QSR Lessons - A few tips to Optimize Costs and generate more Profit!

A restaurant business must run very tight on costs. A typical formula that I follow in splitting the costs Vs Revenue for a ballpark calculation is:

1. Food Costs = 25% of the revenue
2. Salary Costs = Another 25% of the revenue
3. Opex Costs = 25% of the left over revenue
4. Profit = 25% of the rest in a best case scenario. Profit could vary from 15% to 25% depending on the revenue and other variables that may be.

In any scenario, it is very important to keep the cost in control. Unlike other businesses, the more revenue a food business creates, the food costs increase proportionately.  Here are a few tips to keep costs in Control.

1. Do not run your business 24x7:
              One of the important tricks is to observe and identify the lean days and lean periods where customer inflow is so less that the salary costs and OPex are more than the revenue that you make. There is simply no point in keeping your outlet open for just one or two customers. Pick a time in the day where you will be off and also a day in a week where you will be off. This saves a huge amount of OPex and inventory in control.  By limiting your working hours, one also eliminates salary costs by avoiding shift staff and leveraging limited staff for the entire day.

2. Create a Hype - Serve your best Dishes for Limited Hours:
              If you are known in your area for a very unique USP item or Items, then make sure it is available only for a limited period. Two advantages with this approach: 1. You continue to build peak foot fall during those hours and make sure you sell the full stock and cover your costs in this rush 2. You know exactly how much to make and sell, bringing in a lot of predictability into the entire food making process.

3. Avoid middlemen in material Sourcing:

The less the number of players that are involved in the supply chain, the better the profits. Direct from farm is not just a health fad, it is very important to eliminate the greedy sourcing partners who take their cut of profit. This is applicable for every aspect of sourcing that you do on a day to day basis.  Many food businesses, by adopting direct to table policy have been able to pass on the value back to the customers by keeping the cost on the menu very competitive without compromising on quality. This in turn attracts more customers. This is a cycle. Stick to it.

 

Coffee love and the trends that will make us want more!

A coffee is a delight. South Indians like me are very used to a rich filter coffee that is made from coffee powder, custom roasted and combined under our personal supervision at a nearby Coffee Day OR Leo Coffee. For South Indians, a cup of morning Coffee is a ritual that is as sacred and as indispensable as the morning mantras that we chant.

When I first tasted the many coffee variations at Kalmane Coffee in Bangalore, I was swept off my feet. The rich coffee variations of the Mysore kings with cardamom, Cinnamon and other such spice additions were sure a delight to sip up once in a while. I go coffee hunting for multiple South Indian variations. I am generally not a fan of Barista OR Star Bucks where the froth is more and there is more water than Coffee.

Now there is some great news for all Coffee lovers. Restaurant and food trend analysis predict that Quality Coffee at a premium is back as a favorite among customers. Customers do not want just any coffee, but Rich, premium coffee that is custom made with many variations and flavors from many countries such as Ethiopian, Irish, Asian etc. Coffee is now becoming an experience in itself.

If you are looking at opening a QSR serving coffee, this might just be the right time for you.

A few business ideas for a Coffee joint:

1. Curated Coffee: Deliver Curated Coffee beans and Coffee powder online. Craft Coffee is a great business model to follow. Though Cafe coffee day has an online delivery model, the customer base is too huge in India and can definitely accomodate another 10 players in this space if they provide good quality coffee. The online model should let the customer choose the exact ingrediends and beans and create an engaging experience.

2.  Nitro Coffee: Have you heard Nitro Coffee? A super twist to Black coffee lovers, this Nitrogen infused Coffee promises to be a rich and Coffee from a Tap that is served Chilled. This is a rich and hot trend and if offered in QSRs along with some quick food, this will be major consumable for many years.


3. Indian Version of Star Bucks: And I dont mean serving what StarBucks serves in the Americas or the Europe. We want a stylish version of our local Street side Coffee vendor serving "Kaapi". In Indian streets, across Kerala, Tamil nadu and Karnataka we can find a 15 different variations of making coffee either with an Instant powder Or a filter coffee OR a mix of both. I have watched the programme "Food Mad" where they go on a coffee trail to Kerala and find restaurant that serves a 3 layer coffee with decoction, froth and milk on top that brings together a one of its kind coffee taste. Similarly in 
Tamil nadu, coffee is largely made with Buffalo Milk and it is served with    multiple repeated layers of decoction on milk. Kumbakonam Is another famous place for coffee.
Apparently the kings of Mysore in Karanataka were so addicted to rich additions to their home grown beans which Kalmane Coffee serves.

