GLOBAL FOOD DESI HANDS
A fresh wave of international quick
service restaurant brands in India is spawning a new generation of franchisee
entrepreneurs
In his epic drama in 1903, Man and
Su perman, George Bernard Shaw wrote: “There is no love sincerer than the love
of food.“ More than a century later, it's not just Indian consumers who would
agree with the Irish playwright; also dis playing their passion for the chow
are entrepreneurs who are playing partner to some of the biggest restaurant
brands in the world in what's proving to be In dia's second wave of food
franchising.
If the first wave in the '90s began
with the entry of mass-market mar quee brands like McDonald's, KFC, SUBWAY and
Domino's, the next wave is proving to be more niche, more premium, and more
differenti ated. And perhaps not as ubiquitous and familiar to the Indian
consumer as the popular burger, pizza and sandwich labels.
Consider, for instance Johnny
Rockets, the all-singing, alldancing burger chain from Los Angeles.Started in
1986, Johnny Rockets is present across 27 countries; it opened its first outlet
in India in 2014. Or take Carl's Jr., the California-based premium burger chain
that only recently flagged off its India operations. Along with its sibling
restaurant-chain Hardee's, Carl's Jr. is in the top 10 fast-food chains in the
US. Then there is the Canadian quick service restaurant (QSR) brand Pita Pit
which is focused on healthy food alternatives -think pita bread sandwiches,
soups and salads. Pita Pit, which has over 450 stores globally, opened its
first outlet in India in Novem ber 2013.
If more global food brands are keen
to have India outposts, it's because of the sheer explosion in the business
today. The Indian food & beverage (F&B) service market is worth
`2,04,438 crore, growing at a compound annual rate of 23-24% and is likely to
touch `3,80,000 crore mark by 2017, says a recent Grant Thornton-FICCI
report.QSR and casual dining are the two formats that form 45% and 32% of the
overall market, respectively. Titled `Unlocking the potential in the food and
beverage services sector,' the report says changing demographics, an increase
in disposable incomes and rapid urbanisation are driving India's food sector.
That's good news for entrepreneurs
keen on the franchising opportunity.But it isn't a sector just for anybody with
a war chest to invest. Brands, point out experts, prefer entrepreneurs with
experience in F&B -added expertise in real estate management can prove a bo
nus -and want them to be hands-on in operations; financial muscle comes after
this. What is more, these entrepreneurs are also responsible for introducing
new food concepts to Indians (think Carl Jr.'s chargrilled burgers and Sbarro's
pizza by the slice). “This calls for agility and a learning mindset among the
present generation of entrepreneurs who need to go the extra mile to maintain
the brand promise and establish the brand before scaling up,“ says Devendra
Chawla, group president, food & FMCG, Future Group.
From an entrepreneur's point of
view, a presence in an upmarket food business in the big cities comes with a
bit of glamour attached to it. “Food is the new sex. Being in this business and
flaunting an international label has a zing of its own,“ says Harish Bijoor, a brand
strategist.
ET Magazine profiles six such food
entrepreneurs who have taken their passion for and expertise in food to the
high table of six international restaurant chains.
Johnny Come Lately
In 2012, three foodie friends,
Vishal Chaudhry, Gaurav Sharma and Sachin Goel, decided to translate their
passion into business by getting an “exciting and big American f o o d b r a n
d“ i n t o I n d i a .Chaudhry and Goel were already F&B veterans of sorts,
the former opening the Suede Bar & Grill and East 101 Oriental Bistro food
chains in Delhi in the early 2000s, and Goel among the first to bag a SUBWAY
fran chise way back in 2002. Sharma was the odd one out, having been a senior
member of the team that set up Providence Equity's India office in 2007 (he worked
there till 2012).
The trio set up Prime Gourmet in
early 2013, and decided that they wanted a franchise of an American casual
dining restaurant with an `American' look and feel. They soon zeroed in on
Johnny Rockets, the all-singing, all-dancing burger chain from Los Angeles.
“The discussions with Johnny Rockets
went on for over a year,“ says Bakshish Dean, chief executive of Prime Gourmet,
which has the master franchisee of Johnny Rockets in India. The F&B
background of the founders combined with Dean's 24 years as a professional chef
helped swing the deal.
