Tata Jagriti Yatra Day 1

Day 1 at TJY

I have never been so excited as much as I have been for this trip, I have awaited TJY since almost over a month, since I was shortlisted. We were called at 8 am at Ravindra Natya Mandir, staying in Mumbai, gave me a little comfort. I reached about at 9 am, met over 400 vibrant young men,We exchanged ideas. We had breakfast, got done with the formalities and it was lunch time. Then finally we were inducted into the process and institution. TJY is an initiative of Jagriti Sewa Sansthan, a non-profit instituted by Mr. Shashank Mani. I went through the notes and the handbook, a part of the Yatri Kit.

And the excitement just kept growing. Post lunch, Ms. Rewati Prabhu and Mr. Shashank Mani presented about how it all began and introduced the 3^rd edition of TJY. The mammoth TJY event is organized by a skeleton team of about 8.

We practiced the Jagriti Geet. More on that a little later.

Recalling, when I met an enterprising young man at an entrepreneurship summit in New Delhi, explaining me more about this event, I could never imagine, that this is how exciting it is going to be. This was the TIE Entrepreneurship Summit way back in October 2007, when Swapnil introduced me to TJY.

I feel that Franchising in 2010 will be a lot more inclusive, just thanks to social franchising and its outlook.

During the networking break, I met with a lot of people, explaining what is franchising, what is our business model and so on. By the end of the day, I had already learned how-to-simplify-it. It just helps you get your ideas clearer.

I was just regretting all the people that could not join me for the trip, namely my friends and colleagues. TJY is a great event, the audience mix is more of students (potential entrepreneurs) than actual entrepreneurs, between the age of 20 and 25. I met a lot of engineers during these days.

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Franchise your way to wealth

Franchising is one way to give your entrepreneurial self a chance. The challenge is huge, but the rules are simple. Grab the opportunity

Courtesy: Outlook India

Rajat Mathur, 36, had always wanted to strike out on his own. So, when he left the i-flex Solutions office in Mumbai as its senior banking analyst for the last time on 30 April 2006, he did not regret it. An alumnus of the IIT-Mumbai and IIM-Lucknow, he had worked at Times Bank and ICICI Bank before i-flex.

You would walk into Orbit Mall on the Malad-Goregaon Road in Mumbai to the aroma of freshly baked cookies. The bouquet will lead you past the Good Earth store on your left, and round the corner to the Cookie Man shop. And there, presiding over chocolate and honey-almond cookies, you would meet Mathur again. Counting the cash, checking the cookies, and serving them straight out of the oven at the back to the crowds thronging the counter. “I always wanted to do something on my own as I think that’s where the real fun is. You can never get that in a nine-to-five job.” Mathur’s entrepreneurial spirit is alive and well.

 

Jaya Patodia 34, Lakme Beauty Salon, Delhi

She invested Rs 25 lakh initially and now has a monthly income of Rs 50,000-60,000. Her average monthly turnover is Rs 3.5 lakh

“I have a Swiss watch store in Khan Market, but that was not giving me good returns. The turnaround happened when a friend, who owned a Lakme franchise, told me about it.”Franchisee Checklist While Mathur cut loose, a lot of others wanting to do so have not. With responsibilities and dependents, they don’t dare to leave the warmth of a regular income and plunge into the financial turbulence a new business could bring. But today, the ‘fresher’ can go in with the safety tube of franchising. That’s what Mathur did. T.K.S. Kumar, a franchisee of Whirlpool Service Centre in Chennai for a decade now, says: “I wanted to realise my long-cherished dream of becoming an employment giver from an employment seeker.” But P. Ramarao, president, Australian Foods, which owns Cookie Man, warns: “It’s not for people who aren’t passionate.”

WHAT IS A FRANCHISE?

During the Great Depression, Colonel Harland Sanders started selling fried chicken in the little town of Corbin, Kentucky, on the road to Florida. He is said to have used 11 herbs and spices in a secret recipe that gave the chicken its distinctive taste. Sanders’ fare gained fame and Corbin was a routine stop en route to Florida till a new highway bypassed it. That’s when the colonel shut shop and tried selling his chicken to restaurant owners. In 1952, Pete Harman of South Salt Lake, Utah, signed an agreement to sell Sanders’ chicken and pay him five cents for each piece sold. The eatery was called Kentucky Fried Chicken. It was the world’s first franchise. While Sanders was sharing proprietory knowledge and reputation with Harman for a fee, the latter was running the business on Sanders’ behalf. And that is the essence of a franchise even today.

WHY A FRANCHISE?

