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Restaurant Chains Have Head in the Clouds too


Several chains are shutting down outlets & shifting focus to ‘cloud kitchen’, or kitchen-only ops
Mugdha.Varlyar @timesgroup.com

Bengaluru: Several restaurant chains in the country are shutting down outlets and shifting focus to ‘cloud kitchen’, or kitchen-only operations with no dine-in facility due to traditional challenges of rising costs and rentals, plus consumers increasingly preferring home deli-very to eating-out.

Spring Leaf Retail, a quick service restaurant chain backed by Foot-print Ventures and Helion Venture Partners, has shut down its Mast Kalandar restaurants in two of the four cities it was operating in, while SAIF Partners-backed TMA Hospitality Services, which owns Ammi’s Biryani, has converted some of its outlets into cloud kitchens in the past few months to cut costs.

“In several of our outlets, we found that dine-in customers were very few while most of the customers preferred home delivery. We have converted these outlets to cloud only, while the balance outlets continue to provide dine-in as well as home deli-very options,” said Vishal Sood, partner at SAIF.

Spring Leaf closed five Mast Kalandar restaurants in Pune and four in Chennai in recent months and has also shut several outlets in Bengaluru over the past year.

The company is now pushing its online kitchen model MK Dabba-wala to enter newer, more tech-savvy markets such as Mumbai and the National Capital Region. Spring Leaf director Gaurav Jain told ET the company has closed “strategically ill-placed stores” and is opening satellite kitchens in these places for online delivery.

Associate Vice- president,
Technopak Advisors
The market size of cloud-based (kitchen) platforms in India is estimated to be 300-400 cr in 2016

Riyaaz Amlani, president of the National Restaurant Association of India (NRAD, said: “According to my estimates, about 50% of the restaurants that have opened in recent years have closed down. In Mumbai alone, seven of the top ten restaurants that opened since 2012 have shut, because they were no longer profitable.”

NRAI cited contracting margins due to rising costs as the primary reason for the alarming rate of closures of restaurants.

“Margins are becoming thinner as rentals have shot up, costs of labour and produce have increased and propensity to spend is coming down,” Amlani said. He said restaurants are now struggling to make double-digit margins while just a decade ago they were making as much as 25% margins. He said standalone restaurants were more affected compared to venture-funded ones though slow industry growth is hurting all. “Overall, the food service industry has grown at a rate of 7.7% in the past three years while we had expected at least 10°o growth,” Amlani said.

Faasos, which started as a restaurant in 2003 and later became a QSR chain, moved to the online model three years ago. The company did **0 not wish to participate in this story.

Industry insiders said change in consumer sentiment has become a big challenge for QSR business.

“The bigger challenge in recent years has been the weak consumer senatiment, which hopefully will start g getting better as the economy picks “4 up. Also, competitive intensity has been quite high but is now easing off as a lot of players are downsizing their operations,” said Sood of SAIF.

Food delivery has now become a significant aspect of business for restaurants across the country, with the market size of such cloud-based plat-forms increasing. “As per our 2013 report (on food services) the share of delivery in the market was estimated to be around 150/0. However; it has grown to approximately 35% in 2016,” said Ravindra Kumar Yadav, associate vice-president at consulting firm Technopak Advisors.

“The market size of cloud-based (kitchen) platforms in India is estimated to be 1300-400 crore in 2016,” Yadav said.

Source :Economic Times

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