Home Food Service Mamagoto to raise Rs 50 crore for expanding and launching budget stores

Mamagoto to raise Rs 50 crore for expanding and launching budget stores

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What’s the current count and positioning of stores?

We have been opening 3 to 4 Mamagotos outlets every year. This year, we have already opened two – Andheri in Mumbai and Indira Nagar in Bangalore.  We will open in Kolkatta by the year-end. Currently, we are scouting for properties in the western suburbs of Mumbai for another Mamagoto store. We would love to open a big one in Goa. We plan to take Mamagoto to Dubai this year and to Abu Dhabi next year. Our aim is to reach a total store count of 30 to 33 outlets, and will subsequently look at tier 2 cities like Jaipur, Chandigarh, etc. Our outlet in Khan Market, Delhi and Bandra, Mumbai are our top
performers, and the one at Citywalk in Delhi is also doing well.

We started Rollmaal and Speedy Chow about 9 months back, and we have a catering business that brings in 15 percent of our revenue. The concept:of Rollmaal is that of an Indianised non-vegetarian QSR with mainly home delivery and 25 percent in-store dining. We like to position ourselves not as a destination restaurant but as a café. So we look at places that are footfall driven (such as a popular cinema hall), and which attract our target customers.

Our Mamagoto stores are 70-80 seaters. We deliberately refrain from renting big spaces because we want the stores to appear full with a crowd waiting for a table. This lends the place an attractive, suppressed energy, and an illusion of great demand!  A large place would tend to appear empty even with 100 people inside.

You have already had two rounds of funding. Are you looking to raise more capital?

We are looking to dilute around 15 percent stake. We will hit the market by September this year to raise capital, and by the beginning of the next calendar year we should be able to raise Rs 50 crore ( $8.4 million). The corpus will be used for  expanding the flagship Mamagoto brand and for our budget stores Speedy Chow and Rollmaal.

What’s been your biggest challenge so far?

Fighting with various government departments! Why do we have to wait for 2-3 months after opening a store to get a liquour licence? Surely, there has to be an easier way! In Bangalore you have to rent the license needed to serve liquor by paying Rs 30-40 lakh deposit, apart from the monthly rent. It’s like taking a property on lease! The custom duty on imported liquour is one of the highest in the world. India is the worst country to enjoy good wines. A bottle of wine that costs 4 euros becomes 10 euros when it comes to India due to the 150 percent custom duty. The distributor charges another 2-3 euros. So we get it for 13 euros. By the time we add our mark up, it becomes 18 euros. Add another 30 percent tax and the bottle that cost 4 euros now becomes 25 euros. It’s ridiculous !

The new labelling laws are another problem. We import a lot of Japanese produce and they were stuck at the customs as the food labelling laws changed overnight.  Sourcing local produce is not easy. For four months we haven’t got snow peas in Mumbai. All the good stuff (like the Alphonso mango) goes abroad.

Fortunately, retaining staff has never been a problem as we keep our employees happy and incentivised with health insurance, for instance. But finding good staff, training them, and making them attuned to our culture is a challenge, and can take a good 2-3 months.

What about food inflation?

We have taken a huge hit due to inflation. We have positioned our brand as an affordable, fun place for the aspirational middle class of consumers. If we raise our prices, we will lose this segment of our customers  who form 80 percent of our clientele. We have been absorbing inflationary costs and haven’t raised our prices since the last one year.

Many restaurateurs are now sourcing local produce…

Local produce makes sense for restaurants that don’t have a pan India presence. There is a tough call between quality and scale. Most of the producers of  organic food products lack scale so they cannot supply on a pan India level. They are also very unreliable; and they do not have a cold supply chain in place. It’s a challenge to find a local vendor who can give us quality, consistent supply, and scale.

What trend in food service formats do you see?

