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ROUNDTABLE

“Overcoming Hurdles in a Kiosk type Restaurants”

The Quick-Service Restaurant (QSR) segment in the India is fast picking up pace with international brands targeting consumers like never before. To meet the ever growing expectations of the consumers, hospitality industry stakeholders have many challenges to overcome

Wednesday, August 22, 2012, 16:45 Hrs  [IST]

Hospitality Biz conducted a roundtable meet on for ‘QSRs and Kiosk type Restaurants’ at The Orchid Hotel Mumbai recently. The meet was moderated by Ravi Wazir, Consultant, Phoenix Solutions. The panel members were Samir Kuckreja, President, National Restaurant Association of India (NRAI); Vikram Kamat, Executive Director, Kamat Hotels India Ltd; Sachin Lele, CEO, Swastik Foodmart Pvt Ltd; Nilesh Limaye, Consultant, Turnkey projects; Chef Mehernosh Khajotia, Owner, Celebrations Fine Confections; Kinzal Vadera, Director, The Soup Bowl; Harpal Singh Sokhi, Chef and Television Anchor; Dheeraj Gupta, Managing Director, Jumboking Foods Pvt Ltd and Pradeep Shetty, Director, Maharaja Food and Chairman, Legal Sub-Committee,  Hotel & Restaurant Association Western India.

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The restaurateurs highlighted various topics like the latest trends in the restaurant business; food challenges like raw material cost, quality issues, regularity in supply, supply chain/cold chain issues, storage space constraints; manpower availability, sourcing & retention and infrastructure problems like electricity supply issues in non-metro and some parts of metro cities as well.

Investment Trends
The Indian fast food market has been witnessing rapid growth on the back of positive developments and presence of massive investments. Currently, the market growth is largely fuelled by the rising young population, college students, working women, hectic schedules, and increasing disposable income of the middle-class households. Some of the unique properties of fast foods like quick service, cost effective, etc., are making it highly popular among the masses. Thus, India offers enormous opportunities for both domestic as well as international players.

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Anticipating the growth, many big international players have entered into the market by striking deals with the domestic players and are now expanding in different states of the country. According to Kuckreja, the restaurant business in India is the fastest growing sector in the service industry where the consumption story is very strong. Kuckreja, said, “Around 30 investments through private equity were being done between four-five years. And the latest development in this is the specialty restaurants Jubliant FoodWorks which recently went public. However, going for debt is a big challenge in the hospitality industry. NRAI is in a discussion with the Tourism Financial Corporation of India and has presented the model where the revenue and income streams could be collaterals. But the traditional Indian lenders want asset  which is not possible because not all restaurants are owned by the restaurateurs.”

“The power of ‘concept’ is very important in food business and ‘franchising’ is one of the phenomenal concepts ”
Dheeraj Gupta, Managing Director, Jumboking Foods Pvt Ltd

The hospitality industry is also witnessing high net-worth ‘angel’ investors who are keen in investing in this sector. Vadera, who has an angel investor, explained, “There are many investors who want to invest in this booming sector but there are hurdles on the way like the high raw material cost, quality issues, regularity in supply, cold chain issues and storage space constraints.”

Internationally, large chains dominate the restaurant business and stand-alone outlets are a small percentage. As the restaurant industry in India grows, more and more international chains attempt to establish franchise networks, while domestic entrepreneurs try and establish new restaurants under an established brand name. As Gupta, said, “The power of ‘concept’ is very important in food business and ‘franchising’ is one of the phenomenal concepts. Franchising has to be done for the right reason and not because you need that person’s money. The business has to be done rightfully because you have the concept that works across the section. We, at Jumboking, receive 200 enquiries per month and we are processing our franchiser based on our reach and providing them with our product. As it is said, ‘Fancier the projections, higher the value will come’.”

Adding to this, Sokhi, said, “We are walking the path where we believe in building the face value first, create excitement in all sectors of investment and come with a brand and promise. We put double weightage and deliver twice because if we fail to deliver the promise we made, the value and face will be lost. One wrong in a small delivery will hit us hard in all categories irrespective of the medium. And thus, to create that face value we have to again step into the hospitality sector, create concepts and deliverables. We realised that speciality restaurant concept has value and is sellable.”

Lele, also agreed that the investors are looking at specialisation. “They too understand that people who are in the food business understand the business better. All they have to give us (restaurateur) is a better support system and an eco-system,” he said.

“ Customers visit the restaurants repeatedly to experience food and the value they pay for it. It is the duty of the hotels to create excitement in their patrons in different ways ”
Sameer Kuckreja, Samir Kuckreja, President, NRAI

Investors have a choice where they want to part their money. Lately, the hospitality sector witnessed international players showing their interest and also investing on some of the hotel properties. Some of the hotel properties were also seen going public in last few years. Commenting on this trend, Kamat said, “It is a positive time for the restaurant and hotel owners.”

Highlighting on the trend, Kuckreja further added, “Customers visit the restaurants repeatedly to experience food and the value they pay for it. It is the duty of the hotels to create excitement in their patrons in different ways.”

