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Odds of SUCCESS

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Most of the aspirants venturing into the F&B business are driven by their love for food and/or because it’s their preferred career option, while others are allured by its (perceived) glamour and lucrative prospects. According to Baqar Naqvi, Business Director at , “The F&B industry is one of the fastest growing sectors in India, with a current  size of about Rs 55,000 crore and growing at about 12 percent per annum. The share of organised players is  23 to 25 percent. Organised QSRs (including cafes) contribute nearly 45 percent to the overall market, and have a growth rate of 24 to 27 percent, which is more than double that of the overall market. The Café market is about Rs 1,500 to 1,600 crore and growing at a rate of 15 to 18 percent per annum.

Undoubtedly, the industry is experiencing good times, but on the flip side, it has become hyper competitive. As such, each food service outlet, whether new or existing, invariably faces the risk of the ‘here today, gone tomorrow’ syndrome. Samir Kuckreja, President, NRAI, and CEO, Pvt Ltd, states, “Nowadays, a lot many QSRs and other food formats are opening, hence, the penetration levels of food service businesses have notably increased. But the fallout of such growth is the process of ‘cannibalisation’ whereby restaurants and cafés   located in close vicinity adversely impact each other’s sales. Hence, even as the consumer base is growing, the businesses have to deal with numerous challanges, including the risk of failure.”

Why hire a consultant?

In today’s competitive scenario, it takes more than a great idea or money to set up a successful bistro, restaurant, café, or patisserie. Whilst start-ups require proper planning, execution, and differentiation at every step of the business, an existing business may need a makeover. In both the cases, it can be a very daunting task. Hence, for foodpreneuers, soliciting an expert’s advice has become increasingly essential.
In fact, the consultant brings a lot to the table: he/she helps create a winning business by advising on concept, format selection and design, to menu planning, operations, marketing and expansion, and a lot of hand holding along the way.

Underscoring the significance of F&B consultants, Sanjeev Sareen, CEO & Principal Consultant, Trident F&B Consultants, says, “The role of restaurant set-up experts is quite crucial. Apart from ensuring smooth and hassle-free opening, their expertise and counsel is directed at improving profitably of the venture, and also trimming down the possibility of business owners making wrong decisions. A consultant can make a project more cost effective, resolve complex issues related to ownership, lending, franchising, management, foreclosure, and bankruptcy.”

Trident F&B Consultants has executed more than 450 hospitality projects throughout India with clients like Haldiram’s, Rockman’s Beer Island, ISKCON, Om Sweets, Gulab, Satiram’s BTW, Comesum, Gopal’s, Jassons Sheesh Mahal, L S Caterers, Bikaji, to name a few.
Sanjiv Raj, CEO & Principal Consultant at The Chef Masters (TCM), says, “An F&B consultant provides all technical, culinary and aesthetic information to entrepreneurs from start to finish. Experts have hands-on operational experience and are abreast with recent industry developments. Since they are better equipped to visualise present and future requirements of the project, they can help owners to achieve the required operational efficiency, which is of utmost importance.”

TCM has executed over 175 hospitality projects pan India with clients like , Lounges, Picadilly Punjab, Tabula Rasa, Chi Kitchen and Bar, Embassy Restaurants (AAHO), Surajgarh Palace (Shekhawati), Bowl O China, Chicago Pizza, etc. Additionally, Raj is director at Kings Motels Pvt Ltd that owns and operates four fine dining restaurants in Delhi under the brand name Urban Degchi – Kitchen & Bar.

Besides start-ups, consultants also counsel existing operating units. Notes Raj, “Small eateries are also approaching us. They are inexperienced and mostly first time entrepreneurs.  Established ventures mostly require re-positioning, re-engineering, revamping, and an image makeover in their menu, décor, aesthetics, or appointing a new chef.”

Agrees Sareen, “Today, there is greater awareness about the importance of F&B consultants and benefits of the services offered. We are also involved in areas like standardisation, quality control, sick unit handling, and can help with expansions also.”

