ENTREPRENEUR SPECIAL ......................Serving desi delights

Serving desi delights



Dheeraj Gupta overcame the failure of his first venture to launch a successful vada pav chain Jumbo King. The desi fast-food chain recently crossed revenues of `25 crore.

After I completed my MBA in hotel management in 1998, I decided to start my own venture. The idea was to establish a sweets manufacturing and distribution business. My parents were very supportive and offered to fund it, but I opted to take a bank loan instead.

I was looking to model my business on the lines of chocolate companies in terms of manufacturing, packaging and distribution. I leased space, purchased equipment and moulds, and employed 10 people to kick-start the business. It didn't take off.

The market, it seemed, was not ready to entertain such a concept. But I was not willing to give up. I borrowed more money to invest in the venture. Still, it continued to bleed. Within two years, I lost around `50 lakh. In addition to bank loans, I owed money to friends and relatives. It was time to do a rethink.

When I was doing research for my sweets business, I learnt a lot of interesting things.
What caught my attention, in particular, was how successful food chains such as McDonalds, Dominos and Subway primarily focused on one product -burger, pizza, sandwiches -and, yet, had a huge customer base. I decided to do something similar.

Vada pav is a spicy Maharashtrian snack.
It is quite popular in Mumbai. I found that there were hundreds of vendors selling the snack on the city streets. The market was huge but unorganised. I decided to get into the vada pav snacks business.

I somehow managed to raise around `2 lakh to start the business. I leased space for an outlet just outside Malad railway station, north Mumbai, and employed four people. The idea was to outsource the manufacturing of the patties to a vendor for a small fee. We would fry them in the store and concentrate on sales.
There was a lot of wastage in the vada pav business. By cutting wastage and, thus, cutting costs, I had the option of reducing selling prices. Or, I could offer a large-sized vada pav and keep the prices intact. I decided to go for the second option. We began offering vada pavs 20% larger than those being sold in the market. Appropriately, we decided to name them Jumbo King.
It clicked. We started making money from day one.
Opening day -August 23, 2001 -saw sales worth `5,000.

We did a lot of innovation with our product and its presentation. Hygiene was a priority. The staff wore kitchen gloves and sold the vada pav properly wrapped -just like a McDonalds burger. The customers loved this. We made it a point to thank every customer for providing us the business. Soon, through word of mouth publicity, our business began to grow. We concentrated on selling just one kind of vada pavs. In the first year, our turnover touched `40 lakh. I repaid the debt from my earlier venture.

In 2003, we launched our second outlet at Kandivili -another north Mumbai suburb. By 2005, we had five outlets in Mumbai. Around that time, we started receiving franchise-related queries. In 2006, we decided to set up our presence in Surat, Gujarat. But, we lacked a sound supply chain and had to shut down the outlet. Our manufacturing base was in Mumbai. This meant either starting a new manufacturing base at Surat, or transporting patties from Mumbai. From a cost and quality perspective, neither was feasible.

I started looking at options to help sort out this problem. In 2007, I met a manufacturer who was providing ready-to-fry food options to a leading multinational food brand. They would manufacture the patty and freeze it at sub -18° C. The patties would then be transported by a freezer van to various outlets.
This sorted out our biggest problem.

We started expanding our presence via franchises and, by 2009, had 38 outlets.
Meanwhile, we closed down most of the company managed outlets to concentrate on expansion via franchises. In the same year, we introduced several Jumbo King vada pav variants. Today, we are present in 12 cities and have 65 outlets. We have a staff of 15 that manage operations across the country. We recently sold our 100 millionth Jumbo King vada pav. We aim to set up at least 500 outlets in the next five years. But there are several issues that need to be resolved. We have a centralised kitchen in Pune from which frozen patties are transported to outlets across the country.

We cannot set up centres where the cold storage facility is not present. We have around 200-250 franchise-related queries with us, but we are very cautious in handing them out. It is a question of brand image.

We are hoping that infrastructure-related problems will be resolved in the next five years. Last year, we crossed a turnover of `25 crore and are hopeful of revenues of `45 crore in 2014-15.

(As told to Amit Shanbaug) Dheeraj Gupta 39 years Company Jumbo King Headquarters Pune Seed capital `2 lakh (2001) Age at starting business 26 years Source of funds Loan from friends Turnover in the first year `40 lakhs Present turnover `25 crore My first venture was an Indian sweets manufacturing and distribution enterprise modelled arround the the lines of chocolate companies. It failed to take off.
I started with just a single vada pav outlet in Malad, Mumbai. The business boomed and now the company has 65 outlets. I hope to expand this to 500 in the next five years.
By cutting on wastage and, thus, costs, I was able to introduce vada pavs 20% larger in size than what the competition was offering for the same price.

ETW140623