Patience is the key to scaling up a restaurant business

24 Jul
Mitesh Rangras 2

Mitesh Rangras, SID Hospitality

Mitesh Rangras didn’t always own five popular restaurants in Mumbai. There was a time he had mortaged his house, was bleeding money and losing sleep. But the young entrepreneur had served his time in the restaurant business and he drew on a nugget of wisdom he had learnt a long time ago.

 

“I decided to do nothing… just wait,” recalls Rangras, Director and Co-Founder of SID Hospitality, which owns popular eateries Soy Treat, Tight The Pub, Aoi, Lemon Grass and Pot Pourri.


Convinced that a continental menu of pizza & pasta, steaks & sizzlers would sell at Inorbit Mall in Vashi, Navi Mumbai, Rangras opened a franchise of the popular restaurant, Pot Pourri (a brand he later bought), in 2008.

“The restaurant didn’t do well for an entire year. We had practically no patrons and it was clearly a disaster. People had misunderstood ‘Pot Pourri’ and would walk in and ask for puri bhaji! Every day, we watched helplessly as 30-40 people walked in and walked out when they realised we didn’t serve Indian or Chinese. It was heartbreaking,” he says.

Lemon grass 2

Lemon Grass at Bandra

Rangras says his company had made an initial investment of Rs 1 crore and was spending an additional Rs 5 lakh every month to keep the outlet open. “The only positive development was we were recovering our operational costs, which were growing by 5-7 per cent every month,” he reveals. “But most of our staff had left us.”

Still, the young entrepreneur was convinced that Vashi had a continental palate; it simply had to find his restaurant! Rangras didn’t give up and business did begin to pick up slowly. And, after a year, Rangras and his partners were toasting to breakeven.

What does a restaurateur need to keep in mind while scaling up? Rangras shares some valuable pointers for entrepreneurs keen on going from one eatery to No 2, 3 and so on…

Mitesh Rangras

Take It Slow & Steady

Although we had never planned to open a chain of restaurants, we were restless. We also felt we were underutilising our capacities with just one restaurant.

My advice is, take it slow and steady. Don’t jump at the first opportunity to start your second outlet. Even if people keep coaxing you to open new outlets, you may have licence issues or issues with ownership. Be cautious.

The right time to branch out is when you stabilise your current business. Take the next step only if you are consistently making a net 20 per cent profit after tax for a good 6-8 months

Borrow From Banks

That’s what we did to launch our second restaurant, and used the profits from the first to repay the debt. We mortgaged our homes to open more restaurants. Go for it if you believe in your product. As far as possible, try not to sell stakes in your company when you are small. You must attain a certain size to attract good private equity. Ten is a good number when looking for PE funding.

Stay Consistent

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sushi at Aoi

Stay true to what you stand for. Don’t compromise or cut corners. Continue to serve the product you set out to serve. People will eventually come. Sustainability is the key. Gradually, word will spread.

Don’t Splurge

The mistake we made with our first venture and some subsequent ones was not sticking to budgets. We went overboard with interiors and costs mounted. Spend your money wisely – don’t go overboard just because you have ideas. Put a budget in place, get a good contractor and get a commitment from him.

Regionalise

You need to work with the needs of the locality. You can’t take one brand everywhere. You are not a McDonald’s or a KFC. Even a 5 Spice had to open a vegetarian restaurant in Chowpatty.

Any cuisine other than Indian and Chinese needs to be tweaked. When we launched our second restaurant in Bandra, we thought of launching another Pot Pourri. But we realised the suburb  already had a number of continental restaurants. So we launched Lemon Grass (another brand bought by SID Hospitality), Pan-Asian restaurant. And it opened to a rousing response. Also, I can’t take Aoi to Andheri, Malad, Vashi or Thane as it’s a Japanese restaurant. You have to have different products for different areas.

Aoi the Japanese restaurant in Bandra

Aoi the Japanese restaurant in Bandra

Build A Strong Top Line

Someone to take ownership of your restaurant. We have one person at every outlet responsible for that outlet and who looks after it like his own baby. They are called partners and given a salary, plus a percentage of the profit. These are people who are from within the business. He or she is responsible for the profits of the outlet and has decision-making powers on a day-to-day basis. Single owners should take like-minded people. And don’t look to family or friends. Look for professionals. One-owner, one-outlet is the key to our success.

Have Systems & Processes In Place

You need a strong top team comprising people from within the business. Or else appoint a good consultant. It’s the team that makes all the difference. Get in the right people, even if you have to spend a little more.

Be Patient

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Don’t lose heart. Don’t do things you will regret later and don’t serve substandard stuff just because you are not making money. It’s not the customer’s fault. Stay consistent in your offering.

Delegate, Delegate, Delegate!

It is important to decentralise, keeping core decisions like HR, finance, strategic tie-ups, marketing, etc, with the management. You can’t be everywhere, all time. There has to a single person who becomes the face of the outlet, talks to customers, etc.

By Nivedita Jayaram Pawar

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One Response to “Patience is the key to scaling up a restaurant business”

  1. Samarendra August 12, 2013 at 6:23 pm #

    Hi Nivedita.

    I got some very useful tips for setting up my own restaurant business…. 🙂

    Samarendra

    Like

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