It’s a busy lunch-hour on the third floor of Ambience Mall, a popular shopping and eating destination in Gurgaon. People are streaming in and are spoiled for choice at the food court, which has at least 15 brands dishing out Indian, Chinese, Lebanese and Italian fare. Next to the food court are restaurants that also include some of the famous names in business. Competition is intense as the staff in the stalls hand out menus to customers walking by. Their counterparts at the restaurants stand at the entrance trying to attract the attention of prospective customers.
Many of these brands run the risk of drowning in the clutter, but Amit Burman and his friend-cum-business partner Rohit Aggarwal are sitting pretty. Food stalls, or quick service restaurants (QSR) and restaurants, or casual and fine dining restaurants (CDR and FDR), run by the duo’s Lite Bite Foods are a dominant force on the third floor of the mall. Of the 15-odd QSR brands in the food court, six come from the Lite Bite stable. And among the 10-odd restaurants, four are owned by Lite Bite.
The company’s brands cover 85 percent of what Indians usually eat while dining out, including north Indian, south Indian, Chinese and Italian cuisines. To top it all, the food court is managed by Food Union, another Lite Bite brand, that buys retail space in bulk from mall developers and turns it into a food court with own and other brands like Café Coffee Day.
“We want to make sure that Lite Bite’s menus not only provide a range of food, but also function at varying price points,” says the 41-year-old Burman, who is also the vice chairman of family company Dabur. True to his word, Lite Bite’s QSR brand, Street Foods of India, offers a plate of raajma-chaawal for Rs 70 and at CDR brand Zambhar, a thali is priced at Rs 595.
The varied formats and menus, Burman believes, are important because in the coming days more and more Indians will get out of their houses to eat. “Right now, Indians venture out only four times a month outside their homes to eat. In Singapore, it is more than 40 times!”
There is also a financial side to Burman and his fellow St.Columba's School alumni Aggarwal’s strategy. While rentals in malls can make up to 20 percent of operating costs for food stalls and restaurants, for Lite Bite it is just 8 percent. That is not just because it buys retail space in bulk; the company also saves a lot of space in logistics.
“With more than one brand at a single location, we save space by having a common place for receiving and storing our ingredients. Also, while each of the CDRs might have an individual kitchen, they share space for cutting vegetables, preparing sauces and even staff area,” says Aggarwal, who comes from a family that has been trading in textiles for more than three generations. Not surprisingly, at Ambience, three of Lite Bite’s CDR brands—Punjab Grill, Asia 7 and FresCo—are situated next to each other with common backrooms.
Says Raj Singh Gehlot, owner of Ambience Mall: “Right now, there are few organised players that have a mix of small and large format restaurants like Lite Bite. Unless you have good food, it is tough to retain footfalls in a mall.”
The model has helped Burman and Aggarwal to script one of the fastest growing food retail businesses in the country. Within a space of four years, the number of brands in the Lite Bite portfolio has increased from one to 12 and the outlets have shot up from less than five to 62 by April 2012. “Even McDonald’s took more than a decade to reach its first 50,” says Aggarwal.
In the just-concluded financial year, Lite Bite reached a turnover close to Rs 100 crore compared to Rs 79 crore last year. With an EBITDA (earnings before interest, tax, depreciation and amortisation) of close to 20 percent, Lite Bite is performing better than the industry average of 16 percent for QSRs and matches that for CDRS/FDRs.
“Having a mix of short and bigger formats in your portfolio makes sense as you can get both volume and margins,” says Raghav Gupta of consulting firm Booz and Co. QSRs are typically high on volume and low on margins and it’s vice-versa for the bigger formats. “With CDRs and FDRs you can create a Rs 200 crore business, but a QSR-company can top Rs 2,000 crore in annual revenues,” adds Gupta.
However, the Burman-Aggarwal partnership’s real test might just be beginning. The duo’s plan to scale up the business looks aggressive even by their standards. In the next three years, the young company wants to add almost 100 outlets and achieve revenues of Rs 500 crore. In the process, it also wants to make sure it maintains profitability. “While most of the expansion will be driven through malls, we will be present at high streets, airports and metro stations too,” says Rakhi Jain, chief financial officer, Lite Bite Foods.
The company’s present mix has 65 percent of its outlets operating out of malls. That, according to industry experts, could add high doses of risks. “Only about a quarter of malls in India are doing well and this could be a limitation for companies looking to expand through the mall route,” says Saloni Nangia of Technopak.
To pull off the high stakes, Burman and Aggarwal have put in place a professional management that is high on experience in the industry. A successful expansion would put them well placed for a planned initial public offering by 2014.
The only other success story from the industry that is listed on the Bombay Stock Exchange is Jubilant FoodWorks that runs Domino’s Pizza in India. But Domino’s story is of a single brand and of a predictive menu that is easier to scale up. As friend and partner Zorawar Kalra, who till recently ran Punjab Grill and Street Foods of India under a joint venture with Lite Bite, says, “Food business is a tough business and you can lose your shirt… many have!” Interestingly, two lessons from the initial days of Lite Bite will be crucial for both Burman and Aggarwal. Lite Bite has now bought out Kalra’s stake in the joint venture.