Lots of investments that were done in past two years were in the virtual restaurant space or the food-tech business.
It is perhaps every foodie’s dream to own a restaurant. How much involvement and passion one needs to make that business happen is not everyone’s cup of tea. But, today with lots of happening in the segment and low entry barriers many entrepreneurs are betting big in the restaurant business. From owning a food-tech venture to opening a QSR or a casual dining chain it has become easier for start-ups to lure in the investors with their innovative ideas and quirky concepts.
However, according to the industry analysis there has been a slow down in the deal activity which was picked up in 2015 happening more than 60-70 deals in the market. “A lot of investors are becoming cautious in terms of investments. Four five years ago there was transaction happening, the investors were really betting on brands regardless of how profitable they were, but now investors are really looking after profitability,” believes Siddharth Bafna, Partner and Head- Corporate Finance, Lodha & Co. - Though 2015 saw lots of deals but bulk of those deals was food tech. In the restaurant environment what has happened over the couple of years there has been a slowdown in terms of transaction. The customer sentiment has been poor in terms of a particular brand.
Will delivery survive as a role model?
Lots of investments that were done in past two years were in the virtual restaurant space or the food-tech business. With a total investment catching millions of businesses though year 2016 saw some great start-ups shutting their doors and closing their operations at many locations. But, despite of all such barriers there will be lot of people who would prefer ordering online and getting food at ease. “Food-tech companies are here to say, there are going to be enough people who will order online. What people have seen is that unit economics of these companies are really healthy and they are going after volumes and sales with no regard of unit economics,” adds Bafan.
But talking about the likes of China and other developed neighbours, delivery business will take time to grow in India. In India many successful restaurants don’t really care about the delivery. “What is your different sauce or value differentiator? It could be at variety of level, a product, an exclusive brand, a technology which nobody can match, relationship in the industry, negotiate deals etc,” comments Kartik Maheshawari, Senior Associate, Nishith Desai Associates, Legal Tax & Counselling Worldwide.
Restaurants are here to stay...
“I think for restaurants side its good time for larger concepts especially those are in malls because you have seen a better calibration coming out even from the operators of these premises like DLF, Select CityWalk. So, as an investor the idea would be to invest in avenues where upfront capital requirement and the cost of failure are low,” shares Rahul Rai, Partner & Senior VP- Investments, Rabo Equity Advisors Pvt Ltd.
We are seeing somewhat shift in the QSRs space where mall developers are inviting them to open outlets at their premises. Other thing is the traction of food on the go, things that are coming on highways as convenience stations which was an international trend few years back and there is lots of growth in the segment where investors are seeing potential opportunity to invest in.
“I think there are two three segments that attracts investments within this belt now- QSR, Casual Dining segment and lastly the food-on-the go model,” adds Rai.
So, with cash flowing in easily there is lots of opportunity for start-ups and amateurs to try hand in the food business.