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Technology 2018-10-09

Why Restaurant rentals are Pushing Brands to Newer Concepts

The trend of investing in restaurants has caught the flurry in the last 7-8 years.

By Deputy Features Editor
Why Restaurant rentals are Pushing Brands to Newer Concepts

Limited resources always force innovation and coming to restaurant sector there is always limited resource in terms of budget and marketing and if one thinks of expansion there is always saturation of open spaces and traditional food spots like malls and high streets.

Not only this, food business is becoming part of the retail scenario In India. With people preference moving towards the eCommerce disruption, restaurants and food brands are eyeing a good business at top. With fashion and electronics retail investments taking a backseat with e-Commerce disruption, restaurants, gourmet and organic foods, world cuisines, specialised eateries has upped its stake in the retail scene.

The trend of investing in restaurants has caught the flurry in the last 7-8 years and has seen a gigantic shift from unorganized and often illegal eateries to organized eating out with chain restaurants and franchise systems, which is now further matured to specialized food chains and going towards personalized and on-demands foods on the back of technology. But with all this major development happening in the sector rentals is still a major concern in the growth of restaurant business.  “Whenever a new restaurant brands enter into the scene I always advise to look at the brand and its position and how it’s APC and then choose the location appropriately and sensibly,” shares Rohan Jetley, CEO, TGIF India who is also an investor in many start ups.

Whenever, a new restaurant owner opens a restaurant he always aspire to be at the most high-end locations. But to create an appropriate connection between locations or if the APC has done right one need to do severe amount of research. So, if you are planning to open a QSR chain serving street foods of India, opening it at any premium locations like Khan Market or for that matter Connaught Place is a wrong decision. The ideal location for such restaurants will be Chawri Bazar or Chandni Chowk area of old Delhi because the opting rate will be very high and it does have a sheer sense of population within that market. When you do this you can actually convince the landlord to subsidize the rent because you are generating footfall for the retailers and getting more volume to the mall. It is important to determine what your brand is and then choose the location. “I think the revenue share model here in which there is minimal guarantee. In terms of rentals whether it is with malls or high streets there has to be an amount of sharing that an outlet has to do. In case of malls we end up paying 20-25 per cent of our revenue which should come down to 15 per cent by means of  a cap or in terms of sales that is happening,” says Sunil Chauhan, Partner, FabCafe.

And, hence, we are seeing lots of innovative concepts booming in India to beat the rental costs. Home chefs, by invitation concepts and online services are finding new ways into the market sidelining the rentals. “We used to have 40-50% revenue from delivery and we have increased the same making a 20-25 per cent increase in the sales,” concludes Karan Tanna, CEO, Yellow Tie Hospitality.

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