Mumbai-based entrepreneur Ketan Kadam discusses his two QSR chains Maroosh and Sliders, and the promising QSR segment.
Why did you make the transition from the nightclub business to a QSR chain?
I launched Fire n Ice when I saw a vacuum for good entertainment spots in the city. But the night club industry has a shelf life and I knew that if I had to be part of this industry I had to be associated with food. I started young and could connect with the aspirations of the young people and knew exactly what they wanted. But as I grew older, my passion for food led me to launch Maroosh, which is a Lebanese QSR chain.
Maroosh was ahead of its time when it was launched in Mumbai…
We were the first QSR when we opened in 2000. I was convinced of the potential of this segment. While running Fire N Ice I realised that after a night of partying, what people really craved was a nice roll or a wrap on the go. But there were no such places for a quick bite apart from the 24-hour coffee shops in 5-star hotels. That’s how the idea of starting Maroosh was born–a QSR that would cater to this crowd of party goers.
How has the brand grown over the years?
The first outlet of Maroosh was launched at The Phoenix Mills. It was located next to Fire N Ice, so the people partying at the nightclub did not have to leave the premises in search of food, and would step into Maroosh for a bite and go back to Fire N Ice. The initial investment was `7 lakh (for the first outlet) and break-even happened in the first six months. Currently, there are 14 Maroosh outlets out of which 11 are company-owned and the rest are franchises (which we plan to buy back).
After 14 years and 14 outlets what learnings would you like to share about the QSR business?
The biggest learning has been outsourcing the production. Earlier, we used to produce at the outlet level, but this is feasible only when you reach a store count of more than 100. But if you are looking at standardising your product, you have to support it with a strong back-end infrastructure. That is what we will be doing now, thanks to the funding that we have recently received. Products will be made at a facility owned by someone else, and transported to our outlets. Setting up a centralised kitchen that caters only to your own outlets makes little business sense given the high rents, cost of hiring skilled kitchen staff, and utility costs. It’s more feasible to partner with a company that will make the dishes and deliver them to all the outlets. This, of course, entails a entering into non-disclosure agreement and providing the company with your recipes. Besides reducing costs, outsourcing helps in maintaining standard and hygiene levels.
Also, if you want to increase revenue, you must have a good menu mix. KFC is now also selling rice bowls and McDonald’s wraps. Maroosh is a fusion of Lebanese and Indian and we have included curries and biryanis in the menu. Our revenue is `35,000 to 40,000 minimum per outlet per day.
Any other learning?
It would be location strategy. One of the reasons for Maroosh’s success is that we were at the right location at the right price. I do not believe in aggressive growth for the sake of growth. I won’t go for a 400 sq. ft. store at Linking Road at `1,000 per sq.ft. It’s not about having a presence; a mistake many brands make, especially the yogurt and coffee chains. They think it’s an advertising cost for brand building. Many have had to shut down their outlets because sales were poor. What’s the point of owning 200 stores if 20 of them bleed you financially? The rent should not exceed 9 to11 percent of the outlet’s sales. For instance, if an outlet has the potential to generate `20 lakh revenue, then the rent should not exceed `2 lakh.
You recently had a round of funding…
We have grown at the rate of one outlet a year. Funds were the only hurdle in scaling up faster. We have grown from our internal reserves. Ronnie Screwvala’s Unilazer Ventures has acquired a 40 per cent equity stake in Maroosh for 18 crore. This investment will be used to boost Maroosh’s regional expansion in western India, followed by extension of our home delivery services.
Please tell us about your new venture Sliders…
The burger is the new-age aspirational food. Plus, with everything acquiring a mini form, it wasn’t long before the archetypal burger got its own smaller version, the slider. I decided to dedicate an entire new restaurant to this food fad by opening the namesake brand Sliders in Bandra, Mumbai, which opened this March. The idea is to be present in the burger space without taking on the burger giants. So Sliders fit in perfectly. At Sliders it’s possible to have three mini burgers for the price of one regular burger. This appeals to the younger generation that wants to try out different flavours without burning a hole in their pockets. We have an extensive menu of vegetarian and non-vegetarian sliders with a selection of burgers, hot dogs, wings, fries, beverages and desserts.
Food inflation has been a major challenge for food service operators. How do you deal with it?
Outsourcing has helped us deal with it to some extent. Today, we outsource our breads, and have identified huge cold storage spaces where we stock chicken for an entire year. This gives us better bargaining powers and protects us from price fluctuations.
What are the operational challenges in the QSR segment?
Retaining staff is the biggest challenge. To get them to understand the standard operating procedure (SOP) is another challenge. In Fine Dine you can afford a manager at a monthly salary of `50,000, but in a QSR you have to contend with a salary bracket of `8,000 to12, 000, yet expect the manager to deliver the same kind work. High cost of real estate, and finding the right location at the right value are other major challenges.
What trends are you seeing in the Food Service business?
The food service sector is moving towards QSRs. I don’t see much future for the Fine Dine format; in fact, it will be taken over by the casual dine format, as people are taking a casual approach to everything. You may step out of a Rolce Royce, but you may walk into a Moshe’s, a Smoke House Deli or an Indigo Deli. Ultimately, it’s about an excellent product in a casual environment; no one wants to pay `7,000 for a meal.
What are your plans for the future?
This year, we will be adding another 20 outlets of Maroosh which will take the total store count to 34. We want to first establish the brand here, with a strong back-end, before moving to other cities. As regards Sliders, we will be adding 3 more outlets, all of which will be in Mumbai.
Going ahead, we will be retailing packaged hummus and pita bread at all our Maroosh outlets. We are also repositioning the brand with a new logo and store format. All the old stores will adopt the new look which indicates a strong sense of hygiene. I want to make Maroosh the McDonald’s of India!