense promise, the industry still faces some challenges, which are related to government policies such as over licensing, service tax on commercial rentals & antiquated laws. A restaurateur has to go through the complexity of obtaining multiple licenses for one restaurant – between 10 & 15 in different cities. In fact there are separate licenses needed for playing music, serving liquor, et al. Apart from that the license fees vary across states.”
Although their operational dynamics are different, restaurants have always been clubbed with the hotel industry and do not get the exclusive treatment it deserves as a sector. Be that as it may, industry status to a sector results in a major transformation in terms of outlook, generates investments and instils corporate culture and discipline, which is immensely beneficial to both the economy as well as consumers. Still, it'll be quite sometime before we see India's first foodie billionaire... quite some time!
Sanjay Coutinho
COO, Barista Coffee Company
“Not Chasing Numbers”
B&E: How is Barista different from Café Coffee Day, Mocha & the likes?
SC: Each brand has its own uniqueness and a different set of audience; we are targeting a totally different segment mostly 25 and above, which is a more mature audience while others are targetting youth. Our ambience appeals more to our TG – people on-the-go. The music is somber, the colours are soft, board games like scrabble and chess again target a very mature audience.
B&E: Why is Barista operating a separate niche format?
SC: We have two formats – the Espresso Bar and the Crèmes. In Crèmes we have a lounge format and provide table service. Here everything is different, from locations to menu and ambience. Espresso Bar on the other hand has self service. We launched Crèmes because we had to upgrade a brand a bit.
B&E: How many outlets do you currently have & what are your plans going forward?
SC: Right now we have 210 in India & 20 overseas – 11 in Srilanka, 5 in Middle East, 2 in Oman and 1 in Bangladesh. There is a lot of scope in India and last year we managed to open around 40 outlets. This year also we are targeting the same, however we are not chasing numbers. In tier II cities, we're present in 26 cities. Every brand wants an outlet in tier II cities, so the demand there is of course more than the supply. In a lot of these cities where we have 2 outlets, we do plan to operate 4-5 now.
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Source : IIPM Editorial, 2010.
An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).
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