New concept, proven success and a high-margin model are luring investors to juice bars and thick shake parlours. Read on to delve deep into an interesting business proposition.
From street-side pushcarts to air-conditioned outlets, juice bars in India have undergone a retail revolution in the last 5-8 years. In fact, as early as 2005, brands like Juice Lounge entered the market and introduced a new fad called ‘live kitchens’ which successfully got customers’ attention and money. Since then, there has been no looking back for Juice Lounge which has nearly 40 outlets in the north alone.
BUSINESS MODEL
Most of the brands have coined two formats – a kiosk model for places with high footfalls and a lounge model for high-street locations. A kiosk in a metro city can expect about 100-150 customer walk-ins in a day, with each store having the potential to generate Rs 5-10 lakhs revenue. While the investment for kiosks of about 300 sq. feet ranges between Rs 8-11 lakhs of which Rs 3 lakhs will be needed for interiors and lightings, Rs 3-4 lakhs for kitchen equipment and Rs 3 lakhs for land rentals; the overall set-up cost for a lounge is Rs 11-15 lakhs, of which Rs 4-5 lakhs will be spent on the interiors, Rs 3-4 lakhs on kitchen equipment and the remaining will be spent on land rentals and other taxes.
The lounge bars can generate up to Rs 10-14 lakhs revenue, of which a lounge bar owner can earn close to Rs 3.5 lakhs per month after all expenses. Manav says the margins vary between 30-40% and if the place is owned by the store owner, the profitability is higher. According to Samrat Reddy, the co-founder of Drunken Monkey, a premium thick shake brand that has over 75 outlets in the country, the monthly breakeven depends on the rent of the outlet versus the monthly sales.
For a Drunken Monkey franchise outlet, for instance, the breakeven sale for a month should be Rs 3.9 lakhs. This includes the cost of raw material which is 35% of overall sales, 6% of royalty and employee cost of around Rs 1 lakh. For other miscellaneous costs, including electricity and other bills, the expenses will be Rs 30,000. However, rent plays a key role in calculating the monthly breakeven, says Reddy.
Though thick shakes have gained popularity in India only in the last twothree years, the demand is high from locations where families reside, contrary to the belief that students or younger crowds consume such products, notes Arun Singh Thakur, founder of Hyderabad based brand Ministry of Thickshakes. He says, “Pockets where families live are highly profitable as for many students spending Rs 150-200 on a dessert is still a luxury. Contrary to malls or high-streets, it’s the residential pockets that generate large revenues.” Thakur opines that cities like Delhi and Mumbai are way ahead in concept based product selling, and Bengaluru is expanding vastly and has a growing market.
EXPANSION PLANS
While Juice Lounge has four store launches in the pipeline, it plans to open 12 outlets every year. The brand is targeting pan-India presence in the next one year. On the other hand, Drunken Monkey plans to expand in the northern and western parts of India with around 200 outlets by 2020. The brand will then focus on global expansion. Meanwhile, Thakkar says Ministry of Thickshakes is focusing on expansion in Hyderabad, and plans to open 20-25 stores in the city alone, while rapid expansion will also happen in Tier II and III cities. “Stores are coming up in Coimbatore, Cochin and Trivandrum,” he informs.
Observing why most of the brands are turning to Tier II and III cities for faster expansion, Reddy says that although metros have ample opportunities, Tier II cities promise higher rate of success and faster return on investment. He says, “Improved spending power of customers in Tier II cities, lesser real estate and employee costs, and lesser competition from similar businesses ensure profitable business in Tier II cities. Hence, these days most brands are not wasting too much time before entering into Tier II cities and gaining the early movers’ advantage.”
Kiosk
STARTUP COST: 8-11 lakhs
OPERATIONAL EXPENSES: 3.5-6 lakhs
MONTHLY REVENUES: 5-10 lakhs
GROSS PROFITS: ` 1.5-4 lakhs
Lounge
STARTUP COST: 11-15 lakhs
OPERATIONAL EXPENSES: 6-8 lakhs
MONTHLY REVENUES: 10-14 lakhs
GROSS PROFITS: 4-6 lakhs
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