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May, 21 2012

Big biz opportunities on Indian platter

With several international F&B concepts striving to establish a firm foothold in the country, the Indian food and beverage industry is all set to reach great heights.

T ODAY, the Indian food and beverage industry is passing through an exciting phase, especially the restaurant and cafe sectors. According to estimates, the Indian restaurant industry is burgeoning annually at a rate of five to six per cent, with earnings of Rs 430 billion, out of which the organised segment constitutes only 16-20 per cent. With the present high annual growth of 20-25 per cent, its share is expected to increase to 45 per cent by 2015. On the other hand, India's organised coffee retail sector is pegged at Rs1000 cr. Several existing national and international players are consolidating their market positions and planning further growth. Interestingly, there are many foreign F&B brands which are doing exceptionally well in India. The restaurant brands such as MacDonald, Dominos, KFC, Pizza Hut, and Subway, and cafe brands like Gloria Geans, Barista Lavazza, and Costa Coffee are well-recognised names here. However, most of these brands have relied on franchise growth model to swiftly expand their presence across India. Inspired by the immense success of these brands, there are many international F&B concepts that are vying for similar presence in the country.

Current scenario

The concepts like Japengo Café, Loon Tao, Ci Gusta!, and Muffin Break will launch their franchise outlets in the near future, while Quiznos, Pizza Vito, and The Coffee Bean & Tea Leaf, have already launched their operations in India and are building their presence through sub-franchising.

A prospective franchisee wanting to own a restaurant or a café franchise can explore an opportunity with these promising brands.

Pizza Vito: Pizza Vito is a well-known Pizza-based QSR chain from the US. The brand restaurants offer a wide-range of menu options such as pasta, salads, paninis, and a variety of pizzas. Pizza Vito is making its entry into India by opening two of its outlets in Delhi/NCR this year. “The QSR business is good in India, and the market is growing rapidly. As there are not many players in this segment, particularly in the Pizza business, there is room for more players,” observes Joe Di Bartolo, Founder & Chairman, Pizza Vito. After opening one location each in Gurgaon and Noida, Pizza Vito is looking to expand into probable locations like Bangalore, Chennai, and Mumbai. Besides, the brand will also target Tier II and III cities in the near future. The company will also focus on smaller cities in India to control its rentals, and hence ensure profitability. Talking about advantage India, Di Bartolo says: “India's growing middle class is an advantage to any business. Also, social and eating out trends have changed.”

Ci Gusta!: It is an Italian food restaurant chain owned by Italy-based company Happy Time Solutions. Its outlets serve authentic Italian food which can satisfy even the most refined palate. The premium brand offers wide product range of yogurts, gelato, soups, coffee, etc. “Ci Gusta! is a unique food concept which is both modern and traditional. Our key to success will be the extreme quality of the ingredients prepared freshly everyday, combined with the passion we would like to instill in our franchisees,” says Dario Rabboni, MD, Happy Time Solutions. It has expanded into India via franchising, and its first franchised store is expected to open in Mumbai in June 2012. The strength of the brand's business model is its modularity. Depending on the space, location, and product offering, the store format can be easily translated in many different layouts. Rabboni adds: “Our franchise offers a perfect opportunity for people who believe in low fat healthy quality products.”

The Coffee Bean & Tea Leaf: Founded in 1963, in California, with a mission to source and serve the best coffee and tea in the world, The Coffee Bean & Tea Leaf (TCBTL) currently has nearly 1000 cafes in 22 countries. It is premium café that specialises in specialty grade coffee, tea and specialty coffee and tea-based beverages, along with a wide-ranging gourmet menu. The concept is targeted at premium youth-oriented market. The company's Director of Franchise Operations (Asia Pacific), Mohammad Feroz, says: “The demand for specialty coffee and tea chains has been increasing since early 90's, especially in Asia and the Middle East. We localise our food program according to the needs of the market.” Currently, TCBTL operates nearly 21 outlets across Mumbai, Delhi, Kolkata, Chennai, and Hyderabad. It aims to extend its footprints in premium high streets and malls in all major metros in India. “Indian customer has evolved over a period of time and appreciates quality products. The brand's biggest challenge in the Indian market is the high overall rentals,” opines Feroz.

