By Raja Sekhar Reddy
In recent years, the Indian Restaurants and Food Services Industry has emerged as one of the fastest developing sectors of the country, witnessing a healthy and generous Y-o-Y growth in incomes. In fact, it has even managed to remain all but unaffected by the adverse impact of the country’s economic slowdown, which has stunted the growth of several other sectors, including automobile, manufacturing, and infrastructure.
Evidentially, the Indian restaurants and food services industry had an impressive market size of Rs 3.7 trillion in 2018, owing to a Y-o-Y growth of close to 10%, and a CAGR growth of 8.4%, between 2013 and 2018. The four major factors that have helped bring about this evolution are:
The emergence of Millennials and Gen X
Millennials and Gen X, have changed the consumption patterns of several industries and like so, the F&B industry as well. With low patience, high energy, and relatively higher income, higher cultural freedom, their spending patterns, behaviour patterns, family contexts and lifestyle has undergone substantial change as compared to the earlier generations. Cutting across SECs, there has been a huge change in the working styles and lifestyles of consumers. For working professionals, the average time spent at work or dealing with work has gone up to almost 12 hours, every day. This kind of lifestyle does not allow people time to cook each of their meals, either, which has changed their consumption patterns, as well. So, millennials who end up spending a major percentage of their earnings on food and beverages expect the experience of the restaurant to be completely out-of-the-box, and more than worth what they are paying for it. These have allowed concept restaurants, and fine dine restaurants to flourish as well.
Emergence of food aggregators
In 2017, India’s online food business industry had a market size of USD 750 million, witnessing a Y-o-Y revenue growth of 150%,during 2016 and 2017, and an incredible CAGR of close to 140% since 2014.However, while these portals have led to the rapid growth of the online food business, it has also had a similar impact on brick-and-mortar restaurants. These aggregators offer customers a plethora of information on a wide and varied range of restaurants, serving diverse cuisines, with unique ambience and décor, while also being priced accordingly. Customers can even read reviews from other individuals and get all the requisite information online, besides being able to book their tables in advance, which has helped enhance their convenience exponentially. In addition to this, these portals also offer businesses an opportunity to promote their establishments further, as well as reach and connect with their customers directly, which is the best way to build goodwill and recall value.
Market expansion in Tier 2 and Tier 3 cities
The growth in disposable income, in recent years, has not only transformed customers in metro cities, but also Tier 2 and Tier 3 cities, leading to a rise in aspirational demandsfrom the segment. Unlike earlier, customers from these cities are growing increasingly eager to indulge in unique experiences, leveraging their increased purchasing power. However, owing to previous trends, such cities continue to have few establishments which cater to their needs. This has presented an incredible opportunityfor major players to leverage the gap in the industry, to expand their presence and tap into this huge market. This has also played a key role in creating increased job opportunities, and providing employment to a large section of people in such cities. This will help drive the growth of the economy, and further create increased opportunities for the residents, as well as other businesses, in the years to come.
Willingness to experiment
Over the past decade, Indian customers have been increasingly eager to experiment with their palates and try new and exciting specialties from all corners of the world, be it an authentic Japanese Sushi, Mexican Enchiladas, or more. This has helped bring about a burst of innovation that is constantly driving businesses to redefine their offerings with new and exciting elements, inspired by world cuisines, cultures, and more. The direct result of this phenomenon has been the birth of a number of experimental concepts and offerings, such as fusion food, authentic country-specific delicacies, molecular gastronomy, and seasonal and festival-specific pop-ups, among others.
In the years to come, the Indian restaurant and food service industry is only expected to grow further, with the CARE Ratings projecting a growth of nearly 10.4% CAGR, during the period of 2018 and 2022, to help it reach a market size of Rs 5.5 trillion.
The author is a Founder of SquareMeal Foods
Sustaining high profits in the restaurant industry amid rising costs, intense competition, and shifting consumer preferences demands a sharp focus on boosting revenue while streamlining operational expenses. The major focus should be on optimizing menu engineering, controlling food and beverage costs, increasing table turnover, improving labour efficiency, leveraging technology, drive delivery and takeaway revenue, enhance guest loyalty and maximise space utilization.
Around 60% of restaurants in India struggle to scale-up in the business as these issues create hindrance to expand.
Maintaining Cost-Efficiency
Cost efficiency is maintained by running lean and flexible teams, cross-training staff, and utilizing tech for smarter inventory and labor scheduling.