The simple answer is to mitigate risk. “The franchiser can expand its reach by investing almost no money and capital, while the franchisee is almost sure of success as he is working in a tested area,” says C.Y. Pal, president, Franchising Association of India, an industry body. A US Department of Commerce study conducted during 1971 to 1997 showed that less than five per cent of franchises closed down each year. In contrast, a study by the US Small Business Administration found that from 1978 to 1998, 62 per cent of non-franchised businesses could not make it past the sixth year. But remember that a franchise will never give the returns that a successful own business will. For example, Biocon CEO Kiran Mazumdar-Shaw, who started her business with Rs 10,000 in 1978, is now the richest woman in India with a net worth of about Rs 2,000 crore. Some franchises could give you annual returns of 70 per cent, but most will be in the 20-40 per cent range. Good franchisers will help you get your business rolling and to keep it that way. Vivek Kaicker, 44, runs a U$ Dollar Store franchise in Delhi. “I had a retail business, but I liked this concept and thought it would increase footfall,” he says.

On 27 November 2006, retail giant Wal-Mart, with a turnover of $316 billion, announced that it would franchise its Indian operations to Sunil Mittal’s Bharti Enterprises. The latter would own and run Wal-Mart retail stores in India. Wal-Mart would also set up a joint venture with Bharti for the supply chain. Thus, systems honed over 46 years would be Bharti’s from Day One. Overnight, Bharti, whose retail plans had earlier been dwarfed by the Rs 3,200-crore investment announced by Mukesh Ambani’s Reliance Retail, was being billed as the company that would battle for supremacy in organised Indian retail. That’s the kind of fillip the right franchise can give. The model is versatile enough to work for Mittal, as well as Mathur. And it can work for you.

WHY IS THIS A GOOD TIME?

As a share of GDP, franchising accounts for 12 per cent in the US, but not even one per cent in India. The comparison gives an idea of where it could go. Industry estimates indicate franchising has grown to a Rs 8,000-crore sector now, from Rs 4,578 in 2004. Pal says there are over 750 franchisers in India today. Throw in the foreign franchisers, and the opportunity grows even bigger. It is attracting local talent in sectors such as food, lifestyle, retail, business services, healthcare, communication, education, entertainment and travel, among others. India is now the world’s largest franchise market after North America and is growing at  about 30 per cent a year, says Tony White, managing director, White Connections, which advises franchise companies.

WHICH FRANCHISE?

While buying a franchise, you have to consider several issues.

Abilities. This is the time for brutal self-assessment. Rule of thumb: stay off what does not interest you. If you are indifferent to food, stay off restaurants. If kids exasperate you, avoid play schools. But don’t lose heart. Your passion for travelling may make you one of the best equipped to plan holidays. Go for that. “I had already done a few beauty courses,” says Jaya Patodia, 34, who runs a Lakme Beauty Salon in Delhi.

More likely than not, a good franchiser will check out whether you fit the bill. Shahnaz Hussain, for instance, looks for people who are “passionate about beauty care”. Most franchisers will look for specific skills apart from “entrepreneurial attitude and open mind”. Institute of Computer & Finance Executives asks for no less then a chartered accountant, and Spykar Jeans wants a year’s experience in franchising.

Since this will be a new business, it will need a lot of hard work to get it running. “The initial one year is very important as this is when you build up a customer base,” says Hema Malini, 36, who, along with Ambika Viswanath, 24, run a Ferns ‘N’ Petals franchise in Chennai. Most franchisers want the franchisee to be involved personally. Ratan Jalan, CEO, The Apollo Clinic, says: “We need a person who is himself going to run the franchise.” But some may let you hire a manager and work at the franchise part-time. Remember, the monthly expense estimate franchisers give you assume that you will work full time.

Costs & finances. The big question is: how much can you invest in a franchise? Some service franchises could cost as little as Rs 2 lakh. You would need just a room, a table, a couple of chairs and a telephone connection. At the other end are beauty parlours, fine dining restaurants, or retail jewellery outlets. Here, investments could go to a crore or higher.

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Canadian PreSchool, Maple Bear Expands in Indian Subcontinent, Bangladesh

Maple Bear is a Canadian franchise school. The curriculum has been developed by Canadian Education Centre Network, which was set up with the support of the Government of Canada to promote Canadian education internationally. With its headquarter based in Vancouver, Canada, Maple Bear has global operations in Bangladesh, Brazil, China, France, India, Morocco, South Korea, Turkey, Vietnam. The Program Developers of Maple Bear are experts in education. They have won several awards from the Canadian government. Mr. Rodney Briggs is the President of Maple Bear; while Mr. Gerald Macleod is the Vice President. 

