While in the early stages of designing your restaurant, you may find it hard to think past the first year, but it's critical to think further down the road.
Even before you get to that point, a good business plan should factor in the worst case scenario.
According to a study, over 94% of new businesses fail during the first year of operation. Lack of funding turns out to be the most common reason. Money is the bloodline of any business. The long painstaking yet an exciting journey from the idea to revenue generating business needs a fuel called capital. That’s why at every start of the business, entrepreneurs are found asking questions relating to financing their business.
Good Signs to Invest
A large market that’s getting organised and moving towards higher value-added products has sparked investors’ interest in the F&B space where there’s rising demand for better, healthier, affordable and easy to access products, paving the way for entrepreneurs to jump in and build next generation brands.
Niranjan Sheshadri, Founder, Last Mile Ventures says,” There is a secular move in rating out the formally organized space to the branded space be it QSR, CDS or the Fine dining space.”
Colliding with several ups & downs, Sheshadri continues,” This trend will benefit almost every sector in the F&B space. The shift from unorganized to organized will continue to rise and the new era of Entrepreneurs is going to add value, creating brands which are likely to open 30 to 40 outlets across Tier 4 cities.”
On similar terms, Krishna Vinjamuri, Principal, Lightbox Venture Capital says,” With a growth of 10% every year, about 33% of the industry trends are slowly getting organized. Taking this as an advantage, we can build larger brands with multiple outlets.”
To an aspiring restaurateur, the challenges of funding a business can seem overwhelming. “The growth of the market will continue over the next 10 years with a 15% growth, which is sufficient for an investor to invest and create large-scale business in the long run”, adds Sheshadri.
While such companies don’t exist today, certainly the entrepreneurs are there in the field, raising capital and positioning themselves to get good returns.
Most of the Restaurateurs will move away from the mainstream to malls. In terms of customer experience, the changes are not significant enough and will continue the way expansion is handled and the way supply chains are built.
It is always better to go for a partnership in the restaurant business as it not only makes investment easier but also reduces the risks in business by sharing the future profit and loss. If it’s your first restaurant venture, try to look for a partner who already has some experience in the restaurant business.
Innovation is Major
In an industry where standing still means falling behind, innovation is the defining factor for most successful brands.
Roughly speaking, the industry has received close to about 5000 crores of funding in the last 4 years which is half the money that was invested in this industry in the last 20 years.
There is not much expectation in terms of innovation relating to the customer experience. A lot of innovation is expected around standardising processes to make sure that a brand can go from 20 outlets to 50 outlets without compromising on the experience.
“The most important development that is going to happen in the IPO market is going to be favorable towards successful chains”, Sheshadri adds.
There are changing business models actually helping people not just dine out but also at home.
Commenting on the invasion Krishna says,” Technology is helping people discover the restaurants with distribution platforms like Zomato, Swiggy, UberEats that are helping these restaurants maximize their potential by being able to offer to customers in giving them convenient food options.”
“There are elements of the supply chain that is relevant for larger size restaurants where technological innovation is playing a key role in ensuring that the inventory levels are done right”, Krishna added further.