“One of the most effective ways is through menu engineering, understanding which items are not just popular but also profitable, and placing those in the front. Additionally, building strong supplier relationships plays a crucial role. By negotiating long-term deals or sourcing seasonal produce locally, restaurants can cut costs while maintaining freshness,” said Varun Bahl, Founder of Cafe Fleur.
Standard Operating Procedures (SOPs) are equally important as they ensure that no matter who is cooking or serving, the guest experience remains consistent across all touchpoints.
Dheeraj Gupta, Managing Director, JumboKing shared, “Keeping profits high in the restaurant industry is by doing innovations. You need to keep on introducing new products and varieties. It is one of the better ways to manage margins.”
Retaining Labor
Cost efficiency doesn’t always mean cutting corners — especially when it comes to labor. In fact, investing in people smartly can reduce long-term costs.
Putting his views, Shreh Madan, Co-founder, Burgrill said, “We focus on reducing staff turnover, which is one of the biggest hidden costs in the industry. This is done through better training programs, clear growth paths, and regular appraisals that make employees feel valued.”
Building Customer Relationships
Running a restaurant is not just about good food but about building relationships with your customers, your team, and everyone who keeps the kitchen running. Rashmi, Founder of Two Gud Sisters pointed that trust has allowed us to maintain consistency even while working toward stronger profit margins.
Continuing inflation
Inflation is a reality one can’t ignore, especially in a business that runs on fresh produce, quality ingredients, and people power.
Madan pointed, “We’ve built safeguards into our model. As we scale and increase the number of outlets, economies of scale kick in helping us optimize procurement, logistics, and fixed costs.”
“We keep the narrow menu and increase the volumes in same product line, we make them better and volumes go up in that way we become more efficient and confident which give us more margins,” added Gupta.
Restaurants also review and recalibrate their pricing annually, ensuring that it protect both profitability and portion integrity.
Supply chain woes
One of the biggest challenges we face is the lack of robust infrastructure for frozen supply. It directly affects product quality and shelf life, which are non-negotiable for us.
“We’re constantly adapting with multiple backup vendors, better planning, and tighter inventory controls, but these remain real hurdles for any food business operating at scale,” shared Madan.
Pointing his views, Gupta added, “We keep adding two new burgers every year and we remove the items which are not on demand. Our lightness in supply chain is maintained as we focus on this aspect. Lot of restaurateurs becomes unfocused in restaurant business as they keep on adding SKUs and focus on none and they are not able to build more economy or scale up in the industry.”
Handling outbreaks
Health emergencies like the pandemic or a widespread flu can disrupt business overnight, so preparedness must be built in the model.
Rashmi shared, “We shifted quickly, adjusted formats, and found ways to stay connected to our customers. Planning ahead without overextending ourselves helped us stay afloat and serve with care even in tough times.”
Commenting on this, Bahl added, “Cafe's that succeed during such times typically allocate around 15 to 20 percent of their revenue toward contingency planning. This includes maintaining reserves, stocking up on essential health and sanitation supplies in advance, and investing in safe packaging and digital ordering systems.”
During emergencies, the ability to pivot quickly, whether through cloud kitchens, meal kits, or a stronger delivery setup can keep operations running and costs manageable.
Upgrades
Smart restaurateurs focus on elevating perception through digital storytelling, subtle visual updates, and improved guest experiences. Investing in social media, packaging, or even a brand refresh in terms of uniforms and music can significantly elevate brand value without incurring heavy capital costs.
Bahl highlighted that phased interior improvements, thoughtful collaborations, and tech upgrades such as modern POS systems or CRM tools can enhance both the front and back-end operations while being cost-effective.
With this, we can surely say that one can achieve profits, but the future will revolve around tech-enabled efficiency, value-driven customer experience and diversified value streams.
As restaurant brands plan for expansion, they usually adopt a blend of strategic, operational, and brand-focused approaches to drive sustainable growth. With the industry projected to directly employ nearly 10.3 million people by 2028, it's clear that the sector is experiencing rapid growth. In this competitive landscape, every restaurant or café aims to broaden its footprint across multiple locations. To achieve this, brands requires the implementation of specific key business strategies. They are:
Localisation is Important
Adapting existing dishes or creating region-specific items like authentic chinese cuisine are served very rarely in India, serving Indo-Chinese to suit the Indian palate.
