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Aug, 08 2012

BIG PROFITS IN HANDY SMALL PACKAGES

While big players are dominating the scene in the food and beverage (F&B) industry, the advent of small size business formats such as kiosks and carts has rekindled the business aspirations of many budding entrepreneurs.

ADITYA’S hopes of commencing a business in the food and beverage industry always come crashing down whenever he sees the market is dominated by big-box retailers. But there is still light at the end of the tunnel. He won't come a cropper now as small-size business formats like kiosks and carts are becoming popular in the food and beverage market. The trend has enthused franchisees like Aditya to kick start their entrepreneurial dream reaching for the dizzy heights.

Kiosk and cart formats are replete with numerous advantages. These formats provide flexibility for a franchisee to work with and he can set up a business with a minimal investment, coupled with low risk. Also, 'eating on the go' is a phenomenon that lures the urban population as it offers quick service, and convenient and lip-smacking snacks. However, what differentiates a kiosk from a cart is that while a kiosk is usually stationary/ permanent, a cart can be moved around easily from place to place. From carts that offer ice-creams to kiosks that feature chocolates, candied nuts, there are copious speciality food franchises in this business model.

Big names in small formats

Many brands in F&B sectors have made it big in this small world of kiosks and carts. The bakery sector in India is the largest in the food industry with an annual turnover of about Rs 3,000 crore. India is the second largest producer of biscuits after the US. According to estimates, the bakery industry in India is worth $69 billion. One of the early fresh baked cookie chains, Cookie Man, began its operations in India in 2000. Their kiosk and express formats are designed to use space effectively and to provide branding that has an impact on customers. The Cookie Man team works very closely with franchisees to make the right choice of format. The Cookie Man kiosk and Cookie Man express formats have their own advantages. They provide the cost advantage and efficiency not found in other formats. They are ideal for places with high traffic where there is limited area available to set up a store and costs involved are high.

In a market where premium space is very expensive, kiosks are cost effective and allow entrepreneurs, who like to minimise their risks/ costs, to establish themselves at locations receiving high customer footfalls. Kiosks are usually set up at airports, theatres and similar high footfall areas. Amul, the largest marketing organisation of food products in the country, also has Amul kiosks. Amul boasts of more than 600 stock keeping units in fresh, ambient and frozen food categories.

Many overseas food brands are expanding their operations in India via the kiosk format. The Chocolate Room India, an Australian brand, initiated its services in India in 2007. “From 2011 we planned to start kiosk formats of our brand as we wanted each and every individual in every city of India to know that The Chocolate Room is there to create a new chocolate culture in India,” says Vikas Panjabi, the Managing Director and also the master franchisee of The Chocolate Room India. The Chocolate Room is the first in India to serve 16 flavours of hot chocolates, the world's most famous chocolate shakes and chocolate waffles.

Overall, the chocolate industry is set to grow at 25 per cent per year. Leveraging on this 'chocolicious' formula of success is Leonidas, a premium Belgium chocolate brand. Speaking in favour of the small-size format, Vrinda Rambhia, Director of Business Development, Leonidas India, says: “A kiosk business model helps new entrepreneurs to capitalise on the growth story by reaching to its customers.”

Taste of franchising

If you have the chutzpah of growing big in the food and beverage sector, franchising is the way to do it. All the entrepreneurs in this sector spell their success via franchising. Take the case of Cookie Man which believes franchising has been integral to its expansion and growth in India. It started franchising in 2002 and today almost half of the Cookie Man outlets are franchise outlets. “Franchising has given us the opportunity to partner with some really interesting and committed people who share our passion for food and retail. It has helped us build the Cookie Man brand in India and increase our presence across the country,” says Pattabhi Rama Rao, Executive Director, Australian Foods India Pvt Limited. The investment range of the brand is between Rs 10 lakh and Rs 50 lakh, depending on location, size of store, etc. The Cookie Man kiosk requires a carpet area of 80-100 sq ft and it is usually located at the atrium of a large format mall. It also contains a small oven for limited baking. On his preferred location of kiosks, Rao asserts: “All our stores are located at malls or airports. We do have Cookie Man kiosks at malls and they are doing well. In general the kiosk format is gaining popularity in India. It is an innovation that companies are increasingly using to test brands/ products in the market and to increase brand visibility and sales.”

