Intricacies of Starting a Restaurant
Food & Beverage Business Review|August - September 2020
Intricacies of Starting a Restaurant
Globalisation has influenced various aspects of Indian society including the change in food habits. Over last two decades, due to several economic developments, increasing spending power and a willingness to try new diets the F&B industry has seen tremendous growth. This has induced several aspiring entrepreneurs keen on entering this sector. In fact, breaking the stereotypes, several women too have entered – and made a success – in this field. Ashok Malkani examines the pros and cons and discusses the intricacies involved in opening an F&B outlet and running it successfully.
Ashok Malkani

Looking at the escalating restaurant business in India, several entrepreneurs are keenly eyeing this industry for lucrative business. The businessman is further encouraged into entering this industry when he finds several research reports projecting a robust growth of the industry. The growth has been mainly due to the growing urbanisation and the rapidly surging millennial population.

But before venturing into the industry one must make a thorough study of the pros and cons. One cannot become a successful restaurateur if one does not make a deep study of all elements which go into the success of a restaurant.

So what should be the aspects one should consider before venturing into the field?

Jaasjyot Surri, CEO & Co-Founder, SJI Hospitality Private Limited states, “The planning of an F&B outlet is a balance between passion and economics. Factors ranging from geographical aspects such as location, spending capacity, the type of cuisine prevalent in the area, as well as the cuisine and business segment having a lacuna in the market, should be entrepreneur’s major factors for opening an outlet. Besides, this I believe that it is essential to have an operations team and Executive Chef in mind who is roped in early on during project inception to ensure a synergized approach and positive outcome.”

Parthiv Neotia, Managing Director Ambuja Neotia Hospitality, avers, “As the popular adage goes, “In the restaurant business, you earn through fulfilling people’s appetites, needs, and dreams.” That is a mantra one needs to stick to when in the F&B business.

“You need to be very clear about the concept and branding of your outlet. From the format (QSR to fine-dine) to the target patrons to the price point and the vibe and feel of the outlet, everything should be crystal clear before opening an F&B outlet. It is necessary to spend some quality time and money on developing your concept. A good team is a must to run the business. Make no compromise on selecting the right kind of kitchen, service and management staff.

“Of course, the importance of location and menu cannot be emphasized enough. In fact, if you don’t have anything else, at least you need to get these two areas sorted.

“Not just F&B business, but for any business, an effective and feasible financial planning is crucial. Take into account all sorts of expenditure and investment — including overhead costs — before rolling the ball. Minute details including sales projection, staff positioning, profit-and-loss and break-even calculations should be thought through well in advance. Factor in some money for marketing and PR activities as well.

“Permits and licenses are sacrosanct. From local municipal trade license and FSSAI license to GST registration, tax license and liquor license — make sure you are on a sound footing when it comes to the legalities.

“Often, there is a tendency of first-time entrepreneurs to overlook or pay less attention to suppliers and vendors. They are a vital resource for a successful business.

“Last, but not the least, remain updated about your competition and industry trends. Be not just aware of your competition but also do thorough research on them.”

Kaushal Shah, owner, Vice, Global Tapas Bar, outlines the requisites for starting an F&B outlet as: “Good location, legit legal property High Capex, initial 6 months of working capital.” He reminds the entrepreneurs, “All licenses take 3 months to be approved and received, so one must make proper plans”

Locale and Cost

One of the main factors to be considered for the success of an outlet is the location. Besides the locale, the cost of operation too has to be taking into consideration.

Parthiv states, “Ideally, one should consider the cost of real estate rent and also operational cost for having an F&B outlet in a particular location. It has been observed on many instances, that a business had to shut shop only because it had not taken the recurring property maintenance and rental costs into the financial planning.

“It is important to make plans to sustain the property cost way beyond the break-even time period.”

Jaasjyot is of the opinion that the real estate is of prime importance, especially in metros and tier I cities. He avers, “The viability of a project is dependent on the cost of real estate. The location helps decide on the target audience, the spending capacity of patrons, the type of cuisine, the format of the F&B outlet whether QSR, dine-in, takeaway etc. The return on investment and the success or failure of an F&B outlet are highly dependent on property costs, which is a reason we see a lot of outlets opting for the revenue share model with real estate owners more than ever before.”

Kaushal feels that both, location and cost of operation are equally important.

Type of Venture

Different restaurant concepts – like QSR, casual dining, fine dining – it is believed, have different profit margins. Which type of venture would be considered to be more viable for a new comer? Often people are also in a quandary whether to start an eating-out place or a pub bar.

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August - September 2020