The first Johnny Rockets outlet
opened in January 2014, and the brand now has three in Delhi-NCR; the plan is
to have 20 more by 2018. If that sounds like a slow rollout, Dean prefers to
see it as a steady one. “We are not in the numbers game,“ says Dean, adding
that the brand is well calibrated in its approach.“This [the pace] might seem
slow but we are focused on making each store profitable before we move
forward.“
Dean reckons that Johnny Rockets has
a “late-mover advantage“ because it can learn from the first wave of food
entrepreneurs who brought in food brands since the '90s; and also from the
mistakes of some of them who were in a hurry.He's clear that this is not a
business for a quick buck. “It's capital-intensive and calls for patience and
perseverance. “If you're willing to do that, the returns will come.“ After all,
it isn't quite rocket science.
Heavy Mettle
On a sultry Saturday after noon in
Kalyani Nagar in the middle of May, thou sands of `devotees' in the eastern
neighbourhood of Pune braved the oppressive summer heat to get a glimpse of
`God'. Ron `Bumblefoot' Thal, guitarist and songwriter who played lead guitar
for American hard rock band Guns `n' Roses for eight years till 2014, was in
the city -not for a concert but to launch Classic Rock Coffee in India.
“It was heavenly. He is the God of
guitar,“ says Avinash Agarwal, chief executive of FoodJockeys, the Indian
master franchisee of the US-headquartered rock and retro music themed coffee
store that was founded in 2011 and is headquartered in Springfield, Missouri in
the US. “This was the best way to start Classic Rock Coffee in India.“
A master franchisee company has the
rights to sell another company's goods or services in an area or territory.
Agarwal spent 14 years in the family
business of manufacturing generators and components for the earthmoving,
construction, mining and automobile industries before taking a plunge into
F&B.
“I did not have any F&B
experience when I contacted Classic Rock Coffee,“ recalls Agarwal.Starting up
yet another coffee chain didn't exactly excite the 37-year-old -till he came to
know about the rock theme concept of Classic Rock, coupled with the live
roasting of green coffee beans that's unique to this chain. “I felt this was
something really cool,“ he says.
But how did an F&B newbie
succeed in wooing the global brand? Well, it wasn't easy; it took four months
for Agarwal to clinch the deal by the end of 2013. It was around the same time
that he got the master franchisee rights for Indian premium yogurt chain
Cocoberry for a couple of western and southern states including Tamil Nadu,
Maharashtra and Goa.
In the case of Classic Rock Coffee,
what turned out to be a clincher for Agarwal was his enthusiasm. “I guess it
was the passion I showed in their brand and my earnestness in bringing it to
the country that helped me,“ he recalls.
In India, says Agarwal, Classic Rock
Coffee is more than just a coffee shop. While the rock theme and live roasting
are a huge pull, Agarwal has tweaked the model by adding a multi-cuisine
restaurant and bar along with a huge live performance amphitheatre.
“So we are not just one of the
coffee players. We are the only one,“ says Agarwal, who also runs his own brand
of food outlets called FJs and plans to open 10 Classic Rock outlets by 2020.
Ask him about the chances of success
in a competitive market, and Agarwal points out that the foundation had been
laid by the first wave of entrepreneurs who introduced big global food brands
in India in the '90s.
Burger Queen
During a two-month stint in
California in 2014 at Carl's Jr.as a trainee, Sana Chopra had to wake up every
morn ing at 4.30, open the restaurant, clean it (toilets, too) set the chairs
and tables in place, and then take charge of the kitchen. And then get back to
work on the evening shift. Chopra wasn't doing the grind to earn some pocket
money but to learn how to run a food business. “If you don't have your skin in
the game, then you are not in the game,“ says Sana Chopra, executive director
of Cybiz BrightStar Restaurants, the master franchisee of Carl's Jr., the
California-based premium burger chain.
For new-age food entrepreneurs like
Chopra, 24, monetary investments in getting a global food brand to India are
secondary. For the global brands, financial clout of the Indian partner is no
longer a deciding factor. Chopra contends that what matters now is one's personal
involvement in the brand, the time one spends in understanding the brand.
“Getting a master franchisee is like entering into a marriage. It's a long-term
relationship. So one has to be compatible and comfortable with each other,“ she
says.