Maple Bear started its operation in Dhaka in 2007. Maple Bear is the only Canadian franchise school in Bangladesh. In Bangladesh, First Step Research Centre Limited is the franchisee. This company has board members from Bangladesh and UK. The board members are accomplished individuals in the corporate sectors of both the countries. 

The faculty have been trained by Master Trainers to be able to implement Maple Bear's curriculum. Teachers have the option of sharing their views, ideas among different centres all over the world. Canadian education is one of the best in the world. 

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Restaurateur Anjan Chatterjee is expanding his restaurant network, Speciality Restaaurants and betting on the franchise route. But it will be a tough plan to pull off

When you can choose from an array of reading glasses, ask the maitre d’ for a shawl to keep the cold off or get a bassinet for your baby, you know you have come to a restaurant that is different. This is what makes adman Anjan Chatterjee’s Mainland China food chain thrive among a loyal, growing customer base.

 

You expect Chatterjee to understand customer tastes. His ad agency (founded in 1985, it handles clients like Emami and Cello Pens) has taught him to pay attention to details in his restaurant business. Over the past 15 years, he has tried to offer fine-dining experience with food offered at much lower prices than the star hotels.

 

Anjan Chatterjee plans on expanding his restaurant network from 52 to 100 and also plans an IPO

Chatterjee has 52 restaurants (spread across eight brands including Mainland China, Sigree and Oh! Calcutta) across 11 cities including three abroad — Beijing, London and Dhaka. Now he wants to spread to tier-II towns and in some ways be a pan-Indian fine-dining restaurant chain.

 

Chatterjee’s company Speciality Restaurants Pvt. Ltd. (SRPL) and SAIF Partners (Softbank Asia Infrastructure Fund), an investor in SRPL, are busy scripting the new plan. They are looking at a listing on the stock market next year. It depends on the number of acquisitions. They want to expand the chain to 100 restaurants before the initial public offering. What makes them sure they are ready?

 

SRPL models itself on P.F. Chang’s China Bistro, a chain of 189 Chinese restaurants in 39 states in the US. That is the scale it wants to achieve. “The key difference between India and the US is that there are dozens of chains [there] that have scaled to over a hundred locations,” says Ravi Adusumalli, general partner at SAIF. “In India, we believe that SRPL will be the first to reach this landmark. Is India ready for 200 Chinese fine-dining restaurants? Probably not. But 200 across four-five brands? Yes.”

 

SAIF Partners backs Chatterjee’s aggressive strategy. It had bought a 20 percent stake in SRPL for Rs. 90 crore in December 2007 valuing the business at Rs. 450 crore. “Most other chains expand to around five or six outlets and then fail to scale, but SRPL has potential to be the first fine-dining chain to have over 100 outlets. They have demonstrated the ability to scale with the right processes in place,” says Adusumalli.

 

One thing is sure. Chatterjee’s task is difficult. Think about it. There are hardly any pan-Indian restaurant chains, forget fine-dining. The only company to have done it at any sizeable level is Blue Foods through Copper Chimney, Noodle Bar and Spaghetti Kitchen. The impediments are many. The Indian taste palette varies across regions. Restaurants find it hard to get good real estate. And because the restaurant mortality rate is high, finances to scale up operations is very hard to get.

 

Add to Taste
That’s not stopping Chatterjee because SRPL has reached a saturation point in the metros and needs to expand. It is aiming for Chandigarh, Ludhiana, Jaipur, Mangalore and Kochi for the next expansion wave. Not all the growth will be organic. Chatterjee is also looking to dilute 10-15 percent of stake in his company to raise funds to acquire a south Indian restaurant chain and an Italian restaurant chain. And to open new restaurants in tier-II towns, he is planning to use the franchise route, where he will provide the cooking methodology and train the staff while the franchisee will bring the space and the investments. Depending on the location, SRPL will take between 11 and 13 percent from the revenue as commission. So if everything goes well, Chatterjee will be looking at 100 restaurants across 10 brands by the year end. That would mean his turnover would almost double from the Rs. 150 crore as on March 31, 2009.

 

Franchising is difficult in the food business. “Fifty percent of franchisees in India do not match up to the standards of the brands. They begin to cut corners, it could be anything from cutlery to substandard ingredients,” says Nitin Deshmukh, private equity head, Kotak Mahindra.

 

What if the franchisees don’t match up to SRPL standards? “We are taking the franchise -owned, company-operated route. The brand’s essence is not diluted. Manpower, full training, quality standards and brand standards, everything goes through us,” counters Chatterjee.