“Innovation is all about hyper-local inspiration. We’re exploring jamun-based sours, curry-leaf-infused gin cocktails, and pickled elements in our drinks. We will soon be featuring summer special cocktail and mocktails featuring kokum, tamarind, raw mango, ripe mango and more—each with a little local inspiration behind it,” shared Hemender Reddy of The Moonshine Project.
Targeting Right Location = Right Audience
Location plays an important role in running the business profitably. Commenting on the same, Aksha Kambhoj, Aspect Hospitality said, “We have ambitious growth plans and are actively exploring opportunities in key urban centers and high-potential markets. Our expansion strategy is guided by a thorough understanding of consumer demand and market dynamics.”
After all, right location helps in maximizing the profits and serving more customers.
“Our expansion strategy for Mumbai in 2025 and 2026 involves establishing a significant presence across various high-footfall locations to ensure maximum accessibility for our customers, aiming for approximately one outlet every 3 to 4 kilometers like Highstreets, Malls, Airports, Metro Stations, and Corporate Parks etc,” added Kamboj.
Digital and Delivery-first Models
Consumer preferences are increasingly leaning toward convenience and digital ordering. To meet this demand, many brands are developing their own apps, collaborating with delivery platforms like Swiggy, Zomato, and Uber Eats, or launching cloud kitchens and dark kitchens to streamline operations and reach a wider audience.
Although, one thing is constant is that restaurants earn around 50% of the revenue through delivery platforms.
Ruchyeta Bhatia, Co-Founder, Poetry by Love & Cheesecake said, ‘The focus is more on technology and building systems to strengthen their product rather than following trends, as the brand aim for long-term stability. Our revenue is primarily driven by dining (70%), with deliveries accounting for 25-30% (aggregators, not their own).”
Skill-Building Opportunity for employees
Not all restaurants focus on growth of their employees. While some give opportunities to develop them so that employee satisfaction is given and there is a room for growth. This helps the employee to stay in the hectic-work environment for longer duration. 30-40% of the restaurant brands focus on skill-building and well-being of the employees.
Seijiro Hirohama, Managing Director, Kuuraku India Pvt Ltd said, ‘We have developed our own certification programs for Yakitori Chefs and Sake Sommeliers to ensure that our team is trained in both skill and spirit. These programs are carefully designed and closely monitored by our Japanese chefs, who pass on their knowledge, traditions, and techniques to maintain the highest standards of Japanese culinary excellence.”
While, Rahul Shetty, MD, Peninsula Hospitality stated, “If you are running a business, lot of departments has to be taken care of. We do have cross training options and also explain an employee of what all can be focused on specific career for motivation.”
Anurag Mehrotra, CEO of Charcoal Eats, co-founded the quick-service restaurant (QSR) brand along with Krishnakant Thakur (COO), Gautam Singh (CTO) and Mohammed Bhol (CPO) in April 2015 with a strong belief that 'good food can excite people'. The aim was to enhance the Indian palate by building a large and scalable restaurant brand in the country, thereby, providing great quality food at an affordable price.
Read on the exclusive interview of the Co-founder and CEO of Charcoal Eats, Anurag Mehrotra who tells it all – the journey of the QSR brand, key accomplishments and the expansion plans.
From Charcoal Biryani to Charcoal Eats – The Journey
I am a Commerce Graduate from the University of Allahabad and an MBA from Asian Institute of Management, Manilla. Prior to venturing into the entrepreneurial journey, I have held senior positions in large corporates like Kotak and Edelweiss. I have been a part of the startup domain for the past six years, and I, currently, serve as a Director on the boards of Coverfox, Capzest, Woodbox & Alien Adventure.
Charcoal Biryani, as it was originally called, started with six biryanis served through multiple cloud kitchens across Mumbai. In August 2017, we pivoted to a customer facing dine-in model with our first outlet in Pune. We also moved to a franchise model for these new outlets. To support this retail push, we started expanding our menu to offer an all-day meal and snacking options, and subsequently rebranded as Charcoal Eats in March 2018. Today, Charcoal Eats offers high quality, all-day food options across snack and meal times that include Biryanis, Starters, Rolls, Loaded Fries, Curries, Puff Pizzas, Beverages and Desserts. Customers can dine-in, takeaway or order for delivery, as per their convenience.
Key Accomplishments of Charcoal Eats in 2018
Charcoal Eats is currently present with 38 dine-in and express outlets across 12 cities - Mumbai, Navi Mumbai, Thane, Pune, Gurugram, Nashik, Chennai, Gandhinagar, Jamshedpur, Indore, Bengaluru and Jaipur. We have also set the groundwork for our international foray.
