Young Turks: Learn how to bite into the booming F&B market

This episode of Young Turks marks the beginning of its eleventh year and what a journey it has been - tracking India’s brightest young entrepreneurs. So what better way than to celebrate this milestone by giving young startups a chance to be mentored by an industry leader?

Over the next four weeks we bring to you the Young Turks Tutorials. Every week you can catch startups in a master class on what it takes to scale up, build a team, create a brand and delight customers. Sanjay Mahtani of JSM Corporation - the man who brought the iconic Hard Rock Café to India, dishes out his lessons on how to bite into the booming F&B market.

Mahtani: Hi, I am Sanjay Mahtani, Executive Director of JSM Corporation of India. Today I am happy to be on CNBC-TV18’s Young Turks Tutorials. If I have a mantra, it would be if you dream it, believe it then you do it.

Narration: A curious chef and a master entrepreneur in the F&B space, Mahtani founded JSM Corporation with his business Jay Singh and brought the iconic Hard Rock Café to India in 2004. Since then Sanjay and team have launched six restaurants and neighbouring Sri Lanka. His venture JSM is the exclusive India master franchisee for world renowned brands like the California Pizza Kitchen, Trader Vic’s, Inakaya and most recently pinkberry, a frozen yogurt brand. Not just an F&B franchise, this connoisseur of good times is also the mind behind the fine dining brand Shiro.

Shereen: It’s a battle out there and as they say, you are as good as your last serving. It’s time now for us to introduce you to our four young F&B startups as they get into a conversation with Sanjay Mahtani and there is going to be plenty of food for thought.

1. Chirag Yadav, Founder, Chaipatty Teafe

Welcome to Chaipatty, a warm friendly neighbourhood tea café known for the best chai, pakodas and maggi in town. Chaipatty is currently present in four locations in Bangalore. Founded in 2010 by 29 year old Chirag Yadav, Chaipatty clocked revenues of Rs 48 lakh last year and Chirag hopes to take his café outlets to 50 very soon.

2. Richik Nandi, Co-founder, PoshVine

Founded in 2011 by Richik Nandi, Garima Satija and Rafi Ali Khan - PoshVine is an online destination to discover and book dining experiences. It offers diners fast, free, instant reservations with the added incentive of benefits of restaurants. Having reached 25,000 customers so far, PoshVine currently operates in Bengaluru and hopes to expand to Chennai and Hyderabad very soon.

3. Raghavendra Sanjeev Rao, Managing Partner, The Bakery World

Housed in Bengaluru Raghavendra Sanjeev Rao’s The Bakery World offers commuters a wide array of freshly baked products. Customers seem to be relishing these sweet delights as Bakery World’s turnover hit the Rs 1 crore mark this year. No stranger to the food business, 29 year old Raghavendra learned the ropes from two of his family restaurants, both specialists in South Indian cuisine.

4. Nag Manohar, Managing Partner, Hungry Hogs

Founded in 2009 by three young entrepreneurs - Hungry Hogs serves up fast food to Bangalorians. Peace, Love and Hot Dogs as the motto, Hungry Hogs dishes out Hot Dogs but with an Indian twist. Priced between Rs 50-130, Nag Manohar and his team at Hungry Hogs cater to college students in three locations.

Shereen: Four young exciting businesses. It is time now to go across to Sunanda Jayaseelan in Bangalore as she kick starts our master class at the Hard Rock Café.

Sunanda: I have read reports which say the F&B industry in India at the moment is about Rs 2.25 lakh crore and counting and expected to double by 2020. In this space how does one who is starting out really sort of find his USP or find the concept so to speak?

Mahtani: There are so many concepts out there. We have four such guys who have got four completely different concepts out here. From my point of view, you really have to have something in your mind. Either you have to be passionate or you have a business plan which you have studied something, you have seen something you want to do, travel abroad or felt that, hey I like this concept, I think it could work in India.

You have to be able to start off with some base idea and obviously work it up from there. Technically, you have got to really believe in the concept, you have to analyse it in the market, you have to see what competitors are there in the market field, the pros and cons, who is your target, where would it work, how would it work and what’s the cost to it. There is a budget to everything. So you have to figure out if you can budget that concept over here.

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Sunanda: How does one choose that?

Magtani: I didn’t choose it. I didn’t choose it. Many people think I was born into it. I come from a hardcore business family but my parents, my uncle, all my family they loved food and anywhere they’d go, to new restaurants they’ be invited to try the food before the restaurant launched or before they hire the chef. So I was thrown into it. I am kind of an insomniac, I don’t sleep much, I used to DJ professionally when I was younger. I love to cook, I can make pretty much any drink behind the bar so what else could I do, I was kind of driven into it.