 

Not everyone is convinced. One of the best fine dining restaurants in India, Indigo, just celebrated its 10th anniversary this April. The number of branches it has so far: Three and all are in Mumbai. “I don’t know whether Anjan is making the right decision. But franchising doesn’t work for a fine-dining restaurant. And that has been a problem all over the world. Big chefs have lent their names to restaurants and they have all closed down,” says Rahul Akerkar, managing director of deGustibus Hotels, which owns the Indigo brand.

 

However, Chatterjee’s strategy receives a thumbs up from Vikram Bakshi, managing director and joint venture partner for McDonald’s India. “The commitment (to a franchise ) has to be 100 percent; you cannot treat the business as another business in the portfolio. This existing situation demands that we need to sift the committed entrepreneurs from wannabes; which clearly requires a refocus on education on franchising. Hence, our learning so far clearly indicates that company-operated model delivers, as the focus is long-term.”

Undercooked A major reason no Indian sit-down restaurant player has scaled up is a lack of processes. The ability to deliver is limited. “In the mid-level to fine-dining restaurant business, you need a system delivered operation. Right now, people don’t have that in place,” says Akerkar.   And SRPL requires very strong systems. For instance, a lot of ingredients and all the sauces for Mainland China are imported. All the fish for Oh! Calcutta outlets are flown in from Kolkata. When these brands go into the mini-metros, will they be able to continue to deliver? Chatterjee believes so. “We started off expanding slowly. In 1999-2000, we did three [restaurants]. Then it was four a year and then five. Now we are trying for 18. We have the experience and the processes are stream-lined. We just have to continue to do the same on a larger scale.”   A restaurant is only as good as its people. Even if one chef or a small team of cooks leaves, the quality of a restaurant could suffer. Employee turnover is quite high in this business. SRPL has opened a catering institute to combat this problem: Mainland Institute of Oriental Catering at Salt Lake, Kolkata, to train and re-train employees according to its specifications. The institute has 250 students. And the place supplies staff to all his restaurants. The training is important for the staff as their appraisals are linked to how well they perform during their training sessions.   Image: Malay Karmarkar Apart from processes, fine-dining restaurants have to deliver an experience rather than just a meal. “If a restaurant can make Rs. 800 on an average bill, then the margins can be 20-25 percent, else they drop to 10-15 percent. Also, very few locations in India are both lunch as well as dinner places. So a restaurant has to make its money from one dining occasion,” says Milind Kothare, CEO, mKons Consulting, a hospitality consulting company.   Till last year, getting high bill values was not that difficult. With the slowdown this year, one of the first things people cut down is eating out. Chatterjee says most visitors to his restaurants have kept coming, though there has been a drop in the corporate business. “Last year, there was madness on corporate tables. In one table, there were five imported wine bottles. The man has got equity, he thinks it’s not my money, it’s the fund’s money, so udao. That mindlessness has stopped,” he laughs.   Getting Them to Pay Each patron at a Mainland China outlet in Mumbai pays Rs. 425 on an average. This sort of billing enables most of SRPL’s restaurants break even within six to eight months, Rajesh Mohta, general manager for finance and accounts, says. And 80-85 percent of the current restaurants are profitable. Will tier-II towns pay that kind of money? Indigo’s Akerkar thinks so. “There’s ce rtainly money in tier-II cities. There’s a lot of potential waiting to be tapped. Anjan will have prime mover advantage and if he can maintain his superior quality over time, there’s no reason for him to beat existing restaurants,” he says.   Chatterjee adds, “They will pay for quality. Of course we may have to adjust tastes. But we have done that in metros as well. If we serve slightly thick rice, they say what the ****, we are paying so much money and this! Indians like basmati rice. Basmati ka fried rice, you just can’t change.”   Chatterjee looks for opportunities everywhere. And he tells interesting stories. Sigree, the north Indian chain, actually serves pre-partition era dishes. He picked them up from Gafur miya, a chef in Lahore, when he had gone there for a cricket match. He got the recipe for dab chingri, a dish from Bangladesh, for Oh! Calcutta. “I met a 78-year-old lady in Chittagong, Bangladesh for the recipe. One of the finest moments of my life. This lady at home, someone’s granny, extremely difficult to deal with but she chatted with me and made some dab chingri for me. And it was very important for me. Because after her the recipe will be extinct. No book writes it,” he says.   Years ago, Chatterjee’s Situations Advertising had come up with the Aaya naya Ujala, chaar boondon wala jingle to make the clothes whitener a household name. At the time Ujala was competing with Reckitt and Coleman’s established Robin Blue. This time Chatterjee has the first mover advantage. He has to replicate his successful model when others are standing still. This has the makings of a very yummy story.