The hospitality sector is witnessing non-hoteliers and international players as angel investors showing their interests. With foreign investments in the hotel, customers are exposed to multi-cuisine and even the regional Indian cuisines are slowly getting noticed globally. Even though, the high-end restaurants have managed to get regular patrons but the mid-segment is yet to get the right recognition. A growing number of consumers want foods that are good for them – high in nutrition, yet low in fat and cholesterol. Many are shopping at stores that stock organic and natural foods. There are, therefore, a number of restaurants that serve healthy, nutritious meals in a fast-casual format. Some of the chains that have made their mark in this segment are Celebrations Confections. According to Khajotia, said, “The customers who visit bakery/ any food store are well-travelled; they understand the product offered to them and the content/ingredients that go into making a product. After all, the product has to have health/nutrient value and taste wise it has to also appeal the customer.” However, Sokhi believes that building face value is also important. A specialised concept will be valued and accepted by the patrons.

Challenges
Manpower Retention:
Hiring and retaining manpower is a critical problem that shrouds most industries today and especially for the QSR industry, it is an emerging area of concern. With the growth of hotel industry propelled by foreign and domestic tourism and business travel, the demand for well-trained quality personnel too has grown impressively. However, the major challenge of this sector is shortage of skilled employees along with the challenge of attrition rate.

“A specialised concept will be valued and accepted by the patrons. At the same time, building face value is also important ”
Harpal Singh Sokhi, Chef and Television Anchor

While today’s generation have much more exposure and awareness to the effects of globalisation, a flipside to this is that loyalty to an organisation gets affected, if the owners/restaurateurs are unable to meet the employees aspirations and expectations. Today, the industry is losing people to the BPO industry, cruise liners, etc. A critical part to retaining employees is training, which will empower and add value to an employee.

Kamat believed that when compared to the wages/salaries of other industries, a person earns very high in the hospitality sector. And people tend to switch jobs very often. He added, “The attrition rate in the sector is believed to be ten per cent and the trend is prevalent in the month of April-May, when 30-40 per cent of people change/shift jobs. There is a serious manpower crunch in those months and in the month of June we are flooded with enquiries when there are no job openings. Thus, there is a need for a proper people management.”

Suggestive measures like initial scanning device while conducting interviews, providing education to the boys/lower rung staff, and providing incentive like free talk-time for the mobile could help in retaining the staff. However, Kuckreja said that the staff should be trained in such a way that they are capable to attend to the customer’s/patron’s needs. There is a need for an open atmosphere, which is also an ideal way to retain the staff. Having said that, Kamat believes in keeping vigilance by setting-up cameras  and by generating parameters and providing incentives. In this way, every person/staff gets a ‘piece of the pie’.

Lack of Supply Chain Management, Real Estate and Acquiring Licences:

With ‘opportunity comes hurdles’ where poor infrastructure and bureaucracy can combine to thwart even the best laid plans. The most significant challenge that impedes the development of a speciality restaurant is an underdeveloped supply chain. Lele cited some of the key issues for restaurateurs like the transportation, inadequacies in infrastructure such as lack of high quality road networks, power shortages and insufficient storage spaces and few cold chains that make running restaurants even more difficult.

When the US-based brands entered in Indian market in mid-90s, they brought with them brands like McDonalds, KFCs and others. To cater to their needs, some of the cold chains also entered in the market. These cold chains have been definitely of help for the big players/hoteliers but not for restaurateurs. And this is one of the reasons which are holding the hospitality sector back.

Shetty, explained, “Getting a good location is not only the only requirement for running a restaurant, getting various licences is also an issue. How to source/ identify a good location is an issue by itself. While choosing a property, one should also know their competition or people selling similar product. Different states have different rules and regulations, and we have to acquire multiple licences. Failing to adhere to the law is a non-bailable offence; laws are also very stringent to run the business.”

Customer-Experience Management:
Measuring customer satisfaction and expectations is an important aspect in a restaurant business. There has to be practice of collecting data and there must be somebody to perceive and implement it. As the customer’s expectation is rapidly changing day by day one has to take account of that. And the key is to measure customer experience and satisfaction and trying to live up to that level. And for that, there is a need for constant interaction with the patrons. As Gupta explained, “It is a relative term, one needs to meet customer expectations and deliver products which offer value for money.” Gupta cited an example of different models like the Pizza Hut which has its own format of delivering pizzas, Domino’s following a ‘take-away’ model and in the US there is a format ‘take-out pizza’. All these formats are phenomenally different and all three of them are successful. In their experience, Jumboking noticed that, their patrons are keen on the innovation in the product and not with the interior/decor. In India, every product has a use, adhere to that use, replicate and multiply that use. Gupta said, “No doubt, Jumboking will put up 1000 stores in the coming month, provided we stick to the purpose --- snacking.”

In a QSR format, the customer expects the food to be delivered quickly and with some innovation. And in a business model like QSR, a restaurateur can bring innovation in his products and not in the ambience/ décor like in big restaurants. The panel members also believed that the law needs to have a holistic approach. The government should set standard for everything associated with the food industry. The government should conduct sampling test in the warehouse before it is sent to the restaurants. The laws have to be practical and achievable in the Indian scenario.

The Indian government has stepped up various reforms to accelerate the industry growth with regulatory framework, investment friendly schemes, extending support for creating a world class infrastructure, initiating better air and land connectivity, incentivising regional set-up in Tier-III and IV cities, exploring the untapped geographical resources. But, still more concrete measures such as uniformity of state and municipal taxes, single window clearances, improvising lower bureaucracy in effective planning and execution, and safe and secure environment will be critical for the industry’s growth.

(Complied by Preeti Swaminathan) For video click the links below.
Part I
Part II
Part III
Part IV
Part V
Part VI
Part VII
Part VIII

 
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