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Jun, 13 2019

RAISING THE BAR

The biggest spin-off from a change in lifestyle with increasing disposable income is that nightclubs and bars are quite in favour, not just to chill out but also to celebrate events and have casual business or professional meetings. Small wonder then that some of the leading brands in this space are now planning to expand across India in a big way through the franchise model.

Visual appeal, unique ingredients, craft drinks and complex flavours are ruling the nightclubs and bars segment of the restaurant industry. Though it was anticipated that in the year 2019 an increasing number of people would prefer to drink at home, nightclubs and bars across the country are not witnessing any lull in the momentum of business nor has there been any shortage of regular and new customers. Manish Sharma, Founder, Molecule Air Bar, says, “The trend of dining out has increased enormously. From office meetings to small and big celebrations to healthy eating and more, dining out has become an almost daily activity.”

In fact, even as the competition for market share shoots up, nightclub and bar players have been implementing new marketing strategies to attract their target audience. The minimum spending per customer at most of the nightclubs and bars in India varies between Rs 1,500-2,000.

FRESH STRATEGIES

Newer concepts have been playing a major role in the growth of the business of the nightclubs and bars. The Bar Stock Exchange (TBSE) is the first pub chain in India to own a proprietary bar stock exchange software using a comprehensive algorithm to determine and change the price of the drink for the next customer, based on demand. Customers can also place an order via a specially-developed app (Android and iOS) that lets its customers monitor prices and order in real time. “We have invested greatly in the development of this software and in creating adequate back-end support,” says Mihir Desai, the co-owner of TBSE.

In addition, The Beer Café’s beers-on-tap concept has got much attention from the younger generation.

START-UP COST

The start-up cost for a typical 1,000-4,000 sq. feet area of a nightclub or bar could be between Rs 2-5 crore. The kitchen equipment, one-time liquor stock and raw material could cost over Rs 20 lakhs plus the expenses on bar unit and crockery goes to around Rs 7-8 lakhs. The liquor license cost varies from state to state; on an average it costs up to Rs 7 lakhs. Other licenses include FSSAI (Rs 7,500), TIN (Rs 10,000) and municipal health license (Rs 3,000). The total cost of licenses works out to about Rs 10 lakhs. Franchise security deposit for a nightclub or bar for the said area starts at a minimum Rs 35 lakhs. The investment range for brands like Xtreme Sports Bar and Grill, which has a strong presence in south and central India, is much lesser. For an area of 2,500-8,000 sq. feet, the investment would be around Rs 1-2 crores.

OPERATIONAL EXPENSES

The ideal location for nightclubs and bars should be in a posh urban area, which demands an average rent of Rs 1.25-2.5 lakhs. Depending upon the size of the property, operational expenses may range between Rs 50 lakh to Rs 1 crore, informs Sharma of Molecule Air Bar. Staff strength of at least 20-30 persons is required for the smooth operation of a nightclub and bar, which accounts for Rs 8.5 lakhs in salaries. The staff uniform cost is about Rs 80,000-Rs 1 lakh. In addition, the cost of maintaining bar inventory starts at Rs 4.5 lakhs; a typical spend mix on the inventory includes 40% liquor, 45% beer, 5% wine and 10% mixers. On an average, the profit margin is 25-30% of the sale and the break-even time for nightclubs and bars franchise is 1-3 years.

Brands like Molecule Air Bar and The Beer Cafe run on the FOCO model and provide full back-end support, supply chain support, training, financial management and book-keeping to its franchisees; they also take care of talent acquisition and marketing.

EXPANSION PLANS

The Beer Cafe, which recently entered the retail business with Beerosphere, has 40+ outlets at present and offers 50+ beer varieties from 20 countries. It has aggressive plans for expansion pan-India. On the other hand, The Bar Stock Exchange aims to open 200 outlets throughout India over the next few years. Further, many nightclub and bar players feel that Tier II and III cities in India are still untapped. “These areas have a huge potential; hence we look forward to expand in such geographical zones,” Sharma reveals.

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