When Gaurav Ahuja along with his wife Neha launched their first QSR (under Red Ginger Hospitality in 2007) in Lucknow, the trend of eating at food courts at the malls was fast catching on. Seeing the potential in the food business, Ahuja, a banker turned entrepreneur, decided on a ‘desi’ version of the QSR, whose USP would be value-for-money, fresh meals. Red Ginger Hospitality currently operates 32 outlets (brands include Mad about China, Indian Tadka, Madras Mail and Sizzler Cafe). Its aim is to take the count to 200 by 2015. The chain is spread across 10 cities including Hyderabad, Mumbai, Pune, Bangalore, Kanpur, Patna, etc,which serve more than 100,000 meals every month and have over 450 staff on its roll. Its flagship brand Mad About China won the Images Coca Cola Golden Spoon Award 2012 for the most admired QSR restaurant chain of India.Nivedita Jayaram Pawar in a chat with the CEO, Red Ginger Hospitality, discusses the challenges in the QSR segment.
What inspired you to set up Red Ginger Hospitality?
After passing out from IIM Lucknow, I joined the treasury department of Standard Chartered Bank, Singapore. This was in 2005 when organised retail was just taking shape in India. A city like Mumbai had just a couple of shopping centres. Singapore, on the other hand, had sprawling malls at Orchard Road and world-class restaurants.
It was a clear opportunity, and I asked myself:“Who is going to feed the people visiting the Indian malls and multiplexes?” There wasn’t a single Indian brand of QSR which could boast of a pan-India presence. This prompted me to quit my job, come back to India, and start working on my dream project, which was, creating India’s finest quick service restaurant chain.
Those days, entrepreneurship was not as accepted as it is today. My parents supported my move and my wife, Neha, joined hands with me, and we’ve never looked back! We have worked very hard in making Red Ginger what it is today and it feels really good to see our dream taking shape.
You are present in both tier I and II cities. How would you compare the two, operationally?
We chose Lucknow for our first outlet Culture World – an Italian café cum restaurant. Malls were mushrooming and rentals were at their peak. An outlet in a mall worked best for us in terms of location, rental and proximity to where we were residing.
When we began thinking of making our presence more visible and expand in a big way, we considered different formats, and ventured into the QSR segment with the launch of Mad about China, Madras Mail, Indian Tadka and Sizzler Café. Having observed the trends at our Lucknow outlet, we could understand that customers demand variety. We opened outlets in Mumbai, Pune, Hyderabad, Bangalore, Kanpur, Vadodara, Patna and other cities, and are now present in both tier I and II markets. If I have to compare the two, then tier I cities generate more revenue since the number of walk-ins are more. There is a great difference in the eating-out culture, which reflects directly on the sales. In smaller towns, it is still catching on.
One has to deal with the same challenges be it a tier I or II city. What customers want is value for money, good taste and hygienic food, and this is what we focus on in terms of deliverables. If you fall short in any one, the customer will go back dissatisfied. So our service patterns are the same at all the locations, and we follow the mantra ‘one smile per meal’ which clearly means that every customer should leave with a smile after dining at a Red Ginger outlet.
All your outlets are in malls. Any plans to expand into other retail formats?
Red Ginger Hospitality was born at a time when there was almost no organised player in the Indian food segment. I believe this is just the beginning of the journey and I still have much to achieve in terms of supply chain efficiencies, variety in cuisines, and a presence in many more locations. But yes, our main focus is malls as there is tremendous scope here, and we are eying a number of cities to venture into.
The emerging India story will eventually have a sustained market of malls and this definitely is the future, but we are not ignoring other segments at all. We are looking at smaller cities where a mall, a shopping complex or a multiplex is the talk of the town. In fact, a mall has become the need of every city today, within which, a food court is the need of every mall. So malls definitely will be a major chunk of our presence. We also plan to be present in IT hubs in cities, hospitals, airports, high streets, etc.
Which is your best selling brand?
All our brands have their own clientele. However, Mad About China dominates the food court in almost every mall we are present in. This comparison is not only amongst our internal outlets but also other outlets present in the food court.
Mad About China serves authentic Chinese cuisine and our USP is our fresh food preparations served piping hot. This is what makes us stand out amongst the herd of local players in the food courts. Our focus on serving fresh, tasty and hygienic food earns us customer loyalty, though this has its own set of operational challenges as the perception of a QSR is that the food has to be served within a few seconds or minutes! So we have to ensure that we meet customer expectations in terms of timeliness and taste. If we foresee demand for a certain cuisine where we can run a profitable business, then we will definitely consider it.
Why did you choose the QSR format? How has it worked for you?
We chose this format because of the absence of an organised Indian origin player offering Indian cuisine across the country. Though we enjoy Indian food, surprisingly, there are very few local players who can serve a good, hot, fresh meal at food courts. Most of the unorganised players who open at malls, close after a period of time due to high costs, hygiene issues, etc. Madras Mail was our first QSR; within months we rolled out Mad About China and Indian Tadka and subsequently, Sizzler café. Our brands have followed in quick succession to meet this demand for tasty, hygienic, nutritional food made from fresh ingredients, and served fast.
Sizzler café is more of an expanded version of a QSR as we serve every meal on a sizzler plate to give a different experience to the customers. A lot of heads turn when they hear the sizzling sound! We are very bullish about this concept. We have an extensive plan for our QSR expansion, as we feel that our outlets are underutilised. Each of our outlets can offer much more such as starting and (subsequently) expanding home delivery services in cities we are operational in, and offering take-aways and ready-to-eat lunch and dinner boxes.
