Speciality Restaurants, the company that owns fine and casual dining chains such as Oh! Calcutta, Mainland China and Sigree, managed a turnaround in its business even as the pandemic impacted sales and footfall. The restaurant operator reported a consolidated net profit of Rs 11.20 crore in the third quarter of FY22 against a net loss of Rs 3.69 crore reported in the year-ago period.
According to Anjan Chatterjee, chairman and managing director, Speciality Restaurants, the company managed a turnaround at a time when COVID-19 wreaked havoc on restaurant businesses everywhere by focusing on deliveries, cloud kitchen and closing non-performing outlets.
“We launched our existing brands on cloud kitchens, opened kitchen-in-kitchen, shut underperforming stores, downsized staff. So it is a combination of things that worked for us,” Chatterjee told Moneycontrol.
Kitchens on cloud
In the wake of the pandemic, Speciality Restaurants rejigged its strategy to emerge as an omnichannel platform instead of a pure brick-and-mortar company. As deliveries took primacy across the industry, the company leveraged the pull of its brands such as Oh! Calcutta and Mainland China to open cloud kitchens.
The company also resized a few of its existing restaurants to open another house brand.
“As an old company, we have several restaurants which have huge space. Some restaurants, for instance, were sized at 6,000 square feet,” said Chatterjee.
Hence, he added, they decided to reduce the size of these restaurants and open another in-house brand on the premises. The company also adopted the kitchen-in-kitchen model and to service delivery orders for other in-house brands and introduced a few cloud kitchen brands.
“There was zero capex, no additional manpower cost and still we increased our business from each outlet in this way,” said Chatterjee. The company now operates 59 cloud kitchens in the country.
It also undertook several other initiatives such as downsizing its operations and shutting down underperforming restaurants. According to Chatterjee, the company shut 29 small and big outlets and reduced its staff strength from 3,200 to 2,000 to keep afloat.
A push towards deliveries also helped Speciality Restaurants tide over the crisis. The company, which earlier only delivered for its brand Mainland China, enabled deliveries within 5 km for other brands and built an in-house fleet and website too. Apart from food aggregators such as Swiggy and Zomato, the company now taps other delivery platforms such as Dunzo, WeFast, etc. Deliveries now contribute about 29 percent to its business, while 71 percent comes from dine-in.
As it eyes growth, the company has stopped expansion activities at the moment and it is launching new brands and stores only on the cloud.
“We have held back from putting too much capital expenditure on expansion. The growth will come from our cloud kitchens,” said Chatterjee.
Growth after lull
The initiatives by the company finally bore fruit in the third quarter as its revenue climbed to Rs 89 crore, up 57 percent year-on-year, against Rs 56.81 crore reported in the same quarter last fiscal. Sequentially, too, the company reported an over 330 percent jump in net profit. Its profit after tax for the second quarter stood at Rs 2.60 crore. According to Chatterjee, the company would have reported even better results in the third quarter had the omicron variant of the virus not impacted its best business days in December.
However, with curbs now being eased again, business is again back on track.
Restaurants were hit hard during the pandemic as movement curbs and restricted opening hours and capacity constraints led to dwindling footfall and sales. A report by CARE Ratings estimated that the food services industry saw a decline of as much as 40-50 percent in FY21 after growing from Rs 3 lakh crore in FY15 to Rs 4.2 lakh crore.
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