Hey didn’t that Italian place used to be right here?”
“Yeah it shut. It used to be good, but then the standard went down.”
If you’ve lived in a large Indian city, chances are you have presided over many a high (and low) profile restaurant closure. Sometimes they close down before you get a chance to visit at all! Yet, against a backdrop of excessive government interference, difficult landlords and staggering staff attrition rates, the restaurant business in India is booming. And so, every few months, a new joint will pop up nearby with a colourful façade and a bullish restaurateur convinced that this one will be successful.
Restaurateurs are generally a likeable bunch—flamboyant, well-travelled and smooth-talking.Riyaaz Amlani, 39, is no different. He’ll charm you with his wicked sense of humour on the terrace of one of his restaurants and just as easily drill down the economics of the café vis-à-vis the bistro in his chic Byculla office in Mumbai.
The burly owner of Impresario Foods, who first became famous for the high-volume, low-margin ‘college-crowd’ Mocha café chain, realised that as Indians eat out more, they want fine-r dining in “casual” surroundings. So, he added lower-volume, higher-margin restaurant brands like Salt Water Café and Smoke House Deli (eight outlets across three cities in six years)—and has grown into a Rs 65 crore business with 20 percent profit margins and 34 outlets across 11 cities in 13 years.
Though Amlani had his fair share of failures—and perhaps because of them—this time, he’s brought in the right partners and figured out that the restaurant business is about delivering an experience on the front end and keeping fixed costs down at the back.
Amlani’s journey has been well documented in the media. He’s a pragmatist. That’s why he’s been able to crack the economics of the changing Indian palate.
“Mocha wasn’t a serious F&B [food and beverages] place; it was more about a space where you could come in and hang out. F&B was incidental,” says Amlani. Mocha succeeded because it created a coffee shop ‘experience’ with comfortable décor and laidback service. The more time customers spent at Mocha, the more money they would spend. “The average ticket size was about Rs 250—higher than the Rs 150 other places got,” he says. “Come to Mocha when you’ve got an hour-and-a-half as opposed to Café Coffee Day for 15-20 minutes.” Then he gets down to the numbers: On average, 400 people came into each Mocha, each day, resulting in a table turnover of 4.5-5.
But the low-end, lazy-afternoon café model didn’t work everywhere. When he stumbled upon an unused property at Mumbai’s Chowpatty beach, he realised it was too hot for people to come in before 5 pm, so he only had till midnight (just seven hours) to make back his money. He needed to increase the ‘average [revenue] per cover’ (APC) so he ditched the Mocha format, produced a full-scale restaurant and Salt Water Grill was born. Between 2004 and 2008 it had a good run but had to close due to a variety of leasing complications.
Nevertheless, the concept was a hit: Dishes like the signature John Dory have found different avatars across Mumbai, Delhi and Bangalore. It led him to open Smoke House Grill in Delhi’s Greater Kailash. Without the draw of the Arabian Sea this time, its USP would be smoked food and smoky flavours. Though he was only doing 1-1.5 table turnovers a day, the APCs were Rs 1,500! “Even if I’d turn around a 100-seater, it would still do better numbers than a Mocha,” he says. However, he realised that fine dining was still occasional. So, Amlani found the middle-ground: The café format. “I was able to turn the tables three times but the APC was Rs 800-850. Cafés turned out to be the most justified use of space—the Salt Water Café/Smoke House Deli model was our sweet spot.”
He is looking at opening 20 more stores by the end of 2015 (nine already signed), growing to Rs 160-170 crore in revenue. But expanding in the restaurant business means getting a location with enough footfalls to cover sunken costs. “We’ve got Mocha in 11 cities. I don’t think the consumption patterns in Tier 2 towns have evolved enough,” says Amlani. “Eating out is not seen as a convenience. It’s still seen as a celebratory [spend] and it’s a discretionary spend.” But getting prime real estate in Tier 1 cities is difficult and expensive. Amlani puts across a stark indictment: There are 60-70 prime locations in India where you get maximum return on your investment—after that, everything is suboptimal.
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(This story appears in the 07 March, 2014 issue of Forbes India. To visit our Archives, click here.)