The Vada Pav King: How Jumboking Travels the Growth Path
Jumboking is the success story of how the desi vada pav built growth in the international style QSR chain. Mumbai-based Dheeraj Gupta started Jumboking in 2001, making the vada pav relevant to Jumboking in the way that burgers are to McDonalds, fried chicken to KFC and pizzas to Dominos. With 53 stores in nine cities, Jumboking is today the largest vada pav chain in India. Dheeraj shares the lessons he learnt while traversing the path to transformational growth.
We firmly believe that the company should be run by numbers. You should build a top level team only when your balance sheet can support it. When we were small in size, we decided to grow at 50 per cent new stores year-on-year. This meant that when we had 20 stores, 50 per cent growth would have meant that we need to add 10 stores every year. Now that size did not require a CEO. Today, we have 53 operational stores, and as per the growth target, we are planning to add at least another 27 stores in the next 12 months. This is where as the promoter I would struggle to meet the numbers. So a strong CEO is needed to help me get there. The expansion plans and work laid out should be commensurate with the kind of team you put in place.
Defining Your Role
Till 2006 Jumboking had been a one man show kind of a company. However, in 2007 when we hired our first CEO in the company, I soon realised that he of course would have a slightly different way of doing things. I had to redefine my role to ensure that the professional got the space to operate freely so that we don’t end up replicating work. During the 2008 recession, I had to let go of my senior team as it became a matter of survival for the relatively small company at that point of time. When things began looking up again I hired a new COO. That was in 2011.
This experience helped me understand that after a certain point, the promoter has to play a different role than the CEO or COO. The promoter always has the benefit of knowing the company inside out since he has been there from the beginning; the professional needs time to settle in. The professional has to be given clear cut key result areas and then the promoter has to let him do his job while the promoter plays the role of the mentor than the doer.
Start-up to Growth Stage: Changing Demands
For our first 10 stores the kind of team that we were operating with and the systems we had in place were very basic. The food cost, profitability, rent, number of managers etc. were known to me. But as we grew with the number of stores, I realised that all the levels the teams would require different skill sets. As a promoter, I have to grow with the company. At the same time, my team also has to grow. So I will have to figure out a way to take my team along. I tell them as to where they all will have to be if they want to be in operations at 500 stores. As the company grows, as the team grows, system creation is where the challenge lies.
My Role As a Promoter
As a promoter, I am looking after marketing and innovation. So it automatically means for me to be able to go into the market and see what is happening without looking into the day-to-day nitty-gritty of the operations. For example, if I go to a franchisee store and see one of his staff members is without uniform, I will not correct him. I am there from a marketing perspective to understand what new products are needed to boost sales. Of course, I will mention it to the CEO later.
As a promoter, I have to graduate from being a doer and an executioner to a culture creator. My focus is on culture creation as to whether we want to have a franchise system which is very non-tolerant or a system where we put the franchisee interest first.
Growth Via Franchising
When we had set up our first Jumboking store, the challenge was to see whether only having vada pav as a product would be able to sustain even a single store? But by the time we reached 10 stores, we chalked out that Mumbai alone could have up to 200 stores in around five-year time. So the vision kept growing and we started giving franchising outside Mumbai also. The first three stores were company owned and the fourth store was a franchised store in 2004. However, we franchised the second and third store within the first two years itself and later we franchised our first store also. Today, we are a 100-per cent franchised company as we had always thought it to be.
Culture Creation Among the Franchisees
We don’t train our franchisee staff instead we ask franchisees to train their people. Attrition is huge so franchise owners have to take charge of store operations and store training on their own. Today in these 53 stores where there are around 300 people working, even 15-20 per cent attrition means 40-50 people leaving and joining every month. So this is something that we have left completely on franchisees and it has worked great for us. The culture that we as a company try to create is amongst the franchisee group. We try and bring into each franchisee a culture of customer service and store upkeep. We feel the franchisee staff should be loyal to the franchisee not to Jumboking.
Investing in Innovation
Our entire manufacturing is outsourced and this has been from the day one. Product innovation is what we focus on. Ideation or origin of the product happens in the marketplace and to be able to implement it we move back to our kitchens to check if it is possible for us to do. 80 per cent ideation comes from the market while 20 per cent from the kitchen. Innovation, supply chain and brand building at Jumboking happened from day one. The product additions that we did were because we realised that the market was willing to pay more for the value addition.
Jumboking today is a profitable company. We know that if we focus on the 50% year-on-year growth, then we will cross 500-store mark in five years. We should be at 78 stores by next September and we know that we will achieve that without any additional capital raised.
In terms of expanding to other cities, though it will stretch our supply chain but once we do that for let’s say, from Mumbai to Delhi then we will open stores in all the major cities on that route. Now we have stretched our supply chain up to Raipur on the route towards East which has cities like Aurangabad, Amravati, Nasik, and Pune. Today my supply chain cost is the maximum at Rs 35 per kg and every year this cost is going to come down to optimum level of Rs 20 a kg over the next two years.
We are looking at operating in the top 20 cities by next September and top 50 cities over the next three years. We are looking for properties in three more cities that would be operational by December end. In terms of store size, we don’t want to become Haldiram which has 2500 sq. ft store neither we will go for push carts as it is a completely different business model. 90 per cent of the brands go wrong because they try to become everything. For us, India is a market which can support a minimum of 1,000 Jumboking stores.
Future of Indian QSR market
I am sure that at least 10-15 very strong Indian food brands will be created over the next decade. I believe food items like Biryani and sweets have huge potential lying untapped. Further, there is a huge misconception about FMCG and restaurant segment that people in the food industry have. Haldiram selling bhujia at all of its outlets is FMCG which is very different from Haldiram selling chhole bhature freshly made from its outlets which comes under restaurant. The two requires different mind and skill sets and in future will become so large that you will find the most focused player dominating the market. However, if someone will try to do both, he will eventually find it tough.
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