By 2020, coffee Cult will be back and we coffee lovers will neither have it Black or white BUT our favorite Brown Filter Kaapi with Beans imported from Ethiopia!

Cutting right into our sweet tooth are these delicious trends!

 

The Indian foodie loves desserts. Indian tradition has it that we have more than 100 plus distinct sweet variations. Now that is a huge contribution from India to the rest of the world. Our adoption of the western desserts such as Cakes and Cake pops have added to the rich spread of desserts that we so enjoy to have in parties!

And we see some very interesting trends that twist the dessert platter:

 

1. Tea infused Sweet somethings

We have seen Coffee infused desserts and caked, but on the rise is Tea Infusion in desserts. Green Tea ice-cream, Rhubarbs infused with Earl Grey Tea, MatCha Green Donuts, Chamoile Tea Cookies, Chai Chocolate Stables and the list just goes on.

 

 

 

2. Quirky ice creams

Long gone were the days of the Single Scoop plain ice-creams.  We have already seen Stoners and Cream Stones trending well in India with customizable variations added to a plain flavor to create a WOWing ice-cream experience. But what we see here is a change in basic ice-cream flavors. Fruits are entering heavily into the ice-cream where ice-creams are made with the freshest seasonal fruits. Not to forget other flavors such as Pan, Lemon Grass, popcorn, Gulab/Rose into the flavor. Ice creams Just got bigger and more Quirky. Bina’s Homemade Ice-cream in Mumbai is a telling tale of the future Trend in this space.

 

3. Go Hybrid

In Dessert land, Fusion is called as Hybrid.  An interesting trend to watch out for, where ice-creams sandwiched between Donuts and Cookies as a base are making a major headway. What is more delightful is the Donut Cone, where Donut base is used to Fill in a delicious ice cream scoop. Thai fusion has Ice-cream in a Coconut, Ice-cream filled Tacos, Gulab Jamun ice-cream are just the tip if this huge Ice-Cream-Berg.

 

 

4. Sugar and Spice

Well its not all sweet anymore. Customers are beginning to develop a liking for spiking up their sweet somethings with spices and ofcourse Beer, Wine and Vodka. The Margarita cupcake includes lime, tequila, triple sec and fleur de sel. Cinnamon and Ginger are becoming common spices in Cheesecakes, Ice-creams along with Chilli.

Move away Cereals, Quirky Veggie Dishes are becoming mainstream!

Whatever happens in the US or the west soon catches up in India. Usually finds it route to India Via Mumbai and spreads as fast to Bengaluru, the NRI capital of India and from there all over.  The Paleo diet that has become a massive people's movement now in India was popularized by the Americans.  The biggest element of Paleo diet is to avoid Cereeals and dairy and largely thrive on Plants, Fruits, Nuts, Meat etc. No Sugar, Refined Oils and Flour.  This trend has also resulted in the large scale leverage of Vegetables as a base to make noodles, Waffles, Buns etc. Spiralizer has become a big hit Kitchen aid in many restaurants lately. I found a whole lot of recipes when searching for Sprializer dishes:

http://inspiralized.com/2014/05/15/the-best-beginner-recipes-for-the-spiralizer/

Whats more, the food trends of 2016 and beyond predicts the serving of Plant based food variations over cereal/Pulse based creations. I have seen Buns, Rice, Noodles, Tarts being created out of spiralized veggie variations...The pics below of the actual creations are simply mind blowing!