Services and fees

A consultant may deliver end-to-end project, offer selective services or provide turnkey solutions pertaining to varied aspects of food service business, for instance, conceptulisation, market study, site selection, menu and kitchen planning, supplies and equipment, decor and interiors, operations (staffing, training, finance, technology), brand tie-ups, marketing and expansion (new markets, growth capital, franchising, joint ventures) et al.

Elaborates Aneeta Myint, Professor at IHM (Pusa, New Delhi), Development Chef and F&B consultant, “The F&B consultant is associated right from the time an investor wants to invest  in the business to the moment the restaurant is commissioned, and thereafter at periodic intervals for menu re-design, staff training and trouble shooting. Services include inception of food profiling and type of cuisine, area planning, operational efficiencies, client specifications and capital cost, guest area planning, kitchen and the back of house planning in consonance with the interior designer, equipment specifications and procurement, kitchen and display kitchen, bar designing and management, menu planning and recipe standardisation, staff recruitment and training.” She informs that soft commissioning including reopening trials and complete assistance during the teething period of first six months are also taken care of.

As regards, consultancy fees, Myint reveals that for a 5-star hotel, homegrown F&B consultant with experience of 2 or 3 hotel projects the fee would vary from Rs 20 lakh to 35 lakh. A foreign consultant is generally paid in US dollars and hence can be costlier by 40 to 50 percent. For standalone and specialty restaurants, it would vary from Rs 2.5 lakh to 5 lakh. Empanelment generally involves ‘retainership per month’ that may well be in the range of Rs 30,000  to Rs 1.5 lakh per month.

Raj at TCM apprises, “Consultancy fees largely depend on the scope of work provided and varies between 5 to10 percent of the total cost in case of turnkey projects. Manpower sourcing is usually outsourced separately. Food consultants may charge anywhere between Rs 2 lakh to 10 lakh depending upon the cuisine, choice of ingredients, and duration of training programme.”

Consultant’s prerogative

While clients would like to hire the best consultant, reputed consultants would be equally choosy. They would not take up any assignment, even if it is well-paid. Before signing, they evaluate the project’s viability. Says Sareen at Trident, “At the pre-conceptual stage we conduct feasibility study to check the viability of the project. It helps us in analyzing all the positive and negative points of the project, for instance, its location, projected clientele, estimated footfalls, etc.  Only then do we proceed further.”

Adds Kuckreja, “I primarily consult established concepts or existing businesses that are looking for expansion. From the outset, we assess the concept’s viability. On occasions, we have declined consultancy to some clients as their concepts didn’t have potential. A number of people get into food service business for the wrong reasons. They lack aptitude and don’t really have the essential professional qualities that are needed to set up or run a restaurant. As a result, the business shuts down within six months or one year.” According to him, in the last five years or so, the F&B business has come to be perceived as very trendy and fashionable. At times, second generation entrepreneurs with money to invest come into this field.

Different strokes

Each client has a different mindset, generally influenced by his or her academic or professional background, and also whether he/she is a newcomer or a seasoned foodservice professional. As such, in the first instance, a consultant would give due consideration to the customer type and approach him or her accordingly.

For a start-up venture, the consultant’s involvement would be more: from deciding the furniture and furmishing, table ware, cooking equipment, to drafting the menu, designing the kitchen layout, etc, the consultant would chart out everything, starting from scratch to the final opening of the outlet.

Kuckreja is of the view that entrepreneurs having industry exposure (academically or occupationally) have better business sense, which helps when they collaborate with the consultant. But even a newcomer could come up with a fresh perspective, or is willing to try a revolutionary concept but needs guidance.

“The F&B business is marked by ups and downs, especially in the initial phase of its start up.  So one should invest adequately and have the power to sustain the business,” advises Kuckreja. He gives the example of Sunil Lamba of who successfully modernised his family business and also brought in unique concepts like Bread & More, Colours ‘N’ Spice, and Chopsticks. First time entrepreneurs like Gauri Devidyal (The Table), A D Singh (Olive Group) and (Indigo), have all tasted great success as restauraters.