In terms of revenues, we have shown growth of almost three times from April 2018 to December 2018, with a revenue run rate of INR 17.5 mn for December 2018 v/s INR 6.0 million in April 2018. Our order numbers have shown a 350% growth from April 2018 to December 2018, with approx. 48,000 orders in December 2018, up from 13,600 orders in April 2018.
Also Read: Five Reasons Why QSR Is An Evergreen Business
This growth has been driven by two factors - our pivot from a ‘meals only’ to an ‘all-day dining’ menu and the increase in Charcoal Eats outlets across the country.
Our menu comprises a wide range of high-quality all-day dining and snacking options that offer adequate calories, at affordable prices. This delicious menu is now available to customers at their convenience – dine-in, takeaway or delivery. Customers can order delivery online through our website, mobile app or any of the leading food aggregation platforms, or they can simply call our customer care to place their delivery orders.
A key element of our growth story is the hassle-free, high ROI franchise model for people looking to start their food business. The company takes care of the food, supply chain, marketing, technology and customer care, while the franchisee focuses on managing outlet operations and local area marketing. Multiple outlet formats (dine-in, express, mini) allow us to open outlets suitable to a location’s specific requirement/ profile. All Charcoal Eats outlets are designed to be capital and resource efficient, enabling quick break-even and profitability at an outlet level.
Charcoal Eats follows a hybrid distribution model, with a mix of the franchise and company-owned outlets. This mix is currently at 50:50. Our franchise partners are motivated to associate with Charcoal Eats due to our obsessive focus on quality and customer delight.
The company proactively seeks customer feedback and has made many product/service improvements over the past couple of years based on these customer insights.
We have been recognised by Radio City, a leading pan India FM radio station, for Excellence in Food Retail, 2018.
Charcoal Eats’ Expansion Plans for the Next Two Years
"We are quite bullish on our growth both in terms of volumes and revenues across all our formats and locations."
We are increasing our presence in the metros and at the same time, we have started expanding to tier II cities. We are already present in Jaipur, Jamshedpur, Gandhinagar and Indore. We foresee substantial domestic growth coming from tier II cities and have ambitious plans to establish our presence in many more such cities by FY 2020.
Innovations at Charcoal Eats in the Upcoming Years
We will continue on our mission to bring consistently delicious Indian food to people across the country. Ensuring increased levels of consistency in taste and maintaining high quality will be our focus of innovation. Effective, environment-friendly packaging will be another area of innovation focus for us. Menu innovations will take the form of new products, flavours and new category introductions.
Optimizing Menu Boards to Increase Sales
Menu boards are cost-effective to keep customers up-to-date with pricing, products and promotions. They also help in faster service as customers make quick menu decisions. We use these to display real-time changes in the product pricing and availability to the consumers.
Our automated menu boards also allow us to promote daily specials and offers that help drives sales and contribute to increased profits.
Technology Innovations in the QSR Industry in Upcoming Years
We see the following areas where technology innovations will play an important role in the QSR industry in coming years:
- Personalised food recommendations to consumers, based on their past behaviour and preferences.
- Accurate demand prediction for efficient capital and supply chain management as well as waste reduction.
- Dynamic pricing based on demand-supply patterns.
- Enhanced multi-channel customer engagement to deepen the relationship.
Must Read: Four Trends QSRs Shouldn't Ignore in 2019
Food Trends in 2019
Some key food trends in 2019 are:
- Emphasis likely to be on ethnic regional Indian cuisines.
- People are extremely health-conscious nowadays and so the focus would be on eating natural food, especially organic, non-processed and genetically modified food.
- Health and wellness will be the basis for preference for a larger number of consumers.
- QSRs will increasingly look at ways of making their food more wholesome and free of harmful additives in order to appeal to the growing number of health-conscious consumers.
- With eco-friendly and zero waste management becoming the focus of the food industry, sustainability is the core of how food will be approached.
- Alternative ingredients like goat milk or soya milk instead of cow milk will be preferred especially the ones that are at par in nutritional value.
- Innovative food packaging will replace traditional methods to meet the needs of environmentally conscious millennials.
- Snacks will be fancy and an important element of the daily routine.
- Preference for home-cooked food among the younger generation is increasing and this offers scope for food-tech companies to offer interesting meal kits for cooking a wide range of delicious wholesome meals at home.