What challenges have you had to deal with?
In the initial days, all we could think of was the brand name for our outlets, their logo design, colour scheme, etc. Little did we know how tough it would be to sign our first property! The first few years were difficult because good malls would only consider organised players such as Domino’s or McDonald’s for tenants, and they would take in a couple of local players who were willing to pay the high rent. Smaller malls had their own pre-conceived notions; they did not understand that a mall cannot run successfully without a good food court, and local players cannot sustain for long with such high rentals and overhead costs.
In such a scenario, having to convince the mall developers that we would be a long-term player was a tedious task. A food operator in a food court cannot operate like a fine-dine or star hotel. He has to contend with a lot of competition, not only from other outlets selling similar cuisines or meals, but also from others who are selling cheaper variants such as a Rs 25 burger or a Rs 39 pizza. On a daily basis, he has to ensure that the food is fresh, tasty, hygienic, well presented, served hot, delivered on time, and is giving value for money to the customer.
What has been your learning over the years?
When Madras Mail opened, we were overwhelmed by the response to its south Indian dishes. We were amongst the first at the food court and were quick to sense a demand for other cuisines as well. So, we followed it up with our other outlets serving Chinese, Indian and sizzlers in quick succession.
One very important learning we follow even now is to have cooks who are specialised in the cuisine served at the outlet, as only they can give an authentic taste to the dishes. For our south Indian cuisine, we hire cooks only from the Udhipi region as no one can prepare the dishes better than them.
‘Fresh’ is also the most important thing in our business, and we never store pre-cooked meals. If you want loyal customers, give them good, tasty food, and give it consistently every time they visit your outlet. Our head chef travels to all our outlets across different cities to monitor the kitchens, and ensure that the same quality of food is being served.
After seven years in this industry, I have also learnt that the Indian consumer is very price sensitive. He or she may have relished the food, but if the bill is heavy on the pocket, the customer will not return. So it has to be fresh food at value for money price points.
In fact, we have a kitchen in every outlet and not a centralised one. From the very beginning, I was certain that only the freshest and hygienic food would be served at my outlets, so I had incorporated onsite kitchens in the project plan at the very outset. Now, in spite of having many outlets within a city, we do not have a base kitchen. This also helps us avoid wastage to a great extent, plus we save on transportation cost, and my staff too is happy eating fresh homely meals.
From 1-32 outlets, how did you scale up?
When we launched our first outlet, we had the vision to ‘make it large’, and we did all the ground work from experiencing different restaurant formats, spending time at food courts, to understanding first-hand the behaviour of customers, etc. The journey from one to 32 in 10 cities has indeed been very challenging and memorable. Even after so many years of research and development, the execution of a project in the minimum possible time, is a big challenge because of various external factors.
We were quite confident of our first project and designed it keeping in mind its scalability. Today, after seeing its success, I take the cut-copy-paste route for all our new store launches in terms of their look and feel, kitchen layout, menu planning, etc.
When we began scaling up, we worked on a model that delivered profits and helped us expand without any external funding. But now, we are looking for funding so that we can execute our expansion plan smoothly and in the shortest time possible.
Of our 32 outlets, 5 are franchised. For us, the franchisee should not be just an investor; he must be passionate about the food business. A degree in hotel management is not important as we teach the franchisee everything he should know about running the business. But if he is not interested in interacting with his customers, this business will not yield good returns. Getting customer feedback on the food or service is very important if you want to rectify mistakes and be motivated by their praise. This industry is very sensitive and it works through word-of-mouth publicity.
We help the franchisee in finalising the location, designing the outlet, sourcing the kitchen equipment and other supplies, and providing trained kitchen staff. Our in-house food products and ingredients are supplied from our head office to help maintain the consistency in taste and hygiene. A dedicated team provides day-to-day operating support and monitors the overhead costs and sales at the outlet. Franchisees are given training on controlling costs, reducing wastage, maintaining hygiene in the work place, and in generating sales.
What are your future plans?
We plan to set up 200 outlets by 2015 and be seen as a national brand. One finds a McDonald’s every 20 meters; this is the kind of reach we are aiming at. We want to be in malls as well as on high streets.
What is your view on the current QSR segment?
The QSR segment in India is coming up, but has a long way to go before it matures. That will only happen with more organised players in the market. The biggest challenge for existing QSRs is the unorganised way of operating. The local players in food courts generally do not comply with all the terms and conditions. For example, one cannot start selling a dosa at a chat counter or Indian food in a Chinese counter, there are food courts where such practices take place on a regular basis.
With rising real estate costs, high rentals, and increase in food prices, it is going to become increasingly difficult for food operators to earn profits. It is very difficult to open an outlet in local markets as there are no shops available. So, expansions are taking place in malls or in new shopping complexes coming up in new cities. The home delivery segment, however, has a lot of scope, and is growing at a rate of 5 percent.
Strangely, the foodservice business is perceived to be a very profitable business with not much work for the operator! That’s probably a reason why every second person you meet has a dream or has had a dream of opening a restaurant in the neighbourhood. On the contrary, foodservice is a very tough business where the goods used are perishable, where dependence is high on local vendors who are not professional, and where there are daily challenges of timely supply, a dearth of trained workers, and dealing with customer demands, complaints, etc.
