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Organized foodservice industry

Foodservice includes the following formats.

  1. dhabas
  2. restaurants
  3. kiosks
  4. express counters
  5. food stalls
  6. ice-cream parlours
  7. fast-food joints
  8. casual and fine dines
  9. juice bars

The organized players are the following and their presence is shown in the table below:

Retailer No of outlets No of cities
Haldiram 20 1
Yum! Restaurants India 507 50
Barista 310+ 26
Cafe Coffee Day 1350 185
Baskin Robbins 425 55
McDonalds – North 130 32
McDonalds – West 140 13
Costa Coffee 17 7
Domino’s 500 110
Mad Over Donuts 38 4
Nirula’s 72  
Speciality Restaurants 91 24
Subway 250+ 50+
Sagar Ratna 70+ 30+
Yo! China 50 14
Lite Bite Foods 65 7
Blue Foods 120+ 6+

QSR Revolution in India

While global biggies, like McDonalds, KFC, Subway have entered India in a big way, there have been desi startups, who jumped into the bandwagon as well. Global biggies have modified western menu to accommodate Indian palette – KFC selling vegetarian products, pizzasselling tandoori variants etc. I will cover the journey of Jumboking (Vada pav), Subway, Mast Kalandar, Faasos (next post) etc and lessons one can draw from them based on their own account at Startup Saturday Bangalore and Startup Summit 2013 Mumbai edition by Franchise India.

Jumboking

Jumboking Schezwan Cheese combo

Jumboking Schezwan Cheese combo

Dheeraj Gupta is a 2nd generation entrepreneur based in Mumbai, who set out to start a vada pav chain in 1998. He was inspired by Mcdonalds: Behind the arches book, esp how they started a new price point of burger. He made a visit to UK to learn the nuances of fast food, chain business. He stayed with a Burger Chain franchise owner during his stay and even worked in a Mcdonalds for 10 days – talk about dedication! The vada pav market, mostly unorganized is Rs.20Cr per day in Mumbai and Thane alone. That translates to 7,300 Cr per annum!! He priced it at Rs.5 against street food price of Rs.2. He signed up Bharat Petroleum, HP, IRCTC in 2007 for setting these at their premises. [If any reader has spotted them at these, please provide it’s address, photo in comment or email prasoon DOT kumar AT gmail DOT com]. Jumbo King has 38 outlets in Mumbai and Thane (20 self-owned and 18 franchises). This compared to 20,000 vada pav stalls is only about 2% marketshare of the business in Mumbai.

Mast Kalandar

Another great promising QSR is North Indian food serving joint, Mast Kalandar. Pallavi Gupta is co-founder and COO of the company. She worked in IT company as business analyst in Bangalore and abroad with long hours and would live on pizza. Her husband, Gaurav Jain was in sales function at IT company as well. They came up with an idea that even hot and piping paratha should come in a box. They started their first outlet in Bennarghatta Rd in 2004. Next outlet was started in Indiranagar. By 2008, they had 8 outlets and VC started showing interest. Post 1st round of funding chaos ensued and things did not go as planned. They were able to grow from 7 to 11 from that instead of the target of 30. By 2011, they had 25 branches, growing to 40 in 2012. As of July 2014, they have 47 branches in Bangalore, 7 branches in Chennai, 2 in Hyderabad and 5 in Pune.

Conclusion

Within the Rs 8000-crore organised eating out market in India, QSRs are witnessing the fastest growth of nearly 25% annually. Key reasons for this growth include a high number of nuclear families and urban migrant population, a growing preference for vegetarian food, especially, North Indian and a spike in the number of people “eating out”. We have seen Ammi’s biryani and Box8 (earlier Poncho) getting funded as well.

TastyKhana receives strategic investment from DeliveryHero

TastyKhanaDeliverHero

[Updated on 13 June] So, Tastykhana has announced on their blog about receiving 5m reportedly valued at 15-18m.

TastyKhana (website) is a food home delivery company having a presence in 6 cities across India. According to reliable sources, it has received strategic investment from either Global Founders Capital or directly from DeliveryHero, a European company having presence in 13 countries across 4 continents. DeliveryHero had raised 50m last year for global domination [Techcrunch news]. India will be their 14th country. Global Founders Capital is a joint VC fund by Samwer Brothers and ex-CEO of DeliveryHero Fabian Siegel having $194M in its warchest right now. As I pointed in the rear end of my blog post earlier, food home delivery is an increasing revenue generator for not just mom and pop food joints, but also fine dining like Speciality Group’s Mainland China, Mezzuna etc.

