Domestic food chains out-serve foreign outlets. Mumbai, December 3: KFC and McDonald’s may be struggling to make money but home-grown quick-service restaurants (QSRs) are on the path to profitability. Adopting a lean business model while keeping their capital expenditure (capex) low, QSRs such as Faaso’s, Goli Vada Pav and Ammi’s Biryani have turned profitable or are on the threshold of breaking even. Quick profits For example, after growing 20-25 per cent in the past two quarters, Faaso’s — backed by Sequoia Capital — expects to break even next year. “Our transaction amounts may be smaller than those of MNC brands but our meal-replacement delivery model, with wraps and biryanis, has higher sales frequency than a pizza from Domino’s. We should turn profitable in 6-8 months,” says Revant Bhate, Vice-President & Promoter, Faaso’s. Other Indian QSRs serving pav vada and biryani such as Goli Vada Pav and Ammi’s Biryani, are investing in smaller outlets with lower capex, where the return on capital is expected to be better than that of the heavy spending MNC brands. Recently, Ammi’s Biryani entered Mumbai, but the chain prefers to have its outlets in the suburbs rather than paying steep rentals in South Mumbai. “We want to keep rentals at 10-15 per cent of sales — for which we need small formats — and stay in the suburbs. “Besides, we prefer to have a takeaway and delivery format at 500 sq ft,” says Navaj Sharief, CMD & Founder, Ammi’s Biryani. “Unlike an MNC that would have a capex of more thanRs. 1 crore to set up a store, we spendRs. 25-35 lakh.” Expansion plans Backed by SAIF Partners, Ammi’s Biryani is now ready to go pan-India with plans to increase its count from 62 outlets to 125 by next year. Goli Vada Pav also prefers to have an asset-light model with outlets measuring 200 sq ft. “We are at the lower end in the category of vada pav, yet we source our patties from the same vendors as McDonald’s. MNCs are capex-heavy as they have to build their brands with a long gestation period, and profitability is secondary for them,” says S Venkatesh, MD & CEO, Goli Vada Pav. Having raisedRs. 21 crore from Venture East, the 10-year old Indian QSR now wants to go to smaller towns such as Gorakhpur, Kochi and Bhopal, where the MNCs have a limited presence. Besides, rentals in such places are less compared with big metros. Indian cuisine is another big factor that’s working in favour of domestic food outlets. Lebanese QSR Maroosh (funded by Unilazer Ventures) had decided to make Indian cuisine a part of its menu to drive sales since its inception nearly 15 years ago. “We realised that to go pan-India, we would need to include Indian food since a pizza or a burger is a one-off, aspiration-driven food item, while it is traditional Indian cuisine that is expected to work in the long run,” says Ketan Kadam, CEO, Maroosh. Desi preferences So, even if KFC introduces biryanis or Domino’s tries to get chicken tikka as toppings for its pizzas, it is Indian companies with ethnic food such as parathas, chicken tikkas or biryanis, that are favoured over the MNC offerings in the same category. Zorawar Kalra, MD, Massive Restaurants, which owns Masala Library by Jiggs Kalra, Farzi Café and Made in Punjab, says: “MNCs may have better processes, but when it comes to Indian food, Indian chains do a better job.”
Posted on: Thu, 04 Dec 2014 05:59:04 +0000
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