What this spiralizing trend could do to the Indian food industry? Here are some healthy Variations for the diet conscious Indian foodies:

1. Vada Pav - Spiral Vada made from noodles and potato instead of flour
2. Briyani - Ambur Dum briyani might as well get prepared to serve briyani variations made from spiralizers
3. Dosa - A mix of spiralized veggies and a little wheat flour could create a magical healthy variation of the regular dosa
4. Paranthas and Kulchas stuffed with raw veggie variations of Paleo base instead of fried stuffings

Healthy eating is the new normal and the Indian Urban crowd is already avoiding heavily prized and unhealthy eating as a regular habit when it comes to dining outside.  Latching on this, Restaurants are frankly admitting the use of GMO or MSGs in their food and vouching to replace them with fresh farm produces and natural ingredients. Some of them declare the calorie count as part of the menu so the end user know precisely what they put in their mouth. For such restaurants that serve honest and healthy food, this trend among consumers is a breakthrough and a huge opportunity!

Thinking of starting a QSR chain? Have you checklisted these?

Food and Restaurant trends for 2016 reports that more and more people prefer Quick Service restaurants with local flavors, fancy menu at a reasonable prize than a fine dining experience.  The Indian QSR market is expected to touch a whopping 25000 Cr by 2020, surging up with revenues growing at a rate of 25% per year.  Reports say that an average Indian middle class family eats 8 times a month outside is in a Quick Service Restaurant {QSR}! In India we have seen a rapid growth of US origin QSRs such as McD, Burger King, Dominos as well as our own popular ones such as Faasos, Goli Vada pav to name a few.

So what differentiates a QSR from other restaurants? A lot of budding entrepreneurs in the food business have this big dream of running a QSR chain. Here are the top 5 Checklists for a successful QSR Plan

1. A centralized recipe management system: When you dine in a QSR, there is no difference in taste no matter where it is located.  The taste and recipe has to be repeatable in not just 10 or 100 but in 1000s of joints. Standardization and the ability to train towards this is a make or break factor. Find that particular recipe management system that will work for your business, fine tune it, use it.

2. Scalability: The second element to establish is scalability. Can you scale such that you can start and run at the rate of 30-40 new outlets every year? To start 100 outlets with a Powerpoint impressed VC fund is quite simple, but that is just expansion. What one needs to achieve in scalability is growth with profits. This is where very standardized cost and inventory management along with strict practices will play a key role. And this where most QSR fail to show profits.

3. The choices on Location: Can you be so smart about your location choice for about a 100 outlets? Can every single Location be a money spinner? Who is taking that decision for you? And how do you know it is time to close an outlet? As the Boss of your business, you need to have statistics and analytics helping you to measure the ROI of each location and take decisions before they drown the entire business. As a rule of thumb, the poor money makers should not be more than 20% of your total outlets.

4. Less On Menu is High on Profit: Are you having too many lists on your menu?  A QSR menu should  have 5-8 items on the food and Entree menu and around 3-4 on drinks/desserts. Anything more than that will drag your cost down. Even the main dishes should be variations of a single food item. For example, Faaso's differentiates only on the ingredients - it does not deviate from Rolls and serve vada pav. The rule of the game is to stick to just one common base and play around with the rest. Pizza hut literally shot themselves in the foot by launching a briyani which did not gel well with the theme at all. The less menu directly favors your ability to scale and control costs

5. Speed of delivery: Be it in dine eating or door delivery services, QSRs cannot take more than the committed time. Have you computed your delivery times based on the processes that you have established earlier? Can you deliver in that time? What can go wrong and how will you mitigate the risks? Have you found the right logistics, location wise to deliver on time? Enough fleet? Good partners for food delivery? How much is the commission bleeding on delivery? All these have to be factored into your delivery cycle and should translate into customer delight Every time. This makes a big difference in bringing repeat customers to your doorstep.

These 5 elements factored well in a Business Plan along with some good recipe ideas can bring you the much desired VC funding!

 

Food Tech Startups are killing our Food Services Ethics and here's how!

I am all about honest cooking and good Food.  Fresh food made from local produce, made with no preservatives and eaten immediately after cooking. In our family run food business back there in Madurai, we still use wood fire cooking and there are no refrigererators to store left over stuff.  Over 80 years, we have learnt the art of managing our kitchen and food preparation so well that left overs are very less. Almost NIL. The food is absolutely delicious as is.

Eating is nothing less than a wholistic experience

Food is not just about satiating your taste buds and sense of gratification. Food is a wholesome element very closely tied to our health, Body and Mind.  Frozen food, with added preservatives and taste makers is a chemical Bomb. Not good food. On the same lines, a food services owner needs to connect with every customer to bring a great food experience.