DeliveryHero

The journey of TastyKhana has been a long story of patience, conviction, determination, customer-focus, and pivoting like any start-ups. I had heard Shachin Bhardwaj speak at Startup Saturday Pune in Sep 2011. He had started TastyKhana during his tenure at Synygy in Aug, 2007. He quit his IT job within 3 months to focus on his start-up fulltime. For a year, they were experimenting before finding focus. So, in real sense TastyKhana started in Oct 2008. They had delivered food worth Rs. 3.5 Cr by Aug 2011 (8 Cr now) to more than 50,000 customers (now in 1.5 years it has doubled to 100,000). They had only 200 restaurants in Mumbai and Pune on-board at that time, which has swelled over 500 (348 in Pune, 108 in Mumbai) in Aug 2012 and then to 1000 in Pune, Mumbai, NCR (Delhi, Noida, Gurgaon) and Bangalore now Apr 2013 [Source: Restaurant Owner page]. They were receiving 5000 orders a month of an average ticket size Rs.700-800 in 2012. Shachin was able to get angel funding from one of his previous colleague, Chetan Shah to scale up. One of the learning he shared is to take funding in Lacs, not in Crores, so that you learn fiscal responsibility. Interestingly, TastyKhana was just 20 days away from bankruptcy during first 6 months’ of their existence, which is one of themes covered in an earlier blog post.They acquired Food On Wheels to get on-board 3-4 delivery boys, so that they could use own technology solutions to improve the operations. They focussed on solving the following problems of customer:

  1. Serve as aggregator of menus. No more do you need to keep paper menus stuffed in fridges, but have it online, when doing food order.
  2. A customer could use online payment options instead of just COD (Cash on Delivery).
  3. 3 channels to order available are: Online, mobile (using site at that time, now also mobile app) and phone (by calling TastyKhana helpline).
  4. Another convenience factor for a customer was increasing the radius of home delivery of a restaurant by paying a delivery fee, which the restaurant would normally not deliver. TastyKhana was able to achieve this because of its own delivery boys’ network in the city. The customer incurs cost according to delivery distance and order amount, e.g. if order is a small ticket-size and the location is far from restaurant, the charges are more.

For a restaurant owner, they had the following proposition:

  1. Zero overhead with great margins.
  2. Keep the bottom line low, as logistics is taken care of by TastyKhana. They only pay for orders, not for idle delivery boys’ entire time [I call it Operations as a Service, OAAS ala SAAS (Software as a Service)]
  3. Get alternate sales channel on TastyKhana website, phone line and also Facebook app for food ordering and reservation.
  4. In addition, there is valuable data, they get free statistics, feedback from customer on switching, churn ratio and spending capacity of the area’s customers.
  5. While dropping food orders of a restaurant, they are able to drop TastyKhana branded menu of other restaurants.

The technology differentiator has been built by CTO, Sheldon D’Souza and Senior Software Architect Pradeep Singh (First employee of the company).

  1. Focus on automation and scale
  2. Acceptance notification of food order from restaurant
  3. SMS to delivery boy

Once TastyKhana reached scale, they are able to deliver invaluable analytics like “Chinese food eating customers are spending more than Rs.1000/-“. This insight can help someone looking to start a restaurant.

Competition

It’s a crowded market for sure with Europe based Justeat (Jan 2011 investment into Hugryzone. Raised 41M afterwards), Foodpanda (launched June 2012 in India) and home-grown players like titbit, Deliverychef, Delivery, Bigbite etc. Some of these power local search engine like burrp (powered by JustEat) , while India’s leading local search engine forayed into food home delivery on its own. Most restaurants have a phone line for home delivery, while many take orders online and in mobile apps as well.

Deciphering restaurant bill post budget

[Update: 24/Apr/2013] Restaurants and hotels across India will remain shut on April 29 in response to a call by the Hotels and Restaurants Association of India (HRAI) to protest against the new service tax by the central government.

Eating at AC restaurants like Speciality Group‘s Mainland China etc got dearer – [ref: Dine and While], as they are increasing prices by 5-10%. The ‘Indian Restaurant Report 2012′ released by Franchise India last month estimated the current market of Indian restaurant industry at Rs 75,000 crore and forecast it to reach Rs 1,37,000 crore in 2015, growing 17 per cent a year. But the last two quarters have seen growth slowing down on account of cautious consumer sentiment, with brands such as Jubilant FoodWorks’ Domino’s Pizza and McDonald’s reporting lower same-store sales than last year.

