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A cup of coffee or tea that has been known for relaxing, cheering up and initiating conversation is brewing up a storm in India
The organized café market, estimated around Rs 6,700 crore in 2014, is projected to touch Rs 15,100 crore by 2020, growing at a compounded annual growth rate (CAGR) of 15 per cent, according to Technopak. The chain cafe market is 27 per cent of the total organized cafe market at Rs 1,800 crore in 2014 and is estimated to be 36 per cent of the total organized market by 2020. The chain cafe market is estimated to grow at a CAGR of 20 per cent.
The past few years have witnessed many international brands penetrating India, which simultaneously was an awakening for the Indian entrepreneurs to think of taking a sip from this ever-growing industry. This brings out the fact that the cafe market is brimming with opportunities for the investors. Sanchit Saxena, Founder, 07 Arena The Gourmet, says, “The concept behind opening 07 Arena The Gourmet is to give the customer a relaxing place to hangout, along with the high quality food -- a food that fits the budget, especially students, who are budget-restricted and can’t afford luxurious cafes.” Barista, Gloria Jean’s Coffees, Coffee Day Xpress, Costa Coffee, The Coffee Bean & Tea Leaf, Coffee by Di Bella are few of the Indian cafe giants, which are growing via franchising.
India is the second-largest producer of tea in the world after China. Anirudh Poddar, Co-Founder, Chai Break, shares, “The idea of Chai Break was conceptualized while sitting in one of the coffee shops, where we wanted to have tea. We realized that there was a need of a place to serve good tea in a retail format. It was then we commenced with our first retail chain in Novemeber 2011 and since then have opened multiple outlets in Kolkata, Durgapur and Bhubaneshwar.” Likewise many other brands are coming up with exclusive cafés, lounges, or bars that are offering a unique business proposition to prospective investors. Few of the brands with opportunities in this sector are Wagh Bakri Tea Lounge, Tea Trails, Chaayos, Chai Break and Chaipatty.
Brewing via franchising
The franchise model is driving the growth of both the café and tea brands, and in a process brewing immense business opportunities for interested investors wanting to enter the café business by associating with leading brands. Poddar of Chai Break shares, “We are planning to adopt the franchise route now as we feel that we can expand faster with franchisee coming in as investors. I think the retail chains in India are progressing well in comparison to the olden days of tea at the dhabas. In long term, there should me more tea lounges coming up due to the response the current players are getting.”
Talking about the successful franchisor-franchisee relationship, Gaurav Naranag, Director, Coffee Culture, says: “We don’t sell franchisee; we invite partners, who are enthusiasts and are interested in the F&B business. Adding numbers won’t make sense, we ensure profitability of a franchised outlet.”
Investing in a coffee or tea franchise is a great step for long-time profits. Moreover, investment may vary on the concept, whether you opt for a kiosk, shop-in-shop, or small cafe lounge set up. Saxena of 07 Arena, who recently adopted the franchise way for expansion, says, “Currently, we are working on bringing up a franchise module into the market. Basic investment cost will range between Rs 15 and 20 lakh.”
However, the investment may increase for standard coffee and tea lounges. As informed by Poddar, “Chai Break franchise would cost an investor a minimum of Rs 50 lakh.”