Sunanda: Has being an insomniac worked for anyone of you?

Yadav: Chaipatty was conceptualized over a peg of Old Monk, I can’t remember which peg but yes pretty much insomniac.

Rao: When you started was it a gut feeling or did you do any market analysis?

Mahtani: when we first took this brand, it was a 50-50 on the result. I just love being who I am in this place. It’s not like a lot of other places you go to. I felt India really needed that.

Yadav: Talking of ambience how much of impetus do you put towards selecting the right ambience because I see you picking very key locations. It’s also from the perspective of logistically reaching that point but then again the place itself creates an environment for your kind of concepts?

Mahtani: It’s very important for me to find the right property and of course sometimes you find the most amazing properties but they are not in the most key locations. That takes a lot of analysis. The first Hard Rock in Bombay, we were looking in South Bombay, and then we were looking in North Bombay we ended up in Central Bombay. It took us a year and a half to find the property. Location is very important, there is no doubt. Ambience for me is very important.

Yadav: Indians will still look at affordability first, experience later. I see that mentality changing a little over the last half a year or so but still affordability is the first question. I can say I sell the best chai, maggi, pakodas but then people say I can make maggi at Rs 10 at home, pakodas is something my wife or mom would make much better.

Manohar: I think that would depend on which area you are in like if you are in college area you will have that kind of people.

Yadav: It’s the same question everywhere. I can understand the whole concept of this being mass audience and this being niche audience.

Mahtani: You got to remember it’s not only about the product that they are going to eat. For me the product is not just the food you’re delivering or the tea or whatever it is, it’s about the whole experience. From the time you step in, to the ambience, to the service, to them how relaxed they can feel. It’s the temperature in there, the music. If they can walk away once with a good experience and feel the value for money then it doesn’t really matter if you price a few rupees more here or not.

Yadav: I agree on that but like our concept, both of us it’s like a pay upfront or a pay right there, it’s a QSR or it’s like you pay and go sit. So you have not really tested the environment. You come there and you have been surprised with a menu pricing there and it looks like a small place, I am sitting on the floor, maggi at that price so its not like you have really gone inside the place to get the warmth or the feel of the place. I agree that it’s just a five minute confusion, it goes off and we do get our regulars in place.

Mahtani: Yes absolutely. Once we walk in and see people sitting there that’s already a drive.

Yadav: When it’s packed there is no need they will just say can I get a space as soon as possible, no questions asked but when it’s empty what's this, what's that.

Mahtani: Exactly, there is always going to be questions. People have always got curiosity. You need somebody to be able to guide them when they enter perhaps don’t charge them before they enter. Let then sit down and experience it and then give them the bill.

Nandi: Today most of the youngsters and all whenever they hear of a new place or even an established place, they want to research it over the internet or by using their mobile phone but the internet is like a distribution mechanism for all possible information out there. How do you really maintain your exclusivity on the internet as a restaurant?

Mahtani: The only way you can do that is by day to day good marketing. You have to market. It’s not only on the ground marketing you got social media which is very critical today. Having a good PR agency in place is very important.

Rao: As a startup having a PR agency wouldn’t be an overhead for us?

Mahtani: It is expensive but they do add value and you don’t need to take a PR agency for long-term either. If you are start up you need PR.

Manohar: In terms of funding how do you suggest we go about it or what do you think is the best way?

Mahtani: Everyone has a different view on this. Personally, we try to do as much as we could inside within our company and that’s how we go. We took awhile, we waited we did the first two outlets and then we waited a good year and a half before we did the next and then we kept on multiplying. Now we are growing at a pretty fast pace but we had the patience for that and if you have the patience for that that’s the right way because you will multiple a lot faster and then investors will notice you and come to you.

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Sunanda: Chirag brought this point up earlier. He was talking about partnerships versus going it alone. Would you say there is a thumb rule as far as it is concerned?

Mahtani: No, no thumb rule whatsoever. It’s a very personal kind of thing. Some people prefer partnerships because they need something from the partner. Partner brings some value to the table whether it’s monetary or whether they are good at something specific. However, I have had very bad experiences with partnerships. Honestly, if I would advice anyone, no one advises to do anything in partnership. It kind of ruins relationships, it could lead to all sorts of problems and it’s just not worth it. Your reputation is pretty much more important than everything else.

Rao: What are the avenues that you look for when you are hiring? You post an ad on the newspaper or you get through reference?

