Advisory Feb, 07 2014

Maximise profits with smaller biz models

Lower is the cost, but higher are the profits. This is what kiosks and carts are promising to entrepreneurs today. And further, this is what is being vowed by entrepreneurs to their franchisees - greater returns for lesser investments.

By Sakshi Arora
Feature Writer
Maximise profits with smaller biz models

From gifts and flowers to artificial jewellery, ice cream to brownies, and candies to fast food, each and every concept is operational via kiosk format to expand itself. However, the food and beverage industry is dominating them all. Franchisors are seeing kiosks and carts as a fruitful strategy to attract prospective franchisees.

It is not today, but almost for two decades that the kiosk trend is in. In fact, with increasing count of malls these days, the trend has seen increased number of entrepreneurs adopting it. Also, franchise model is being followed by them as it has come out as a lucrative way to expand faster. Some such brands include Fresh & Naturelle, Snackoz, Grillz Sandwich & More, The Chocolate Room and Sunshine Kebabs, all of which have been operating in small formats, viz. kiosks, carts and parlours. Shopping centers and malls ensure high footfall for them along with their growth by leaps and bounds. Still, there are some challenges like limited product display that these businesses face through their journey. Read on to learn how to fetch higher profits with a low start while countering these challenges.

Destinations preferred the most

It is very important to decide the location before one opens his business. One should see and thoroughly analyse the market to ensure high sales and footfall. Even when opening a kiosk, the same strategy works. The brand Fresh & Naturelle believes that sales is directly proportional to the footfall rate and thus, tier II and III cities can report as much sales as  tier I cities do. Kunal Pabrai, Partner, Fresh & Naturelle, says, “Our initial investment is fixed. Hence the deciding factor for opening a counter is the rent-revenue ratio and the presence of our target customers.”

According to Sunshine Kebabs, kiosks model can only suit shopping complexes or food courts. Chocolate room is also of the same view.

In a similar way, Grillz brand sees malls as well as schools, colleges, bus-stands, railway stations and commercial markets having high potential for kiosks and carts.

The challenges that arrive

All new businesses carry a lot of challenges along. To operate a kiosk in a mall or shopping complex is also not an easy task. It takes a lot of effort on part of aspiring entrepreneurs before they could finally achieve a milestone in their entrepreneurial journey. Sheel Khanna, Head Business Development, Grillz Sandwich & More, opines, “The biggest challenge faced by kiosk operators is timely delivery and display of collections. Limited collection can be showcased and logistics can also be a problem.” From a franchisor’s point of view, high-rentals are a big issue and thus, franchise route is opted.

Limited showcasing of products is faced as a biggest challenge by Fresh & Naturelle also. The brand sometimes needs to reduce the product offerings so that these could fit the space available. This is the reason why smaller formats typically have more of the higher selling flavours such as Nalen Gur, Rich Chocolate Brownie and the like and now the more exotic flavours of ice creams, including wasabi and green tea.

Even storage can be a challenge. Different brands need to make arrangements for additional storage separate from the counter in case the locations are a combination of high sales and high real estate cost. Fresh & Naturelle finds it difficult to accommodate as much as possible while maintaining the aesthetics of the counter and brand.

For Snackoz, it is the space that acts as the biggest obstacle. Vaibhav, Director, Snackoz, says, “Especially when hot and fresh food is to be ensured, kiosk model does not allow having a kitchen and requires lot of struggle at the end of its operator.” However, The Chocolate Room finds it tough to control wastage and inventory, which can take away all the margins very easily.

Aatika, Business Development Manager, Sunshine Kebabs, says, “The difference between kiosk model and stand alone model is kiosk model suits only for shopping complexes and food courts, and standalone model is an individual outlet.” The brand operates in these two formats only.

How to overcome them?

Facing challenges alone, waiting for them to disappear over time and overcoming them wisely by following an intelligent strategy are two different things. Since, countering challenges timely can help you see the business growing by leaps and bounds. For Fresh & Naturelle, coordination amongst the franchisees and franchisors is a must. The same can help navigate most of the problems very easily.

It is not easy in the food and beverage industry to maintain the products’ essence while keeping intact their quality and freshness. Thus, centralised kitchen is what is suggested by Snackoz along with supply of raw material to its franchisees. Not only will the same save money and time, but would also definitely allure the taste buds of customers with the products being fresh.

Key benefits

As cons cannot be there without pros, so can’t be challenges without benefits. Kiosk/carts model has some key benefits as well, which include visibility, space and above all, cost. Kiosks and carts are cost-effective formats as compared to the other formats. Grillz and Snackoz both believe that because of less space covered by small formats, one can open these at any high footfall/visibility area.

Fresh & Naturelle’s partner said that more touch-points could be reached as a brand with the customer and greater hits could be ensured. However, large formats do not allow covering each and every corner of a city.

Vikas Panjabi, Director, The Chocolate Room, “The biggest advantage in kiosk than business models is that they can be set up in small investment, require less staff maintenance, and less inventory and overall it can be managed along with some other work as well.  It does not require 100 per cent presence of the owner always.” For Sunshine Kebabs, on the other hand, low investment in kiosk model is a plus point and the same makes it a profitable investment model.

Franchise Facts:

Brand Area Investment Breakeven RoI Current Total/ Franchise outlets
Fresh & Naturelle For parlour – 200-500 sq ft
For kiosk – 64-100 sq ft
For parlour – Rs 12-15 lakh
For kiosk - Rs 9 lakh
1.3–1.9 years 40-60% 18/17
Grillz 100–200 sq ft Rs 4-7 lakh Within 6 months 200% 10/60% franchise
Snackoz 150 – 400 sq ft Rs 8-12 lakh 3-6 months -- 7/6
Sunshine Kebabs 200-300 sq ft Rs 10-15 lakh 12-18 months 24% --
The Chocolate Room 60-200 sq  ft Rs 10 lakh 12-18 months 24% 112/105

Related: How to start a sweet doughnut business

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