Japengo Café: Launched almost 10 years ago, Japengo Cafe is an elite concept of Bin Hendi Hospitality, a part of UAE's diversified business conglomerate. This multi-cuisine restaurant offers a menu based on assorted mix of international fare ranging from salads and steaks to sushi, pizza and pan-Asian specialties prepared by expert chefs. Japengo cafes serve the finest casual dining. Mohi-Din BinHendi, President, BinHendi Group, explains: “The concept is a great success because we cater to the whole family and it offers a great choice for food for everyone.” The brand is looking for strong franchise partners to develop its presence in India. It offers promotional campaign for the launch of the café, along with extensive training to the franchisee's chef and the staff. On the scope offered by the Indian market to the food brands, BinHendi observes, “Indian people have already been totally taken by fast food, casual and multi-cuisine dining. I can see huge potential for food outlets in India."

Market success

In a diverse market like India, factors like customisation, uniqueness of products, pricing and quality of products and service, are key to the success of an F&B concept. Many brands have tweaked some of their menu offerings to cater to local tastes and preferences, along with dishing out international flavours. As Di Bartolo from Pizza Vito says: “Ours is a premium quality high-end Pizza with economical pricing. We are also considering customising some of our menus to suit the Indian taste”. TCBTL's Feroz insists: “We believe as long as we maintain the total quality experience in terms of product, service, and environment, our customers will judge us on that.” Additionally, a brand may control its food costs to provide high ROI to its franchises. Besides, now companies are also exploring growth opportunities in tier II and III cities of India to grab a massive market.

Opportunity

For most franchisors, potential partners having prior experience in retail, real estate or F&B space are ideal candidates for inclusion in their franchise systems. The brands are looking for qualified franchisees to extend their reach in the Indian market.

Pizza Vito is aiming for 50 stores in India in the coming years. The franchisee needs an investment ranging from Rs 55 lakh-1cr depending upon the business model. It is offering master franchise for Southern India, sub-master franchise for a territory or state in the master franchised area of North and East India, and area developer rights for multi-unit development. It offers several store formats, including casual dining restaurant (CDR), QSR and take- away. The space requirement ranges from 800-2,250 sq. ft (on an average). The brand also recommends a beer and wine bar in its CDRs and Tier II QSRs (as per law).

The Coffee Bean & Tea Leaf is offering partnership to the investors in the youth segment, existing family owned restaurants, and women entrepreneurs. An area of 1,500 2,000 sq. ft and a capital of Rs 60 - 70 lakh are required from the franchisee's end to join its partner network. Ci Gusta! is looking for franchise partners across the North, West, and the South of India. Preferred locations for opening brand's stores are Tier I cities, like Delhi, NCR, Mumbai, Pune, Bangalore, Hyderabad, Chennai, and Kolkata. It is targeting to have at least 150 stores of different sizes and menu over the next five years. The brand's franchise options include Café, Mini Café and Kiosk format. An investment ranging from Rs 30-80 lakh, and an area of 80-1,200 sq. ft are needed to partner the brand.

To partner Japengo café, an investor needs Rs 1.3-1.5 cr along with space of 3000 sq. ft. Its franchise is available for all zones in India i.e. the North, South, East, and the West.

Growth challenges

An F&B concept may have to deal with certain operational challenges related to real estate, food inflation, supply chain mechanisms, competition from other players, and most importantly the brand's ability to connect with the target consumer. A brand can be challenged by paucity of suitable sites, high real estate costs and rentals. The rising food inflation impacts the pricing of products and services offered at restaurants and cafés, making it difficult to retain their customer base. One can survive market competition only by offering unique products and the best services. To overcome supply chain issues, a brand may partner with a third party logistics and supplier company which has extensive presence in its territory to control its costs and improve the product availability. Many brands meet with failure when they are unable to connect with their audiences. As Ci Gusta!'s Dario Rabboni says: “Our biggest challenge is to bring authentic Italian food culture and heritage to the Indian consumers. We would like to convince them for our originality and passion.”

Conclusion

Today, one can find a Barista, Pizza Hut, Subway or Dominos, in almost all kinds of retail locations in large cities. They are also focusing on small towns to bite into large consumer base. At present, there is a wide gap in demand and supply in the Indian F&B market. Hence it will continue to be the foremost sector in the franchising industry for a long time, providing lucrative investment opportunities to interested franchisees.

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