Riyaaz Amlani of Smoke House Deli has picked up the art of managing multiple restaurant formats, each with a different business model. Today, he manages 33 outlets (with various brands) in 11 cities in India
Here’s an interesting trivia. Riyaaz Amlani, CEO and managing director of Impresario Entertainment and Hospitality Pvt. Ltd (Impresario) indicates that, on an average, Indians eat out around only 1.8 times a month, as compared to Singaporeans, who eat out around 50 times a month. Surprising? Definitely. But, given our growing love for eating out, are we likely to beat them anytime now? “Not in my lifetime,” he remarks, adding reassuringly for restaurant owners, that he expects it to reach 10 to 15 times in a few years.
Amlani is no stranger to the F&B industry. He first shot to popularity with his low-margin, high-volume cafe model, Mocha; then he indulged his customers with fine dining with the high-margin, low-volume restaurant, Salt Water Cafe, and is now playing the middle-ground, with his casual dining brand, Smoke House Deli. The other restaurants in the group include Prithvi Café, The Tasting Room (the wine café), and the Indian restaurant, Le Kebabiere, in Pune.
Over a span of 13 years, Amlani has gone on to setup 33 outlets across 11 cities, recording a topline of Rs. 82 crore in FY14. This year, he plans to open an estimated 22 new outlets of Mocha and around 11 new outlets of Smoke House Deli across Indian metros. And, by FY15, he aims to record a topline of Rs. 160 crore. “I don’t believe there is great potential for our kind of business to grow in the Tier II and Tier III towns. So, our focus in the next three years is going to be to saturate the markets in Delhi, Mumbai, Bangalore, Chennai, Hyderabad and Pune,” shares Amlani.
Impresario raised the first round of funding in 2008, to the tune of Rs. 25 crore, from Beacon India Private Equity. In August 2011, Mirah Hospitality, the company behind brands like Khandani Rajdhani and Manchester United Café, invested Rs. 40 crore, while its existing investor, Beacon India Private Equity, upped its stake in the company by investing a further Rs. 8 crore.
Making the right moves
From the early days of being a shoe retailer, Amlani, and his co-founder and friend, Kiran Salaskar were keen on setting up a quaint coffee shop, where, unlike in a five-star hotel or in a bistro, people could spend quality time lounging around. That’s how, in 2001, Mocha came into being. It was built on a business model where the average cost per cover (APC) was Rs. 250, and the table turnover was 4.5. “Our model was very different. The average time our customers spent at Mocha was three to four times more than the time they spent at Café Coffee Day or Barista,” he says. As he succinctly puts it, the idea behind setting up Mocha was, if you get a customer’s watch, you can get a bigger share of his volume. Eventually, in six to seven years, as real estate prices shot up and the coffee shop space became crowded with a lot of Starbucks me-too’s, Amlani decided to explore parallel opportunities.
That’s when he stumbled upon a property at Chowpatty Beach in Mumbai, and decided to setup Salt Water Café (SWC), a full-scale, fine dining restaurant. SWC was built on a lower volume, higher margin model, with an average APC of Rs. 1,500 and a table turnover of one. “Essentially, during this evolution phase, we were covering both ends of the chain; the value chain (with Mocha) and high-end chain (with SWC),” states Amlani. However, due to a string of challenges on the leasing front, he shut down SWC and opened Smoke House Grill in Greater Kailash, in Delhi, re-named as Stone Water Grill, in Pune. “After 2010, cafes started evolving as a more casual fine dining format, and people were looking for a gourmet experience. Five-stars had become too old school by then,” points out Amlani. He immediately does some number crunching and tells me that this model gets a 250-people walkthrough and operates on an average APC of Rs. 850. In other words, it’s the middle-ground between Mocha and SWC.
Being ‘in the know’
“Indians carry a strong culinary heritage and the flavours are deeply embedded in us. In fact, the flavours change every 100 kms. In such a circumstance, it really helps to be an Indian to run a food business in India,” says Amlani.
Apart from this, naturally, choice of location plays a crucial role in the success of an F&B business. Amlani indicates that, typically, it costs Rs. 2 crore to Rs. 3 crore to setup a new restaurant. But, given the high real estate costs, how does he manage the price balance? “If you look at it, there are 70 to 80 prime locations in the country today. What’s also happening in the restaurant business is that people are constantly competing on two fronts; real estate, and labour. To tackle this, we’ve entered into a collusive oligopoly model,” he explains.
There are 70 to 80 prime locations in the country today. And, in the restaurant business, people are constantly competing on two fronts; real estate, and labour. To tackle this, we’ve entered into a collusive oligopoly model – a model where restaurant groups that compliment each other work together to save input costs.
Here’s how it works. Impresario has partnered with Mirah Hospitality to occupy big spaces at prime locations in India, thus securing a discount on the land rate, and in turn, setting up a range of eateries on the owner’s property. “Margins are anyway pressurised. So, it works better for restaurant groups that compliment each other, to work together. That way, the real-estate cost comes down, the labour market is managed, and the overall input cost is reduced,” he says. On the labour front, his reasoning is that, Chefs and other restaurant employees are usually drawn towards large conglomerates, so, as companies form bigger groups, attrition rate will come down to a large extent.
Into the future
Today, the primary challenge for Amlani lies in navigating the skewed licensing process in each state. “Securing a licence is a long-drawn process. Adding to this is the bureaucracy that controls the business,” he indicates. But, having been in the business for over a decade, he notes that he has understood the dynamics of how each state operates.
Though the consumption patterns in India are evolving at a rapid pace, Amlani is confident that his company has the ability to strike a chord with the pace of change. He says, “15 years from now, we want to be among the top five F&B service providers in the country. The trick is to find that balance between café, casual and fine-dining models and how they coo-exist.”
By FY15, record a topline of Rs. 160 crore
In three years, saturate the markets in Delhi, Mumbai, Bangalore, Chennai, Hyderabad, Pune
In 15 years, be among the top five F&B service providers in the country
Founders: Yogi Shah, Suchna Hegde-Shah
Year founded: 2007
USP: Design holidays that help experience culture