Coming from a background that hails these philosphies, I am a big skeptic of technology linking to food. Offlate there has been a lot of hype, enormous funding linked to food technology startups in India.  Starting from FreshMenu, Swiggy, Tiny Owl, , SpoonJoy, Yumist, Bhukkad, Zomato....there has been an explosion of players in the entire food supply and delivery chain between 2014 and 2016.
These startups attract a lot of consumer attention by promising some spectaluar looking food, rated 5 out of 5 by some hand crafted analytics, promising delivery times within 30 minutes at a reasonable prize. There is a considerable leverage of technology to make a consumer believe this to be real. Several first hand narrative of these food delivery business have been a contrast to what these business promise.

 We are losing out on the Core Values of Eating

 But what consumers are losing out, in the name of convenience is:

• A first hand experience of the environment where the food is cooked and served. A good eating experience must also involve visuals of how and where it is cooked not a make believe experience made from websites
• Consuming a considerable amount of added preservatives to artifically maintain the freshness of food
• Consuming a considerable amount of pre-cooked frozen ingredients in the name of exotic menu
• Good restaurants serving authentic food going out of business due to messed up ratings created by technology

The good news, however, is that,  nearly 80% of them are now seeing a downfall, scrambling for money in the already very low margin food business. Delivery Commissions heavily run over the food profit margins resulting in neither the delivery nor the supply chain making the kind of money that is worth the effort. People call it flawed business models, too much competition, but the fact is - THERE IS NOT MUCH MONEY and a lot of compromise in this. 

Stick to the Core Ethics of Food Services

 Till then, a suggestion for all food startups to stand by the 3 ethics of a good food business to flourish without the support of technology or a big spend on marketing:

• Connect directly with your customers. Food is about a personal experience and an emotional connect
• Keep it fresh and real. Do not compromise on food quality by adding chemicals OR preservatives just to enhance taste. The best example is the American Mexican Grill Chipotle. Local Produce, cooked in front of your eyes, Highly prized for all that quality
• Own your business End-to-End. Cutting off from delivery keeps you in a blind spot about what customers actually think and feel about your food. A mistake by Swiggy on poor packaging directly impacts your business but you dont get the feedback. Food business is about continuous feedback and reinveting yourself.

In the end, a few players will continue to be successful and those will be the ones that are Honest and Loyal to their customers.






 

Repeat Customers hold the key to profitability for a food Startup!

For a business to thrive, the number one need is to create a loyal customer base. Customers who will repeat their purchases/visit with your brand. While this is true for any industry, food businesses depend to a very large extend on repeat customers. Studies have found that nearly 45% of  customers that come dining into a Quick Service Restaurant are repeat. This is huge.

Here are a few facts and Tips on customer loyalty:

• An increase in customer retention is directly linked to a reduction in costs. Not only do they bring you business, but also serve as marketing channels through word of mouth and a direct increase in profitability by 25% to 125%
• QSRs lose nearly 25% of our customer base every year because customers relocate, find our competition better than ours or find new eating interests. To gain that same percentage of customers back, we will need to spend a lot of money and effort. In effect losing a loyal customer base directly increases our cost which is an overhead.
• To retain existing customers, it is very important to help your customers go beyond the boundary of just satisfaction and transform this into customer loyalty.  To build that connect it is very important to know your customer base personally well and to create personalized experiences when you are a startup
• Food is tied to people emotionally. A dining/food experience needs to bring out positive emotions such as - special,valued, important, welcomed, heard, Joyful, and respected. Before your food startup becomes too big, ensure that you set in such a culture among your staff that they understand and behave as if each customer is a king/Queen. Customers love the larger than normal life experiences that they go through. Create Such emotional experiences for your customers.
• Stay Connected with your customer through Social Media, Emails, Blogs, Telephone. Social media and digital marketing that use analytics based approach to create personal and custom messages are not just a hype. They are required to keep connected to your customer every day.

Some of the best examples of  QSRs that give these delightlful & personalized experiences are Rajdhani, Stoner Ice Cream, Burger King to name a few.  So if you are a personal baker Or a personal catering service OR a QSR that sells specialized items just make sure you get an emotion ticking for the customer. That is what will set you apart from competition and take you to profitability