The age of high-end standalone restaurants is over. The issue with Fine Dine is that you need to create something that is resistant to economic depressions in the country. The pressure to sustain quality is very high. What happens when the high paying, sexy chef leaves? So there’s a big risk involved. Moreover, they don’t have the holding power. If you have 5-6 bad business months, you are finished. The future is in Cafes… at recession-proof price points.

What is your observation of the Indian consumer?

The top 15 selling items in all our outlets across cities are the same! I think this indicates that the Indian palate is more similar than diverse from region to region. However, this could partly because we are present only in metros where there is a lot of migrant population.

We are living in a world of social media, surrounded by self proclaimed experts with inflated egos. People’s level of tolerance and patience is very low.
With open forums like , people who are super opinionated and intolerant have got a bigger platform. So, you need to be doubly careful as consumers are getting harder to please and are offended easily. However, having said that, social media is a necessary evil as it also brings consumers who defend your brand and praise your work.

What’s the ethos behind each Mamagoto design and decor?

The restaurant gets its name from a Japanese word which means ‘to play with food’. And true to the name we believe in experimenting with not just the food but also the interior décor and ambience. With Mamagoto, we wanted to create a quirky, casual and fun place. But art is at the heart of the brand. The colourful Asian characters drawn across the  walls of the Mamagoto restaurants are opposed to the bamboo shoots and mini plants that are seen in most Asian restaurants.

When we launched our first outlet in Delhi, the brand was still in its infancy, and we weren’t looking at an particular visual imagery; rather, we wanted graphics that were peppy and fun. Now that the brand has grown, we want to make its image more contextual, that is, we want each outlet to reflect the ethos of the area it is located in. For instance, Kala Ghoda in Mumbai is an art heritage area, so our outlet here has a 1930s art decor look and feel. The outlet at Bandra, which is a very urbane, youthful place, has a vibrant, industrial, Western vibe. The Andheri outlet is in an area surrounded by the film and TV fraternity, so, here, the interiors were created to resemble a movie prop warehouse.

What next?

We want that our brands should keep growing and evolving. The Mamagoto brand is not sexy anymore. How can we make people enjoy Mamagoto in different ways? So we are introducing burgers and sandwiches in the menu. Loyalty programme is next on the cards.

We are also aggressively pushing our home delivery business. Currently, our sales from home delivery is about Rs 20-30 lakh, which is just 5 percent of our revenue. We are launching an online application for people to order from their mobile phones. We will also be launching a common telephone number in every city for deliveries.

Since we have displayed a lot of tigers in our décor we will be collaborating with WWF for  Save the Tiger week. Our staff will urge people to donate for the cause, and in turn, we will offer them a free dessert. We want to create an aura around the brand, engage the customers and keep their interest alive so that they keep coming back. This is the way to survive…

Mamagoto
Launched: January 2010
Founders: and Kabir Suri
Initial Investment: Rs 2.5 crore
Current no. of outlets: 9
Average investment in each outlet: Rs 2.1 to 2.5 cr including rent deposit
Average outlet size: 2,000 sqft carpet area
Cuisine: Chinese, Thai, Vietnamese
Average spend per person: Rs 750-850
Sales contribution: 80%
Turnover: Rs 40 cr in fiscal year 2013 – 2014
Projected turnover: Rs 55 cr in fiscal year 2014-2015
Expansion strategy: 3-4 outlets every year

Speedy Chow
Launched: 2014
Cuisine: Thai and Chinese foodNo of outlets: 5 (all in Delhi)
Average spend per person: Rs 300
Sales contribution: 5%
Expansion plans: 8-10 outlets every year

Rollmaal
Launched: 2014
No of outlets: 5 (all in Delhi)
Cuisine: Indian fast food
Average spend per person: Rs 200
Sales contribution: 5%
Expansion plans: 8-10 every year

“The age of high-end standalone restaurants is over. The issue with Fine Dine is that you need to create something that is resistant to economic depressions in the country. The pressure to sustain quality is very high. So there’s a big risk involved”