Mahtani: We’ve tried all of that. Initially when we were startups we tried ads in the newspaper, references, we went out, I would sit at a bar and if I liked somebody I would – I am very spontaneous like that. If I like you I am not going to say come and work for me but I am going to say here’s my card and if you are ever thinking of moving on, you know where to find me and I have got lots of people who have come back. But from the professional set, I would say we went out, we contacted a couple of HR companies, recruiting agencies, we put our requirements to them and that’s how we started.

Sunanda: How easy is it to find these people or probably I should be asking you guys, have you ever been looking out for people to hire? How easy has that process been?

Manohar: We have actually struggled quite a bit. We haven’t found the right kind of mix.

Mahtani: It’s never an easy process. It only gets easier when your brand gets the recognition, when people see that they are earning enough and that the quality of life with your brand is good.

Yadav: I would give you a very simple example. The first person to join even before the structure was made was a security guard who would basically take care of the fact that at night nothing gets stolen because it was an open outdoor space and the main building didn’t have a security guard. You will be surprised after two months he joined us an assistant cook because he would otherwise cook for his seven roomies. But today we do have the support systems in place like I agree with him it is difficult picking new talent but if you’re oldest staff is still with you, they are there to send the legacy out in the neighbourhood.

Mahtani: I agree with you. One of the things we do which has been pretty successful in us recruiting people is we have a referral system. So anybody in any of our teams across the country and they know we are looking for people, if they get someone who joins us they can incentivize as well and plus they are giving great reviews about us because obviously they are working with us so when they go out there and do that and they are happy at the job and they pull in people, it’s even better for us.

Sunanda: How much of training normally would go into the process before you are able to take someone on?

Mahtani: At Hard Rock, the first few outlets that we opened they used to send down 20 people who would be in India for a month. I am paying for their airfare, I am paying their wages for that full month and these are international staff based in the States and all this kind of places. I am paying for their accommodation and yes, it’s a very important part of our business.

Rao: But with smaller startups, spending on training would be an overhead

Mahtani: It’s a very different business model for you but remember you will need to train them, now whether you train them, whether you have a person coming in and training them, its critical because if they are not on the same page as you and they are not giving the customer the satisfaction that they require then your startup is already half way gone.

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Yadav: How much has word of mouth contributed towards your success?

Mahtani: So much, I cannot even begin to tell you much. At the end of the day I have to reach out to everybody. As I said, I am the guy who hides in the corner, you don't know who I am but if the customer comes in and approaches me I sit with them, I talk to them, I want to get to know them as in the best way I can and I don't avoid them but one thing is for sure you are right about of word of mouth because with most of our brands when you walk in you feel it.

Sunanda: At a place like yours or probably a smaller scale say a startup how important is service? What are the aspects that go in to it? How do you manage any negative publicity that is probably coming out of that service?

Mahtani: Service is everything, especially in my scale of a restaurant. It may not be so necessary in his. To a limitation yes, speed is important, etiquette is important, cleanliness, hygiene is important and the way the person talks to you is important but you will have one interaction in his venue or in his venue with a member of staff, in ours in one day you may have 20 interactions with that same member of staff so for us its that much more important but for everyone it is important.

Sunanda: As far as permissions are concerned, as far as regulations are concerned, in most cities in India is not at its best. How does a start-up really handle these situations?

Mahtani: With a lot of patience, good connections, smile on your face no matter what happens and keep your fingers crossed. I don’t want to say more.

Manohar: For us the biggest problem we had was the age. We were like 22-23 years old that time. What are you going to do and no one looks at you, no one gives you any respect, and they are like you are just a kid you are not going to do anything. So they give you a harder time just because you are younger. But if I take someone older with me, lets say I take my dad or I take my uncle with me it’s a completely different scene.

Mahtani: The fact is they are giving you the respect now right?

Manohar: Now it’s different.

Mahtani: Anything you do in the world, the first few steps are a struggle. Even when you are a baby, when you start to walk it’s painful, but once you get used to it you can run.

Mahtani: I know its an exciting business and I know everybody wants to get into it, I am sure that there is a lot of opportunity out there. But I think one needs to really study it, believe in yourself and then go after it.

Shereen: We do hope that Sanjay has inspired those of you who are waiting in the wings to take the entrepreneurial plunge.

Our tutorials will continue over the next few weeks and we will give you ideas on how you can strategize entering the market and scaling up your ventures. Join us next week as we head to the Flipkart headquarters in Bangalore, we will be at India’s IT nerve centre in a tutorial with the test case for e-Commerce in India. Sachin Bansal of Flipkart will take your queries.