Making it big

The entire process of satisfying and pleasing the customer can be a daunting affair. This would explain the precarious nature of running a restaurant. By Sayoni Bhaduri

It may look all fancy and glamorous. But running a restaurant is a tricky business with an unpredictable success rate. There are many things that go into making one successful, but how would one describe an unsuccessful restaurant? According to a 2005 research by the Cornell University School of Hotel Administration, Ohio, it is difficult to give an exact definition. By and large, lack of success is judged by the ownership turnover rates, together with bankruptcies and qualitative data on management, growth and development.

The foundation

Although this definition is based on international research, it gives a fair idea as to why restaurants, geographical location notwithstanding, fail. A restaurant can be described in two ways. Riyaaz Amlani, CEO and managing director of Impressario Entertainment & Hospitality says, "There are location-based restaurants and concept-based restaurants. The former focuses on the area it is present in and then does further research as to what the product will be all about. The other looks at the concept and then goes about doing research as to the most suitable and appropriate audience and location for it."

Accordingly, there are things that play a key role in the success of a restaurant. Location for instance is the biggest factor deciding its fate. Identification of an appropriate location is important as it directly decides the sort of clientele the restaurant will get, says H A Mishra, managing director of Food Design Hotels & Resorts Systems. "Knowing your clientele is key to the product and its differentiating factor. For instance, what cuisine will be served - specialty or mixed," he adds.

It is also important to know the viability of a restaurant. Investing capital is the first and the foremost step, but needs thorough research as to how much investment the market requires and how it will be utilised. In approximation, it can start from Rs 10 lakh to more than Rs 2.5 crore for a restaurant. If this lacks clarity, nothing else will work.

Apart from the conceptualisation there is the fundamental brick-laying process. This starts from the target audience and the product and has a crucial effect as to the ambience and the feel of the restaurant. Next in line and perhaps the most important is the kitchen. Mishra informs, "It is the heart of the restaurant. The ratio of the area of the kitchen and the front has to be half to two-thirds."

The next in line is the operations part whose key is the workforce - the people who work for you. "Leveraging key people like chefs and managers is important. If there is no access to correct and diligent people all the hard work put in goes down the drain. You can poach people but there is no guarantee of their loyalty. They will be poached again by someone else for a higher price. It becomes easy for others to take advantage of a scenario with a novice in the midst of things," says Kamlesh Barot, director of Encore Hotels.

“If all these things are not considered, it will compromise on the quality of food and service down the line,” says Mishra. Management of a restaurant is as important as any other MNC. Any inadequacy can have a negative impact on the restaurant's future. Apart from the workforce there is the management which needs to be accounted for. Proper accounting, access to information and proper advice is a must. Financial stability and proper work culture are other internal factors that can affect a restaurant.

Hiring of consultants is often an easy and sensible solution. "Even in terms of a consultant it is important that one is aware of what is happening, understanding the economies of scale and how costly running a restaurant can be," says Barot. It is always a good option to be consultant-driven and involve the people in charge of various functions like marketing, architects and others so as to get an overall perspective as to what might work and what might not. Allow the staff to voice their opinions and know where they are placed with regards to the project.

The reason why some restaurants seem to fail is because of the surface working knowledge restaurateurs tend to begin with. They go to a land broker with money for land and then hire a consultant to create a successful and functional restaurant. A better method would be to discuss strategies with a consultant even before buying land. According to Barot, nearly 60 to 70 per cent of the breakdowns happen during the start-up phase. "Eventually there is a need to reinvent after some time. A restaurant also needs to be able to adapt according to the changing environs, both internally and externally. "There is a need for constant market analysis, understanding, adapting to it and then anticipating further changes and strategising accordingly," he says.

The novice and the experienced

An interesting concept is the difference in outlook of two different entrepreneurs - a novice and a veteran. The former is lured by the perceived glamour and the sudden passion, which Barot says emanates from being a guest at a restaurant they idolise. "Often this turns out to be PR for them; it's for the sake of owning a popular high profile place," says Barot. The existing player is one who wishes to expand after owning a successful restaurant.

Start-ups have a tendency of failing due to lack of research, especially when the owners have no clue about the kind of investments that are required, the back-house needs, infrastructure and human resources. Their source of reference might have been some friends in the business who are possibly dealing with one particular area of work.

In such a case, consultants come to the rescue. The owner too has to be careful, vigilant and present in every step of the way. After the first set of dealings with labour costs and infrastructure set-ups, not to mention the long-winded government procedures and front-house dealings, chances are that the owner might want to bail out. This also proves to be the acid test for a budding restaurateur.

In contrast, the existing restaurateur who intends to start another enterprise knows all the tricks of the trade as well as the possible glitches. However, this causes the first F&B set up to suffer due to lack of attention. Even the new restaurant is at risk because of the old working formats that haven't been updated. In this case the advantage lies with the newcomer, who is more open to changes.

An important aspect is the inputs given by young entrants in a family-run enterprise. The second generation may have plans and ideas that may invigorate not only the upcoming business but also the existing one. However, there is a danger of difference of opinion between family members.

Money matters

Getting sanctions for loans in India is not an issue because funding for restaurants has always been through private funds. Owners don't usually go to banks for their financial requirements. However, even if bank loans are unheard of, they are not uncommon. Mishra details the criteria. A good and solid background in the industry is crucial. If this is not available, then the party must have at least one or more persons onboard the team with extensive knowledge in the field.

This is unlike the West where banks are often the main investment source. This however does not make things easy. Procuring loans for restaurants is a difficult task because its success cannot be predicted. This, together with slow returns, high costs of goods, debt and small profit margins, is not a good proposition for the bank.

Franchises and standalone brands yet again pose a dilemma for owners, both big and small. F&B franchising is in its nascent stage in India. It is important to know how they operate. According to Barot, "If you are new, there is nothing much to lose in opting for a franchise. You get the technological advantages and the risk is lower. You can also tap the fan following of an already established brand. At the same time, this is generally restricted to the malls where success is pretty much guaranteed."

He adds that as against this, owners of standalones have the advantage of doing things their way. Mishra adds, "When an owner has sufficient experience in hospitality and F&B, with a good backing, he will invariably go for developing a standalone brand. A newcomer, not wanting to take too many risks and with limited liability, will prefer to opt for a franchise." Amlani on the other hand gives the conceptual perspective, "If the concept and pattern is easy to replicate, one would go for franchises. That's why there are more fast food franchises than fine dine restaurants going in for franchises," he says.

Celebrities galore

In India, successful people in any field are celebrities, and rightfully so. But what guarantees success when they venture into other spheres, in this case F&B outlets? Celebrity restaurants are an interesting facet of the Indian restaurant scene, and this is not because they are popular. On the contrary, they do not perform as well as one might expect them too. So where do these restaurants go wrong?

"Celebrities are popular in their profession and what follows them is their fame. They do not necessarily have the expertise to run a restaurant or anything vaguely associated with it. If they do, there is a chance that they will succeed," says Barot. What happens is that the lack of any kind of experience in the field leads to people not taking this venture seriously. Celebrities help bring awareness and the association does help in bringing clientele in initially. But you need substance to back it up at the end of the day. It also depends on the level of involvement. If the end product is not up to the mark, it creates disillusionment among customers.

So what is the key ingredient for a successful restaurant? A committed individual, with an ideal location and quality food and service, and as Barot says, "the soul or the human touch". It may not be omnipresent, but this is what gives the restaurant its raison d'etre.