Artificial intelligence (AI) has now been in talks for a while. According to Accenture reports, 85 per cent of organizations have already planned to adopt AI in their supply chains. Recently, United States market recently predicted that the value of artificial intelligence will grow to $36.8 billion globally by 2025.
Various other markets other than food industry have already opted for the technology. Stock markets are now dominated by technology, everyday search engines like Google use AI for improving their results the moment certain keywords are typed. Therefore making its presence felt in almost every sector. Artificial intelligence might be a new technology for food industry but there are many early adopters of the technology including mainly pharmaceutical, healthcare, cosmetics and retail industries. But things are changing for the food industry as there has been a lot of noise for it currently.
Restaurateurs are getting aware of the benefits of having AI which can eventually help them in growing business. Machines over humans have always been in the talk for a long time where everything was predicted to transform into machinery format. Artificial intelligence increases the efficiency and speed eliminating the time factor. But there are vendors who believe that this technology will bring additional revenues with better margins and lower costs in the industry.
AI relies on a continual process of technological learning from experience and improving at answering complex questions. The F&B industry is expected to modernise by adopting AI in their supply chain planning. The technology is proving everybody wrong who thought that they have done their best by utilizing yesterday’s technology solutions and optimizing the supply chain process.
Similar to the human brain, artificial intelligence adapts to the environment and improves with its regular usage. But unlike humans, the capacity for improvement is unlimited as repetitive, more and boring tasks are never a problem.
Calculating data
Having to deal with thousands of customers on a daily basis, machine learning can provide much more efficiency at calculating complex data quickly and meaningfully for the food manufacturers and retailers. Machine learning is highly effective at clustering promotions based on looking at similarities and many other variables other than using traditional techniques. For instance, a leading health food brand used the technique to analyze demand variations and shopping trends resulting in a 30 per cent reduction in lost sales. Not only will this technology know when shelves are empty, but more importantly, will predict what is going to happen next. Thus, making the shelves fully stocked along with minimizing the waste.
Reducing wastes
In food industries, many people are looking at new ways of increasing their sales which clearly states that it is still a problem in the food industry. According to the figures from WRAP, UK waste advisory body claims the industrial waste to be around ten million tons of food a year valuing over 17 billion pounds. Some food processing companies have already turned their way towards artificial intelligence as a means to better calibrate their machines in order to manage several products sizes reducing wastes and money cost by it.
Some beverage companies even tried to use AI to allow customers to change the flavors of their chosen drink. Armed with an application on their mobile phone in front of self-service machinery, it’s helping in developing new product ranges.
Artificial intelligence might just be the order of the day which will be useful to the people belonging to the food industry. The adaptation of this technique is expected to rise as the time passes by.
The vibe has to do with the culture that you create inside your restaurant which eventually ends up in attracting a lot of new customers. Enhancing the restaurant’s ambiance can help in its market sustenance in the long run. “Vibes can be created by the simplest of things. It’s all about creating a culture. It can be the feeling while you enter a specific restaurant to the staffs greeting you. Vibes are generally very essential as it helps customers to decide whether they want to continue dining out with your restaurant or not,” shares Saurav Mishra, Owner, Hilly Billy Café.
Sense of Sight
The vibe which customers get from the visual aspect of the restaurant is very important. It is well said that the people initially consume with their eyes and later with their mouth. It is important to be aware what you want your restaurant to feel like and then accordingly decide its appearance. Your vision should be resonated via the interiors of the venture.
Sense of Smell and Sound
How the restaurant smells is another key factor which drives the customer’s attention towards it. The aroma created in the kitchen which usually travels to all corners of a restaurant is a big part which contributes to creating a vibe for the venture. The vibe of a restaurant also depends upon the sound which can be found on entering. Many factors including whether a restaurant is busy and noisy or soft and quiet decides the vibe. The background music also contributes to this factor and should keep rotating the playlists.
Sense of Taste
The menu available at your restaurant works as a catalyst for its vibe. Compromising with the quality usually leads to the shutdown. Food usually works as an instigator in order to achieve all kind of vibes you want to have at your restaurant. “The taste of your food defines your future as a restaurateur. If you are good in it, then that’s amazing otherwise you really have to work on it before your venture collapses,” says Santanu Chakraborty, Director, Hing Bar and Restaurant.
Hence to attract more customers, it is highly essential to create a great vibe in every term. Work with your staffs and team in order to create the culture which you want to provide to your customers.
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