Further to Revenue Department’s bringing such restaurant under Service Tax as of CBEC circular 2 years ago in Feb, 2011, the service tax was increased. According to new fare, the calculation needs to be done as follows:

Charges Final Cost
MEAL Rs. 5,000 Rs. 5,000.00
SERVICE CHARGE 10% on food bill Rs. 500.00
SERVICE TAX 4.95% on food cost + service charge Rs. 272.25
VAT 12.5% on food cost + service charge Rs. 687.50
Total Rs. 6,459.75
You pay a maximum tax of 29.19%

Service Charge

The levy is usually 5-10%, although there is no minimum or maximum. The restaurant can decide the rate as per a February 28, 2011 circular. The amount raised is to be shared among staff. For instance, Sea Lounge at the Taj Mahal Palace doesn’t levy a service charge. If Service Charge is included, you need not include tip. Many patrons overlook this and end up paying twice. So, it is nice of Barbeque Nation Andheri West to put up this notice.

No tip at BBQ Nation

BBQ Nation Service Charge, so no tip

Service Tax

All restaurants don’t necessarily show it on t he bill.

VAT, Cess and Charity

These are other components.

I am reproducing 2011 circular as it relates to restaurant:

1. Services provided by a restaurant

1.1

Restaurants provide a number of services normally in combination with the meal and/or beverage for a consolidated charge. These services relate to the use of restaurant space and furniture, air conditioning, well-trained waiters, linen, cutlery and crockery, music, live or otherwise, or a dance floor. The customer also has the benefit of personalized service by indicating his preference for certain ingredients e.g. salt, chilies, onion, garlic or oil. The extent and quality of services available in a restaurant is directly reflected in the margin charged over the direct costs. It is thus not uncommon to notice even packaged products being sold at prices far in excess of the MRP.

1.2

In certain restaurants the owners get into revenue-sharing arrangements with another person, who takes the responsibility of preparation of food, with his own materials and ingredients, while the owner takes responsibility for making the space available, its decoration, furniture, cutlery, crockery and music etc. The total bill, which is composite, is shared between the two parties in terms of the contract. Here the consideration for services provided by the restaurants is more clearly demarcated.

1.3

Another arrangement is whereby the restaurant separates a certain portion of the bill as service charge. This amount is meant to be shared amongst the staff who attend the customers. Though this amount is exclusively for the services it does not represent the full of value of all services rendered by the restaurants.

1.4

The new levy is directed at services provided by high-end restaurants that are air-conditioned and have license to serve liquor. Such restaurants provide conditions and ambience in a manner that service provided may assume predominance over the food in many situations. It should not be confused with mere sale of food at any eating house, where such services are materially absent or so minimal that it will be difficult to establish that any service in any meaningful way is being provided.

1.5

It is not necessary that the facility of air-conditioning is available round the year. If the facility is available at any time during the financial year the conditions for the levy shall be met.

1.6

The levy is intended to be confined to the value of services contained in the composite contract and shall not cover either the meal portion in the composite contract or mere sale of food by way of pick-up or home delivery, as also goods sold at MRP.

Finance Minister has announced in his budget speech 70% abatement on this service, which is, inter-alia, meant to separate such portion of the bill as relates to the deemed sale of meals and beverages. The relevant notification will be issued when the levy is operationalized after the enactment of the Finance Bill.

Vegetarian Bengali Food festival backlash on Twitter

Oh!CalcuttaVegFestival

So, I saw an ad last week of Speciality’s Oh! Calcutta, Mumbai running on a vegetarian food festival. I had been to Oh! Calcutta in Shashtri Nagar, Andheri West a couple of years ago and had only tasted fish and rice. Nearby Hangla’s stall on Lokhandwala offered chicken biryani mixed with egg in a special style among other Bengali dishes. I was a trifle surprised with vegetarian Bengali food, because the term bordered oxymoronic. My mind still wondered – over recent years, there has been pro-vegetarian movement in West and even in India, so this move only felt proper to showcase vegetarian food and break the popular myth of Bengali food being primarily non-vegetarian. My food IQ is not particularly great, so I even thought that I might have been unaware about this side of Bengali cuisine. I did educate myself about vegetarian fares in Bengali cuisine – Aloo Poshto, Chorchori, Potoler Dorma, Dhokar Dalna.

As I started my commute towards work, this stayed in my head. I only wanted to figure out, if social media marketing engine of Speciality Restaurants were showcasing it over there in addition to print ad. In their investor conference call, the Speciality Group has mentioned food festivals being used to increase revenue (14% rise) despite discretionary spending of Indian consumer coming under pressure. I was in for a big surprise. Food connoisseurs of Mumbai were talking about it. Most of them, many Bengali were condemning such a promotion.

Sadly, there was no reaction from the official Twitter handle OHCALCUTTA1 of the restaurant. I did tag that handle in a tweet mentioning this scenario.

