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High rentals, expensive raw material, shortage of skilled staff plague India's foodservice sector

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The foodservice industry is growing at a rapid pace, and with the advent of new cuisines, themes and concepts, the segment is becoming a lucrative business option, attracting restaurateurs and investors alike.
According to India Foodservices Report 2016: “The restaurant sector is third largest industry among India’s service sectors. The country’s foodservices market has been estimated at over Rs 3.09 lakh crore and projected to reach close to Rs 5 lakh crore by 2021.”
But despite a seemingly bright future, the shortage of skilled staff, high real estate and manpower costs, inadequate supply chain infrastructure, financing issues, policy formulation, over-licensing and high tax rates are some of the key roadblocks that have plagued the industry’s development over the years.
“As any other industry, food service industry also faces a lot of challenges. Starting from how to develop a loyal customer, to how to tackle Government departments and how to adhere to every legal aspect,” says Co-partner, Raasta, Joy Singh.
Shortage of Skilled Staff & Sky-rocketing Costs
The India Foodservices Report 2016 says: Direct employment in the Indian restaurant industry is 5.8 million and will reach 8.7 million by 2021. This means that approximately 6,00,000 skilled employees will be required by the industry every year. However, only 50,000 graduates pass out from Government or private hospitality institutions every year, leaving a huge gap requirement for talent.
Another problem is the surging cost of raw materials and real estate. Restaurateurs are quick to acknowledge that high rentals deter growth of their establishments.
“I think higher rentals, lack of F&B hubs with integrated back-end services, too many licenses, and a shortage of quality and trained staff are some of the key challenges faced by the industry today,” says, Co-owner, Prankster, Inderjeet Banga.
Lack of Transportation Facilities & Logistics Services
The cost of importing ingredients, compounded by a lack of clarity on labelling laws, delay in transportation and unavailability of specialised logistics services have made sourcing a challenge for even seasoned chefs. For restaurants that use top quality or imported products, food costs shoot unimaginably high.
“Delays in transportation, unavailability of specialised logistics services for transportation of bakery products is my critical area of concern with the industry. Unlike ice cream or cheese, bakery products need a different temperature control environment and often, logistics agencies stocking bakery items remain unaware of the critical nature of this 4-5 degrees. It’s an area with maximum spoilage and delicate balance of product, delivery time and controlled temperature play as crucial a role as the chef who’s created the product,” says Chef and Founder, G’s Patisserie, Gauri Varma.
Corroborating the thought, Founder,, Vedant Kanoi says, “The major challenge is storage and transportation. The availability of vehicles which are conducive to movement of hot and cold food, especially cold supply chains, remain weak. In times of small order size, the problem is more acute.”
Ray of Hope
All these issues mean that restaurants today are operating at slim profit margins. There are bigger problems ahead like evolving with changing times. Consumer tastes are fleeting and evolving along with your customer’s palate is the biggest challenge of them all. However, a majority of restropreneurs think all these problems are surmountable. One simply has to be able to adapt to changing trends.
“Surviving competition and evolving yourself to the extent that your customer always gets something new on their every visit is the only challenge in today’s time,” says Owner, Big Fish Ventures, Umang Tewari.
Echoing Tewari’s sentiments, the owner of Imly, Varun Puri says, “I don’t call these roadbloacks hurdles. I call them challenges. Every problem that arises in running a restaurant helps you in evolving as a better restroprenuer.”

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