‘Gong’ to breakeven in 24-30 mths; Hoppipola most promising: Speciality Restaurants

Speciality Restaurants, a chain of fine dining and casual dining and confectionaries with the most popular brand Mainland China, Oh! Calcutta, Hoppipola, Sweet Bengal etc is optimistic of turning profitable in FY18.

They would be trying their hand at new causal as well as fine dining formats, says Director-Innovation Avik Chatterjee in an interview to CNBC-TV18 and with that in mind, the company has opened a new restaurant in Pune called ‘Gong’, which has modern-Asian cuisine.

They would also be opening a new progressive Asian cuisine restaurant in Kamala Mills in Mumbai by end of this month

Currently, the company has 124 restaurants – out of which 81 owned by the company, 25 are franchise restaurants and 18 are confectionaries. Out of these, he says 80 percent are already profitable with an average sale of Rs 1.8 lakh per day.

Gong would likely breakeven in two, two and half years, said Chatterjee.

Current cash on the books is around Rs 65 crore.

From the current brands, Hoppipola is the most promising one and the company has plans to expand that franchise going forward. They already have 13 units of those.

Below is the verbatim transcript of the interview.

Reema: What is the kind of investment that you have made in this particular restaurant, do you own the land, is it on lease when do you expect to breakeven, what are the kind of revenues and margins that you expect, take us through financials?

A: This property is on rental and it is a newer format for us it is called Gong and it is a Modern Asian Cuisine, so we look at breakeven somewhere at around two years. Hopefully, I think we should achieve that and that is how we have planned our targets. Restaurant is based on modern cooking techniques fused with Asian ingredients and we are taking inspiration from lot of western cooking techniques as well.

Nigel: You are looking to breakeven in this particular unit in the next couple of years, how many restaurants you have in total? Is it around 100 I think so or thereabouts? Out of the 100 could you tell us how many are profitable and how many are non-profitable and how many are being shut down if at all?

A: Currently, we have 124 restaurants out of which 81 are owned by us 25 are franchises and 18 are confectioneries. So, out of these I would say around 80 percent of our units are profitable and some of them are lagging behind due to some hits and strikes like demonetisation. But, we are trying to recover and we are trying to get back and that is how we are planning to take over. Basically, what we are doing with newer format’s currently which I am taking in particular care of one would be Gong and the another one that we are doing, that is coming up in Kamala Mills in Mumbai. So, we are trying to re-brand ourselves looking into newer formats which are little younger, more on the casual format and operationally mostly on the afternoon and early evenings.

Reema: When is the one in the Kamala Mills expected to open?

A: The one in Kamala Mills is supposed to open next month mid-May, so that is going to be a little different from Gong. It is going to be progressive Asian rather than modern Asian where we are going to be infusing mostly cooking style of Asia.

Reema: You spoke about a breakeven in two years for this Gong restaurant?

A: Two - two and half years.

Reema: Two- two and half years to meet the internal targets, so what are these internal targets, just give us an example of the kind of revenues that you are pencilling in year one, year two, what are the cost that you entail and this I presume would be EBITDA breakeven at the EBITDA level?

A: That is true, we are looking at daily average of somewhere around Rs 1.8 lakh, so that helps us achieve our breakeven way faster so hence the two year transit.

Nigel: FY18 will be profitable for you all, for the nine months you are making a loss, FY18 you believe you will be back in the green?

A: Yes.

Nigel: Just wanted to ask you I believe you have a strong balance sheet, you current market capitalisation is around Rs 380 crore what is the cash in your books, you are opening up quite a few restaurants, so I guess there will be some drainage of cash? What will be the cash that will be in your books and how do you plan to use it?

A: We do have some cash lying with us after IPO, so what are planning to so is innovate as well and not just stick in growing to our current brands that we have done for so long. I think the newer brands in newer formats that we are trying is at least 5 this year, that would give us a signal of which ones to grow in which cities. We are trying to look into newer format because that is what people are wanting now and they are kind of bored of the older ones. Whilst the old ones still have their presence in their current cities and we can probably find tier II cities to grow them. But the newer and the metropolitan needs the newer brand that we have been working on. It has been almost a year and a half since we are worked on them.

Nigel: What is the cash in your books?

A: Rs 65 crores.

Reema: We know Mainland China is predominantly where you get at least 50 percent of your overall volumes and revenues. You have got a lot of the other brands something like a Hoppipola, Oh! Calcutta etc. tell us the brand where you are seeing the greatest traction which appears to be most promising in terms of revenues as well as profit margins?

A: Currently, above all our brands Hoppipola looks very promising. The reason being we have expanded to 13 stores within three and a half years. We are still looking at innovating within Hoppipola because the kind of market that we cater to with Hoppipola needs constant innovation and constant growth in terms of what your product lines are.

Reema: You have managed to breakeven in your Hoppipola stores in two years?

A: Yes, we have. Some of them less than two years.

Nigel: Your stock is up closed to around 17-18 percent I think the last one month, so clearly the street believes that maybe the worst is over for you all. FY18 what kind of numbers can we look at? You always told us you are trying to break that into the profitable range. In terms of topline I think you have been doing roughly around Rs 300 crores or thereabouts on the topline for FY18 what kind of a number can we work with?

A: That is something that I can’t directly comment on. That is still being worked on with our finance team. I am sure we are looking at a green signal because the way we are going currently, even internally as well as external, Gong is something that is very promising for us. Once these two brands are set we will exactly know what kind of targets we should achieve and how many number of stores we would do in the country.