From day one, some entrepreneurs like Vikas Panjabi have stuck to franchising as their formula of success. “From the beginning we had set our mind straight that we had to take totally to the franchising route; that is the reason out of all the 71 stores that we have, 70 are franchise stores and only one is a company store. We are just focussed on franchising of our brand all over India,” says Panjabi. The brand showcases its presence at all the top malls of the country, such as Inorbit Malls, Phoenix Market City and Alpha One Group. This strengthens the presence of the brand and helps the franchise to grow as the brand value and awareness increases nationally. One needs an investment of Rs 10-15 lakh and an area of around 60-350 sq ft to start The Chocolate Room kiosk.

LEONIDAS chocolates that is present via more than 1400 retail outlets spread over 53 countries, started franchising in the early 80's. The local knowledge of their franchisee partners has helped the company to reach out to new customers and grow rapidly. One requires an area of 15-200 sq ft and an investment of Rs 20 lakh to open a Leonidas kiosk. According to Rambhia, the best location for the kiosk model is to have presence in malls, departmental stores, hotel lobbies, etc.

Amul has the lowest entry barriers and that is the reason why it has arguably the largest number of franchisees (6000) in the country. To start an Amul kiosk one needs an area of 100-150 sq ft and an investment of Rs 1.50 lakh. Anyone with a very small capital base and good business acumen can become its franchisee.

Other ingredients of success…

Though serving a tempting confectionary on your kiosk and cart is an important ingredient of success, partaking in the training and support from the franchisor is the foremost. The Cookie Man training team is always on hand to assist in activities from baking procedures to maintenance, merchandising, recruitment and sales promotion. In other words, training is provided for every single aspect of the business, including hygiene procedures, stock planning and management and even statutory financial reporting. On the importance of hygiene in this sector, Rao says: “All our baking is centralised to enable us to maintain international standards. Personal hygiene is also addressed in our training sessions. In fact, we choose our franchisees with care so that we have a shared commitment and passion to not only do well but also maintain high standards of quality and service.” The Cookie Man displays its presence in 21 cities and has 22 franchise outlets. The company will continue to expand to other cities, based on interest and demand. “The rural consumer in India is getting more interested in buying premium products. In the next one year, we would like to open stores in smaller cities across the country. We are present in all the metros and several large cities and would like to take our brand to smaller cities,” adds Rao

Leonidas provides training in all areas, including operational training, product necessary training and employee training and in all the promotional activities done by Premium Pralines to promote Leonidas India. The company has a firm belief that the value proposition of Leonidas lies in the fact that it has made use of the latest technology to guarantee freshness, quality and safety of its products and has introduced the Hazard Analysis and Critical Control Points system.

The Chocolate Room leaves no stone unturned for the success of its franchisees. For instance, the company helps them in recruiting and training the staff, both theoretically and practically. Company officials visit outlets of franchisees for 15-20 days to train their staff and monitor the operations of the outlets. Then, they visit the stores monthly to monitor their quality and hygiene standards. They also keep on launching new festive menus or seasonal menus and forge some cross promotional tie-ups to up the standards within the store. “The Chocolate Room has 20 kiosks and 10 more kiosks are coming up within this year itself. We are planning to strengthen the East India market as we have just launched our operations there,” asserts Panjabi.

Food for thought

Though consumers may opt for pricey meals in restaurants once in a while, eating a convenient snack at a kiosk/cart is what they prefer on a daily basis. And if the kiosks/carts are located at high foot-traffic areas like malls, they are sure to catch the attention of consumers. Moreover, kiosks/carts don't require costly build-outs. So, hurry up and join the league of small-size but huge in returns business formats.

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Players in this sector

Amul

Kwality Walls

The Chocolate Room

Leonidas

Cookie Man

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Growth Rate

The bakery sector in India is the largest in the food industry with an annual turnover of about Rs 3,000 crore. India is the second largest producer of biscuits after the US. According to estimates, the bakery industry in India is worth $69 billion.

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