Start-ups and established throw up different challenges, comments Myint. “Most F&B start-ups are ventures of first or second time entrepreneurs, so a consultant has to tackle their ignorance of key technical issues, including staffing, procurement and other operational aspects. It becomes more challenging when we have to deal with investors having little domain knowledge,  yet come to us with a pre-determined or fixed mindset. But start-ups are much easier to handle.”

“Managerial consultancy is very important for beginners. Since they are not well-versed with restaurant and hotel operations, we offer them our services post opening also for a few days so that they can start out smoothly,” adds Sareen at Trident.

As regards, providing consultancy for an existing business, Myint says that consultants must thoroughly understand the reasons behind the makeover and probable hurdles, before undertaking the assignment that might call for resolution of issues like falling revenue, attrition, lack of leadership and decision making, slack in operating cash flows, higher cost of procurement, wastage, lack of standardisation, and so forth.

External funding

Like any other venture, an F&B business may raise funds from external sources for investment capital, working capital, growth funds, etc. In recent years, the private equity (PE) route is finding great favour among food service companies. Shivakumar R, Partner at P2P Consultants,  outlines what the quintessential PE investor broadly looks for in an F&B business before funding, “Casual and fine dining concepts often struggle with consistent food quality as there is limited standardisation. They also tend to be higher in terms of fixed investment, footprint and staffing. So in this category, we accept only those clients that have at least 5 to7 well operating outlets with a minimum turnover of Rs 20 to 25 crore.”

As regards QSRs, he says that they look for the chain’s ability to standardise production; manage service quality across distributed base; potential to create larger footprint, and build scalable model with limited execution risk. Hence, QSRs with turnover of Rs 10 to 15 crore and a stable model, centralized key processes, and certain product quality across 8-10 outlets would make ideal candidates.

He adds, “Today’s environment is more challenging for early stage smaller formats. Over the last five years, enough brands have achieved reasonable scale and qualify for growth capital. So, established players would be preferred to early-stage ventures, even though they may have an interesting format.”

According to him, start-ups would find it challenging to raise capital in the current milieu. Notably, most of the marquee early-stage investors have made investments in the food space in early stage ventures. These include Yo! China by Matrix, Faaso’s by Sequoia, DCK and Ammi’s by SAIF, Adiga’s & Moshe’s by NSR, a bunch of brands by Everstone, Beer Café by Mayfield, Goli No 1 by Ventureast, Mast Kalandar by Helion, to name a few. “We feel there is scope for food service companies to focus on the internal processes, costs and efficiencies that can make them inherently more profitable and scalable,” he observes.

Seasoned advice for foodpreneurs

, Vice President-Culinary, (LBF), opines that even if a person has an academic background in hospitality or is an experienced foodservice operator, he or she cannot be a specialist in all aspects of start-up or operations. “Apart from setting up and running a successful F&B business, the inputs of specialists are extremely important to create the difference between an ordinary and extraordinary food service operation. Depending on the size and complexity of the project, specialists could either be employed on regular roles or hired as short term consultants.”

Furthermore, he affirms that an experienced chef owner or an experienced F&B business owner is able to explain their requirements precisely to the consultant, whether it is operations related, design inputs, or exact equipment requirements. “As a result, the owner can concentrate on his/her core competence and focus purely on running the operations. More so, experienced owners can better understand the situation if the consultant proposes or refuses a particular idea or plan. On the contrary, an inexperienced entrant with no background knowledge of this sector, becomes totally dependent on the consultant’s and could, sometimes, feel cheated in the bargain.”

and Ronak Kapatel co-founders of Brewberrys (currently a chain of 25 cafés and snack bars across 70 cities in India), came armed with a degree in hospitality management when they rolled out their cafes without engaging a consultant. Gupta who is also the company’s director, explains, “Though we did not have to go to a consultant, we have consistently sought advice from our seniors in the industry. But, now days, consultants are a part of every industry, and there are occasions when one has to consult and even outsource some area of the business at one point or the other.”

