Consolidation is the way forward for the growth of the restaurant sector in India.
Indian restaurant business is dominated by the unorganised players which constitutes 67 per cent of the overall food business scenario. The chain food business has to grow as compared to the US, the UK and other food market globally. And, this change has to be made to make more businesses successful and organised. For instance, big restaurants need to partner with small chains and acquire them giving it more organised format. Consolidation is the way forward for the growth of the restaurant sector in India. Both technology and offline acquisitions are important to match the global standards. Hence, one needs to be very clear and choosy about what he picks as a model. No doubt there is a certain level of dependency on the restaurant business itself. There are no enough margins for food tech entrepreneurs.
“The margins for errors in food-tech business are very narrow. So, if one goes wrong on their thought process or unit economics they are probably going to make more and more loses,” shares Kailash Nath, Innovation Fellow, Bharat Innovation Fund who believes that’s the reason where one can see most of the companies failing or losing out because of premature expansion or they are not thought through unit economics clearly well.
Also, when you look at these companies you will see that not many of them are cash positive. According to experts there are three things one has to keep in mind before venturing into the business from investors point of few. They need to keep in mind the customer acquisition cost, amount of margin that they have to play with and also how much logistic cost they have to bear to turn out around in the particular order. Likewise, if one has not got a good sense of these three livers probably they are going to lose out. One need to be very clear what the business model is, how are they going to bake at the table, can they do something more than other online platforms or order and most importantly are they aware of their customer. Getting the right investment is also difficult sometimes as the start-up get involves in lots of external advises and suggestion which in turn ruin the business and its core idea.
“An advisor should not be the crutch for your business. You need to have trust in your business. Lots of brokerage firm, consultants are there in the market who would say I can get you finding right PE or VC but trust me even if the introduction is made they will ask the founders to sit across the table and not they,” adds Sumit Sinha, a Food entrepreneur-turned-angel investor. It’s not about good investment but also if the person is the right investor to invest in the business.