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Food and Beverage 2013-07-31

The Curious case of Shree Rathnam

Has Sagar Ratna shut up shop? Have they changed their name? Is Shree Rathnam a sister concern of Sagar Ratna? Is this Sagar Ratna's new name or some branding exercise?

Has Sagar Ratna shut up shop? Have they changed their name? Is Shree Rathnam a sister concern of Sagar Ratna? Is this Sagar Ratna's new name or some branding exercise? Multiple questions were raised among Sagar Ratna loyalists in Chandigarh, Punjab and Delhi after the launch of allegedly similar brand called Shree Rathnam. TFW investigated and got into the nitty-gritty of both the brands to understand the business ecosystems of Sagar Ratna and Shree Rathnam. The brand swap of a few Sagar Ratna outlets and the emergence of a similar novel brand Shree Rathnam at the same place had left many loyalists, food connoisseurs and others in a bewildered state of mind in the city beautiful. Sagar Ratna loyalists were confused because except for the branding and changes in the menu, nearly everything at the converted Shree Rathnam outlets was same, even the staff.

New York-based private equity fund, India Equity Partners bought a controlling stake in Sagar Ratna Hotels, a more than 25-year-old popular chain specialising in South Indian cuisine, in 2011. In the first 25 years Sagar Ratna had built 25 stores. In the last two years the brand has accelerated growth and they now have 52 corporate stores and three stores are being built. They have 40 franchise stores and 12 new franchise stores are also being built.

Whereas the recipe of Shree Rathnam was 'cooked up' in 2012 and in June 2012 they opened their first outlet and now have reached to 26 outlets pan-India.

Similar recipe yet  different flavour

On a query regarding similarity of branding and cuisines, Shivanand Banan, Director, Shree Rathnam, says: “There are no similarities between Shree Rathnam and Sagar Ratna. It's just Sagar Ratna, Shree Ratnam and Dada Prakash. We are just selling the same products and there are thousands of other outlets that sell these products only. Customers need not confuse between us. We try to serve our customers and make them happy with our services.”

Legal tastes..

Across the F&B industry in India, restaurants serving similar cuisines open and compete, but the alleged controversy between these two brands has different aspects. When asked about the idea behind the opening of similar restaurants and their relationship with Sagar Ratna,  Bhushan Prakash Gupta, Director, Shree Rathnam says: “No we are not at all associated with Sagar Ratna. They are a different 30 years old brand having a separate legal entity and we are a new brand entering into the food industry. There are no connections between us at all.  Our USP is that we want to give our customers the value for their money and our good quality food, ambience and our service. We do need to differentiate ourselves from Sagar Ratna.”

On the other hand Muralikrishna Parna, COO, Sagar Ratna Restaurants Pvt. Ltd, tells a different story. “The two managers have quit and started their own brand along with others. A legal action for IPR and brand infringement was filed over six months ago at the Delhi High Court against Shree Rathnam. Also, a petition for legal action against ex-Chandigarh Sagar Ratna franchisee was filed recently for default of franchise agreement as well as for the recovery of unpaid franchise fees.”

This kind of conflict is an eye opener for the franchise fraternity. As India does not have any specific legislation regulating franchising business, this conflict has emerged.  To protect the interest of franchisors and franchisees, the franchise fraternity must raise a voice as India is in dire need of franchise laws. If there were franchise laws present, the issue would have taken some other shape. Franchising in India is basically built on the principles of the contract law, namely the Contract Act 1872, while the Foreign Exchange Management Act 1999 regulates all franchising activities involving foreign investments and foreign remittances.

Fight for franchisees

Franchise swap is a very normal phenomenon. But such an act by a loyal franchisee and that too with a brand that has been run by an ex-employee of an ex-franchisor has led to a tangy flavour in franchisee-franchisor relationship in this case. However, Parna says: “Only one franchisee has colluded with our ex-managers and he has two stores in Chandigarh, one in Panchkula, one in Ambala and a kiosk in a mall. No other franchisee has defaulted and infringed upon the brand. We have already opened a new store in Panchkula and that store has done exceedingly well, in fact better than our previous location in Panchkula .We have signed four new franchisees in Chandigarh and two new franchisees in Ambala. All these stores are scheduled to open by October this year. So we have lost five old stores and will replace them with eight new stores in the same market. In fact, the response for new franchise search was very quick due to the popularity of the brand.”

On the other hand Shivanand Banan says: “We didn't approach any of the franchisees. Even we didn't want to convert any of the Sagar Ratna's franchisees into Shree Ratnam's franchisee. But the franchisees started approaching us from several places. I cannot tell the name of the franchisees that have been approaching us; they might not be happy with the functioning of Sagar Ratna. I cannot comment on why they are approaching us.”

Now the talking points are, why don't the two brands engage in a healthy competition? Where will Shree Rathnam stand by this year-end? What strategies will both the brands adopt to compete with each other, since that's inevitable anyway? Right now, there are no easy answers to these queries. Let's see how the brands fight it out in the market, and if they eventually succeed to retain or lose their franchisees.

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