According to him, the raison d’être for consulting could be different for an entrepreneur with a non-hospitality profile and one who is a hospitality professional — while the former would want to know more about the products, recipes, kitchen set up, sourcing, etc, the latter would possibly seek advise in setting up the place, marketing or expansion.

Backed by 23 years of experience Chef Gregory Lobo, managing partner at Hot Chix Restaurants and partner at The Grill House, also creates and supplies marinations to leading food stores, runs a hotel management institute, and is a consultant. He says, “Being from the F&B industry, including manufacturing, I didn’t need to consult anyone. Sometimes, my friends pitch in with an idea or two. But it’s a fact that even if one is a professional in the industry, it is not possible to be an expert in all the areas of the business; we do need mentoring or expert guidance in some areas for sure.”

In his view, chefs may be magicians in their domain, that is, the kitchen, but usually, 70 percent of them fail as businessmen. On the other hand, entrepreneurs from a non-hospitality background are more open to expert advice. “In some cases, clients share the reasons why they have failed, which makes it easier for a consultant to sort out the issues, whereas hoteliers, at times, are conceited and rigid as they believe they know it all.”

When a business fails

When every move seems to be right from location to cuisine, including advise from a consultant, then why do some start-ups fail, or why does an established restaurant have to shut shop? What can possibly go wrong?

According to Manocha of LBF, restaurant start-ups require a concrete business plan, right location, right ambience, best quality food, and best service. But some businesses fail despite  putting in all the efforts. “It usually happens when the team lacks good training or motivation, or if promoters lose focus of the business. Also, when ROI expectations overpower service delivery standards, and cost-cutting is favored over cost savings, the restaurant is ready for disaster.”

Naqvi at Wazir Advisors cautions, “In terms of rentals or real estate cost, for a fine dining restaurant, the rent should be below 20 percent, whilst for a QSR it should be below 15 percent. Food cost for a fine diner should be between 25 and 30 percent; for QSR, between 37 and 42 percent.”

Raj at TCM opines that a business fails when owners do not oversee day-to-day operations and leave them entirely in employee hands. Also, some start-ups fail to adapt to trends in cuisines, or are ignorant of customer preferences, or ignore aesthetics and hygiene. Consultant make the menu more innovative as they are abreast of the latest food trends, and can plan menus that are  experimental, quirky, and interesting. For them, the first step is to understand the core theme of the project, the  catchment, preferences of the customers, which will determine/influence the kind of cuisine it will serve, and such like. For an established business to fail, it can be attributed to rigid and fixed mindset of the owners and their refusal to accept societal changes, globalisation of food, infusion of modern technology into the business, etc.

According to Myint, consultants probably constitute only 30 to 40 percent of the prerequisite for success. Working capital, a long term vision, team building, target segmentation, and respect for competition are some parameters that should be taken into account for a start-up business to thrive. For an established player, lack of adequate motivation, strong leadership, an old, unchanged menu, disregard for competition in the neighborhood, pricing, etc, can result in loss of customers.

The consultant and the client must have realistic expectations from each other. After all, consultants are not wizards! Despite their knowledge and best intentions, they may fail to deliver some times due to a host of factors that may not fall under their purview.

Says, Brewberrys’ Gupta, “There is no sure shot formula for success in F&B business; a lot  depends on various permutations and combinations. To succeed in this business, one must be passionate about the concept and to always keep learning.”

Manocha feels that the gestation period is important for a business to establish itself, while Lobo observes that all concepts will not work in all areas and sometimes even a consultant can make mistakes. “After all, everybody is human,” he says.

Kuckreja states that even if an expert has given the right advice, a concept may not be a success as consultancy is only one variable and entrepreneurs understand this. “In today’s competitive era, it will not be wise to venture into a F&B business without seeking an expert’s help, especially, for those who are not from the industry,” he concludes