The California-based premium burger
chain, known for charbroiled burgers, opened its first outlet in India in
August 2015. Chopra's target is 10 every year. “This is what the last-mover
advantage teaches you,“ she says when asked why she isn't in a hurry to expand.
“It may be a fast-food business but one has to go slow and be content with a
slow pace of returns,“ she adds.
Though the decades-old family
business of real estate and F&B -Cybiz Superbrands has the master
franchising rights for various restaurant brands under the Lazeez Affaire group
like Out of the Box Café, Warehouse Café, Boom Box Café, Flying Saucer and Fork
You -did come handy when pitching to the American food giant, it was the
promise and display of commitment and deep involvement of the Indian partner that
helped clinch the deal, says Chopra. The combination of real estate and F&B
expertise also worked in her favour. As Chopra says, knowledge of real estate
(rentals, location et al) can make or break a brand.
Declining to share the financial
details involved in buying the master franchisee rights of Carl's Jr, Chopra
says it runs into several crore. She's in no hurry to get it all back, and is
willing to wait at least five years for Carl's Jr. to break even in India.
Chomping at the Pit
For 29-year-old Anun Dhawan, the
transition from oily and spicy chicken tikka and hal eem to sandwiches and
salads was as dra matic as the choice of the global food brand he represents in
India. Two years back, Dhawan decided that he had enough of unhealthy eating
and wanted to make a radical change in his lifestyle.What came handy was his
elder brother's advice when he went to Canada to meet him in early 2013.
“Ishann took me to a Pita Pit outlet
and asked me to try their made-to-order customised pita sandwiches and salads,“
recalls Dhawan, adding that the taste was so good that he got hooked to the
brand that carries a tagline -Fresh thinking, healthy eating.
On returning home, Dhawan was quick
to form a company called Mentor Hospitality, and didn't waste much time in bagging
the franchisee rights for the healthy Canadian quick service chain for north
and east India in for north and east India in 2013. The brand opened its first
outlet in August this year and since then gone up to three in Delhi-NCR. Dhawan
hopes to open five more outlets this year.
Dhawan is betting big on many
neo-healthy converts like him. With changes in lifestyle and increases in
disposable income, more people are becoming health conscious, says Dhawan.
“There is a huge untapped market for a healthy alternative to the traditional
fast food joints in India,“ he reckons.
There's another factor, points out
Dhawan, that will help the Canadian brand develop deep roots in the country:
Indians are now more open to experimenting with food, thanks to an increased
exposure to global markets. “Being a foreign brand helps as the concept is
already established abroad. So the reputation helps in attracting first-time
customers,“ he says.
Dhawan realises that just bringing
in a global brand doesn't assure success. Awareness of the market (tastes and
trends), assessing the demand and the ability to cater to it in a timely
fashion are key. “Even global brands can fail if they fail to adapt,“ says
Dhawan, adding that getting a master franchisee is a big investment game. He
spent an estimated `5 crore to rope in the brand and in opening three stores in
India. The Indian partner for any global food brand in the country, says
Dhawan, has to shell not only the master franchisee fee but also has to pay a
royalty, incur staff expense, invest in advertising and marketing and bear the
cost of real estate.Dhawan declined to share the financial details of the deal
with Pita Pit.
Breaking even is not an immediate
priority for Dhawan.“It's a Test match and not a T20 game, although I will play
the Test match in T20 style.“
Pizza with Puri
New York-based pizza chain Sbarro
made its India entry in 2007, a good 10 years after Domino's. Too late? Maybe,
maybe not. The optimistic way of seeing the belated entry is that the two big
daddies -Domino's and Pizza Hut -had built the market and developed the taste
buds of Indians for the Italian cuisine.What's more, Sbarro is different from
the early movers, in that it serves pizza by the slice in its 800-odd outlets
across 33 countries.
Three years later, however, Sbarro
wasn't going anywhere along with its joint venture ( JV) partner Hotz
Industries. Faulty site selections and financially unviable stores contributed
to the chain terminating the JV in 2010.
