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Courting With Food
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It is the likes of Kandasamy and his extended family that Sanjay Ratadia's Veg bynature will target. Ratadia, whose outlet serves north Indian fare, recollects the look on his father's face when he told him he was keen to enter the food court business. "He just stared at me. And it said it all — you will be back in the family business of trading," says Ratadia. Seven years down the line, Ratadia and his partner, Jot Kapoor, run two food outlets in Mantri Mall and Garuda Mall. The confident duo want to open two more in the city. And why not?
The food court business is guestimated to be around Rs 2,000 crore per annum. There are no hard numbers. Real estate consultant Jones Lang Lasalle Meghraj puts it differently. There will be 400 malls by 2018. And by then, food courts could be a shade more than a $3-billion potluck; each one will funnel 15 per cent to a mall's revenues in five years, up from the current 10 per cent.
India's food courts are more than soup kitchens. The young and the restless view it as a "cool" place to hang out. Poovili Manan, a commerce graduate from Chennai, says it "allows us to experience different brands (of foods) each time". You can take your pick of the fare on offer — Chinese, Italian, south or north Indian or blends such as Arabic and Continental. Or hang out at "brands" — McDonald's, or a KFC. There is something out here for the silver-haired, too. For them, it is less about food brand, and more about a sense of the community.
Now to the food court math. "The revenue from food courts in our malls is commensurate with the area it has as a percentage of the overall mall. That is about 8-10 per cent of the overall leasable area. And revenues are the same in terms of contribution," says Arindam Kunar, mall head and vice-president, DLF Place Saket in Delhi. The national capital is an exception — food courts generate nearly 15 per cent of a mall's revenues due to extremes of weather. Many throng a mall during the city's biting winters and sweltering summers. Some end up having two meals during a six-hour walkabout.
Chew On This
"It is a misconception that food courts break even faster than standalone outlets," points out Jonathan Yach, chief executive officer of Mantri Mall, which is spread over a million sq.ft. It is a tough detour from a standalone model in the unorganised sector where you can lease equipment and grease past quality audits to break-even double quick. In the food court business, you've got to get a handle on compliance — hygiene, fire safety, investment in machinery, et al. And if you can get the hungry to tuck in merrily to the food, you can hope to break even in a couple of years.
Even a retail baron like the Future Group's Kishore Biyani has to fight it out. He set up Pan India Food Solutions, a 50:50-venture with Sunil Kapoor's Blue Foods in 2006. Pan India operates six food courts across India under the brands Food-talk and Spoon, and offers multiple-cuisines — Noodle Bar, Spaghetti Kitchen, Gelato and Italiano.
The food court in Delhi's Select Citywalk is over 12,200 sq. ft. In Noida's Great India Place, it is bigger at 45,000 sq. ft. "It was difficult to launch without the more heard-of and popular brands," says Jagjit Singh, general manager of operations at Pan India. Singh breathes easy now. "We have managed to create a niche of our own over time."
And you learn as you go along. At Great India Place, the sheer size of the food court made the company offer the space to McDonald's on a 7-10 per cent revenue sharing basis. Singh confesses this to be a relatively bad decision for the food court "considering the price-points McDonald's works at, it takes away a major chunk of the traffic". The food court typically works on a minimum guarantee plus revenue-share model. It varies anywhere between 27 per cent and 28 per cent of net sales, inclusive of a common area maintenance fee.
You need to have at least Rs 50 lakh to set up a 300-sq. ft restaurant. Forty five per cent of this amount goes to the developer as a refundable deposit. The rest of this kitty is expenses to dress up the place. "You do not have to invest in tables and chairs; rentals are far lower and one can really run it as a low-cost operation," says Sriram Rajgopal, director of Sbarro, an international Italian-American pizza Franchise. "The Indian food court business is about choice and experience. That is not the case abroad."
Sbarro will open three more outlets in Bangalore. Rajgopal says there is a window to soon roll out 10 more. Again, that is the easy part for the likes of a Sbarro. The wallet will open only if the palate is tickled. Mall owners are there to give a helping hand. "One of the things that we do is to share data of what sells in our mall. We take interest in telling the operators about the dos and don'ts in a food court," says Yach of Mantri Mall. He says it pays to keep the menu short and hit the right price points.
Not Just Paranthas, another food chain with three of its five outlets in malls, did just that — it trimmed its menu and price points. It took some time for the old-Delhi paratha vendor to tweak its menu and model to suit that of a food court. "Food courts are about sharing food. We realised that our wide menu was just not working. So, we focused on combo meals apart from operating at lower price points to the tune of 40 per cent," says Varun Agarwal, managing director of Not Just Paranthas.
|TAKING A BITE: Sanjay Ratadia of Veg bynature runs two outlets in food courts at Bangalore's Mantri Mall and Garuda Mall (BW Pic By Jagdeesh NV)|
It is a fine-tooth comb process. "The ability of the brand in changing the menu without much hassle, at short notice, is a key factor in choosing a food court entrepreneur," says Aroon Kumar, CFO of Express Avenue Mall in Chennai. Typically, the average sale in large malls such as Mantri Mall is about Rs 150 a day and about 8,000 bites are pushed across counters. On weekends, the numbers are up — to Rs 400 per day and 16,000 meals. That means, it brings in about Rs 8 crore a month. A big variable in all of this is the staff cost, where churn is a constant. Fifty per cent of managers have been holding their seats for less than a year.
Says Yograj Naik, who started Starks, a grilled-chicken outlet in 2007 after a four-year grind in a London food court: "A lot of time and money is spent on training. People leave, costs remain fixed, and we have to find replacements quickly." A third-party operator supplies food to Starks; the food is premixed in the factory owned by the restaurant's service provider Pearl Bistro. Naik and his three partners intend to scale up — 30 more outlets in two years.
When the retail boom caught fire during 2005-08, rentals were at almost 35 per cent of the sales. That killed many. The revenue-share model or a combo with rentals is in. "We do a combination of revenue share and rentals. It depends on the location that we are at and the performance of the food court," says Omer Bin Jung, CEO of Prestige Leisure Resorts, which manages properties of the Prestige Group. The revenue share is based on a percentage of the sales or a base rent — if sales are lower than the rental, that is.
Take Coconut Grove in Bangalore. It started off its express offering called Grand in food courts. It believes that a mall takes the marketing hassle out of the entrepreneur. "Rentals have come down because the revenue is good for a mall that grabs the consumer," says Shibu Thomas, director of Coconut Grove Grand, adding that it is the common-area maintenance fee, water, power and staff cost that pushes charges skywards. Coconut Grove is about to break even with three outlets in three malls.
There is plenty to chew on in the food court business. The idea is simple — get in hungry footfalls. And they are crowded. Samar Qureshi, director of the 22-outlet food chain Fast Trax, has just one outlet at a food court in east Delhi's Pacific Mall. "There is too much clutter and competition. Food courts just focus on adding more counters. The branding of a particular outlet takes a hit. Nothing works like a standalone outlet positioned on the first floor of a good mall," he says. So what? You still have the Ratadia's and their Veg bynature, big US brands such as McDonald's and the KFCs; Beijing Bites, Rajdhani, Subway, Moti Mahal or a Coconut Grove. Point is, you need the stomach to feed off the food court business.
(This story was published in Businessworld Issue Dated 07-02-2011)