It would have been apt for them to engage with respected food bloggers and uber Twitter user, who could become their brand advocate on being educated about green aspect of the cuisine. I saw a really old, although quite apt tweet from that (either agency or digital customer service department. Neena and Bhavana from Speciality group are good at handling complaints as I found in blog posts and forums) regarding addressing a Twitter user’s bad experience, but then no activity since 1 Aug, 2012. Of course there were some enthusiasts mentioning about this in neutral fashion.

On Facebook, Oh!Calcutta did better in promoting this, as there were quite a good number of shares and likes. Although not responding to queries over there, like request for contest would make me give them minus points. The brand needs to engage and show the human side on its Facebook page.

Some other news bites about Oh! Calcutta in chronological order:

  1. ET reported on in the beginning of Feb 2013 that Oh! Calcutta along with Mainland China will house Italian and Mediterranean deli within their premises, called Mezzuna targeting 18-24 year olds, who “drink more and eat less”. As an aside, it also talks about the group tying up with Justdial for its logistics for home delivery.
  2. A Feb 25, 2013 news piece in ET talks about Oh! Calcutta’s parent company Speciality Restaurants is betting big on home deliveries for its fine dining restaurants including itself and Mainland China. It was reported that it will tie up with a local search service to provide backend-calling support for its delivery operations. If you put these 2 articles together it is clear that the company being talked about is Justdial. Nonetheless, we will mention that the Indian tech startup focussed blog TechCircle reported as an exclusive news piece on 8 March 2013 that the local search company being talked above to be IPO-bound Justdial. They have hired a logistics head and are outsourcing delivery backend. It does not mention if it is just backend-calling support or logistics including delivery boys. For former, Justdial makes perfect sense having established its name as a friendly call centre for providing business information. More on this in a separate blog post. Please note that Justdial has forayed into food ordering service with its restaurant listings earlier this year as I talked in an earlier blog post.

Justdial foraying into Food Home Delivery business

Background

Justdial is India’s leading local search engine. It has quietly forayed into Food Home Delivery business by tying up with some restaurants. It is entering crowded market with national players like JustEat, Foodpanda, bookurtable and a few local players like Titbit, TastyKhana, DeliveryChef, FoodKaMood (now a part of Titbit). Another player in restaurant menu business is Zomato, but they don’t do home delivery. I had written my 3 features wishlist for them earlier.

Justdial Restaurants Page is just a static page with links to Justdial’s main site. While Restaurants Vertical on the homepage is a shortcut to Restaurant search. They have a tie-up with bookurtable for table reservation at restaurants. Interestingly, bookurtable has quietly introduced Food home Delivery themselves, so let us see how long the partnership with Justdial lasts, as they are now direct competitors. [Update: Looks like the tie-up is no longer in place, as I could not find a restaurant with bookurtable link on Justdial’s site.]
Here is some praise for restaurant search of Justdial:

— Baskar Ganapathy (@BaskarG) January 18, 2013

How it works

You Search For A Restaurant

SearchPage

You will find an Order Food icon prominently below SMS/Email button. There is old Menu link at the left.

Area of Delivery and Time Selection

You are presented with text menu for such restaurants, unlike scanned copy for other restaurants. When clicking on plus icon next to your desired dish, you are presented with the following screen.

AreaOfDeliveryAutosuggest

It shows areas, where the restaurant delivers. When you start typing, a different set of areas appear.

AreaOfDeliveryAutoSuggestOnCharEnter

If the restaurant delivers to the area selected, Proceed button is activated. Else, an error message is thrown.

AreaOfDeliveryDeliveryAvailable

AreaOfDeliveryNoDelivery

Dish Selection

You can select addons, if available and even add customizations.

MenuAddon

Checkout

You can login with your Justdial credentials or as a guest. There is a verification code on mobile, which you need to enter.

CheckoutMobileVerification

Thereafter, order summary is neatly show and you need to confirm the order. Once you receive the food, you pay the delivery boy. Restaurant then pays Justdial their commission.

CheckoutOrderSummary

Analysis

All in all, this is a really significant move by Justdial in the local search space. Probably, this is the first time, Justdial is moving from a lead-based model to transactions. The interface is fresh and convenient. The old Menu icon at the left bottom on the search listing page, as shown in the first screen should be different, as that icon is now associated with jpeg images of menu of restaurants, which Justdial used to show. This will help them in doing SEO for restaurants on food items. They will need to add options like online payment, loyalty program and increase restaurant coverage with their vast presence to differentiate from the competitors. Other players like Getit have integration with Bookurtable for table booking, not for home delivery.