Four years later, Sbarro was back
with a different entry strategy. Rather than tie the knot with one partner, the
pizza chain inked deals with three different master franchisees for the
country. Akhil Puri, chief executive of Jyoti International Foods Private
Limited ( JIFPL), which holds the master franchisee rights of Sbarro for north
and east India, is one of them.He too has observed Sbarro's missteps in the
past. “Location plays a major role; one must be realistic about expansion and
one must have the right business model,“ says Puri.
Puri's Pune-headquartered JIFPL,
though, is not new to the food sector, having a presence in food supply and the
cold chain sector with clients such as Chili's, Krispy Kreme and Starbucks. Its
tryst with QSR started way back in 2003 when it became one of the franchisees
for American fast food brand SUBWAY.
That, however, didn't make bagging
the Sbarro franchise a cakewalk. Puri says it took a little over one and a half
years to clinch the deal, with the US team visiting India a couple of times and
the local partner travelling to the Melville, New York headquarters of Sbarro
several times. For its part, the pizza chain was going through a rough patch,
having exited bankruptcy in mid 2014 for the second time in three years. As a
part of the restructuring package to reduce debt, Sbarro moved its headquarters
to Columbus, Ohio.
Perhaps the cut-throat competition
back home made overseas expansions in faster-growing markets an imperative -as
well as choosing the right partners. “You are getting into a relationship, a
serious, long-term one. So it's crucial for both parties to understand each
other,“ says Puri, who opened Sbarro's first outlet in September 2014 in
Gurgaon. There's another one in Delhi and Puri plans to take the store count to
50 in five years by exploring various business models such as food-court
outlets, kiosks and home delivery.
Declining to disclose the amount
paid to get the master franchisee rights, Puri says that it's a high investment
game running into crores and one should not look for a quick turnaround.“After
all it took Domino's about 10 years to make money,“ he says.“One has to be
patient. It's not a tech industry which will give you returns overnight.“
Undeterred by the dominance of
Domino's -it controls over 74% of the pizza market -Puri claims that consumers
are looking for new options and that Sbarro's ingredients are far superior than
the others in the market.
Wendy, Vidi, Vici?
In 2014, Sanjay Chhabra was
confident of getting the American brand Wendy's to India. Reason: he was
convinced that his company had the perfect credentials.For its India debut, the world's
third largest burger chain after McDonald's and Burger King was looking for a
serious and committed player with a strong F&B background. Chhabra
seemingly has it all. He has experience in the sector, courtesy his position as
director of the holding companies of Italian restaurant chain Jamie's Italian
and coffee brand Barista in India. The commitment was assured by Chhabra being
an independent director at auto parts company Amtek, a company valued at
roughly `2,700 crore on the stock exchanges. “That's where we came out very
strongly,“ avers Chhabra, director of Sierra Nevada Restaurants, a 50:50 joint
venture between Rollatainers of India, owned by the Amtek Auto group, and the
UK's International Market Management, which has the master franchisee of
Wendy's in India.
The journey from the US to India was
not a quick one. It took a year to sign the deal and another year to open the
first Wendy's outlet in May this year. Chhabra plans expand to 10 stores in
2015, all concentrated in the Delhi-NCR region. “We believe in growing in a
cluster format so that we can optimise the synergies of all the outlets,“ he
says, a strategy in sharp contrast to the other global food brands that opened
in early '90s.
With the likes of McDonald's and KFC
well entrenched in the country, Chhabra is counting on a strategy of
differentiation in terms of food quality, ambience of the stores and product
offerings. “The menu has been considerably tweaked to suit the Indian palate,“
he adds.
Chhabra says that the new generation
of master franchisees is radically different from the earlier ones not only in
terms of the way they operate but also in terms of quickly drawing lessons from
the mistakes of their predecessors.And one of the biggest learnings is to avoid
reckless expansion. “We are not in the game of opening 100 stores and then
deciding which one to close down,“ he says.
The second big learning for Chhabra
is positioning of the brand. Wendy's, he points out, has not been positioned as
a price warrior. “It's a value product, not a price product,“ he says.
Chhabra feels that the hands-on
approach of the management also makes them different from many of the earlier
franchisees. The newage food entrepreneurs are more involved in deciding menus,
listening to consumers, and are more tuned to global changes in food and
innovations, he claims. “Every generation has its learning curve, and we too
will have ours.“
|
Rajiv Singh
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ETM23AUG15
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