Whipping up an Enterprise

Whipping up an Enterprise

Any which way you turn in Chennai today, you will hit a restaurant that belongs to Oriental Cuisines (Oriental). Over time, Oriental has gone from being a household name in Chennai to a global entity.

The man behind Oriental Cuisines and its current chairman and managing director, M. Mahadevan, was a management professor who felt he wanted to switch gears to a challenging career. And in the 1980s, he started a bakery – Hot Breads. While today bread might be common across most Indian homes, back then, the concept was met with skepticism. Over the years, those doubtful few were proven wrong by the success of Hot Breads, so much so, their stores became landmarks across Chennai.

Not content with the success of this brand, Mahadevan went on to create several others, while introducing Chennai to different international cuisines such as Tex-Mex, Spanish, Chinese and Thai. In addition to starting his own brands like Copper Chimney and Maple Leaf, he is also instrumental in bringing to Chennai several well-known names from across India. Today, his mixed bag includes names such as Benjarong, Copper Chimney, Kailash Parbat, China Town, Ente Keralam and French Loaf, to name a few.

In May 1994, Mahadevan incorporated his firm, Chaitanya Gourmet Splendour Pvt. Ltd. and later renamed it to Oriental Cuisines Pvt. Ltd. in March 1997. He conceptualised and popularised the concept of food courts through Planet Yumm.

The company also runs The Chennai Culinary Institute, in association with the Corporation of Chennai and Rotary Club of Madras East. Their collaboration, Winners Bakery, trains underprivileged youth who have a passion and flair for the art of baking. On successful completion of this course, the student is either absorbed into a five star hotel or placed at one of OCPL’s own units.

Mahadevan shares with us what it takes to run a successful chain of restaurants and how human values stand above everything else in an effort to get to the top.

What inspired you to enter the restaurant business?

I am a first generation entrepreneur. My parents were doctors, and I was a management professor. We did not have enough capital to start a business, but, I was ready to run around and get work done. My job required me to work for only 65 days a year and I wanted to do something different.

In general, a restaurant business is a low capital business where you can buy on credit and sell on cash. There is always enough money to rotate. Margins are good from the first month onwards, easily touching 12-14 per cent. In case of a vegetarian restaurant, if one tightens the belt and has cost control measures, one can even achieve close to 18-20 per cent. So, this was the ideal for me and it will be for young entrepreneurs with not much capital.

But what about management skills? Doesn’t one need an understanding of the business?

I used to teach management and I strongly believe that managers are not born, but, made. Business skills can be picked up along the way. Most of the brands I run, I created back then. Today, I do not have the time, so I am bringing in established brands and it is a mix of both.

So how did you decide which segment to be in?

We are starting a Japanese restaurant shortly. But, before deciding on it, I did a lot of research – it took me three months of market research to understand the demand and decide. It requires a lot of hard work. And making sure that the stuff you serve is authentic is critical. When I introduced the Sangria, a Spanish drink, I brought in an expert from Spain to make the drink as authentic as possible. That is the kind of care one has to take.

What about people? Is getting hold of the right kind of people easy?

I am known today because of my brands. My brands are because of my people. It is not easy to establish a brand. The first step is to create a brand, then make it successful and then sustain that success. I am going to open a 10,000 square feet unit in Kuwait. I am also going to start four more units in Chennai. This is possible only if you have a value-based brand. Quality should be maintained. My chefs have been with me for a long time. We have worked together to establish the quality so they know what I expect. We provide periodic training and along with knowledge, also make sure that the right ingredients are used. I interact personally with most of them, so if there is a problem, we are able to take care of them. From the pantry boy to the manager, I treat them as people first. There is a personal rapport.

Of course, since taking in equity, there is a greater requirement to play by the rules, but, I try to do what I can as an individual.

What about attrition?

People do use this as training ground. And my people get lapped up very easily because of the training they get here.

But, bringing in professionals has caused some ripples. My people may have been paid less when compared to them because when they started with me, they had just a high school education. But, someone with the right qualification, or coming from a five-star hotel, would have drawn a higher salary that we have to match. So then, I try to relocate them so that they enjoy other perks. But, amongst the top guys, there is zero attrition. Mostly it happens in the lower levels, where the numbers could be as high as 30 per cent.

You received funding in 2008. Can you tell us how this has impacted business?

I received funding from People Capital in 2008 and diluted a 50 per cent stake. I have managed to expand because of this. It has also enabled me to run this as a professional organisation. But, it is like mixing oil and water. As I mentioned, I cannot take some decisions independently. So, when one of my staff recently asked for help for higher education, I helped him personally. I attach importance to human relationships.

Is getting funding easy in this industry?

External investors consider this industry to be suicidal which makes it very difficult to find funding. I believe that every second unit packs up in the second year of operations. You have to break even within the first year. I believe, 70 per cent fold up in the first year, and very few last till the third year.

What should a newcomer do to build a brand in this industry?

There are two segments here – mass and class and then the nature of food you want to offer. Indians love Indian food first, then Chinese. You build brands according to where you want to be.

With fine dining restaurants like Copper Chimney, the ambience and the experience are important. Here, I make on order and have zero wastage. A restaurant like Hot Breads is mass, where I make and wait. But, to decide that, I need strong systems and experienced managers with good intuition who can predict demand. If I have sold only 200 loaves of bread the previous week, I would not make 210 this week.

Also, first establish one unit before expanding. Be calculative. I started my first Tic Tac with a Rs. 5 lakh investment. I controlled costs, focused on quality and added value. Today it is doing Rs. 150 crore worth of business.

As for Chennai, it is like a developed village and repeat business is very critical, unlike in Mumbai where the floating population is high. So you have to make it attractive for the customers to come again.

What are your expansion plans?

I am now opening units in other cities of India and in other countries. This year, my focus will be on stabilising. In the past, we picked up some high rental properties that we closed because we did not achieve the success we anticipated. Now, we will focus on consolidating and choosing which ones to expand and which ones to go easy on. There are some businesses that are scalable, our task is to identify those and expand there.

One thing you have to be alert to is – when a unit is not functioning as expected, you should be able to close that and move on.

Anything you would like to tell prospective restaurateurs?

You have to enjoy working with people and be ready to work at odd hours – because we work when others are relaxing. My major business happens at dinner and over weekends. So attitude is very important here.