The business of eating out

“The mismatch between what the restaurant is offering and who it is reaching out to is really what causes most restaurants to fail,” says food writer Anoothi Vishal in her book Business On A Platter: What Makes Restaurants Sizzle Or Fizzle Out .
 
 Ms Vishal, founder of the ‘Great Delhi Pop-Up’, examines the food and beverage (F&B) industry not only through the lens of an independent commentator but also as a stakeholder: “I see the business both from a consumer point of view and also from the other side, from an insider, entrepreneurial side,” she explains.
 
Her book delves into the less glamorous aspects of restaurants: Their commercial viability, business models and success to failure ratios. Her research is intended as a comprehensive guide into the Indian restaurant universe, for those who are considering the thought of entering this “fickle and tricky business” as she describes it.
 
She traces the advent of “eating out” as we know it in India and covers important phases that helped shape the sector; including the domination of Punjabi cuisine led by restaurants such as Moti Mahal and Kwality in New Delhi, to the arrival of the Indo-Chinese era in the 1980s popularised by pioneering restaurants such as Nanking, China Garden and House of Ming. Along the way, she cites examples of evolving consumer trends and other factors that shaped the Indian F&B industry.
 
Her book offers a glimpse of the turbulent careers of a handful of successful contemporary restaurateurs such as A D Singh, Riyaaz Amlani and Rahul Akerkar. Ms Vishal uses their examples to illustrate how even the best in the business have struggled and made mistakes. These case studies buttress her larger point: That all too often, naive entrepreneurs are seduced by this sector without spending time on market research or understanding nuanced consumer trends and other market constraints.
 
Her book features other insightful profiles, such as that of restaurateur Rohit Khattar, who is most famous for being the owner of “Indian Accent”, India’s most successful fine-dining restaurant. Others examples — such as that of chef-turned-restaurateur Ritu Dalmia, who oversees the “Diva” brand of restaurants around India (and now abroad) as well as a profitable catering business — showcase how chefs with no prior business acumen or training can become successful restaurant owners.
 
But for every successful owner, there are an equal number who failed. “The restaurant business everywhere now seems to be struggling across segments,” writes Ms Vishal “Rising costs — rents, wages and food — are also coupled with what many restaurateurs describe as erratic and changing demand of millennial consumers, making the restaurant business riskier than it was deemed to be.”
 
The Indian restaurant environment is characterised by red-tapism and throws up its own challenges: “High cost of rentals, long gestation periods for restaurants, a lack of financing, unclear policies such as multiple clearances and high taxes, heavy import duties, different excise policies for different states and multiplicity and publication of licensing at central and state levels.”
 
And although the disposable income of the Indian middle class continues to rise, price is still the most important factor when Indians dine out. “A majority of consumers are reluctant to spend money on dishes and ingredients that they eat at home, however trendy these may get on Instagram”.
 
As a result, even if a restaurant takes the trouble to source the highest quality ingredients, their efforts are rarely appreciated “Restaurants like The Table and Indian Accent often complain how rich Indians are ready to drop $300-400 on meals abroad but don’t want to spend that kind of money within India,” Ms Vishal writes.
 
Interestingly, she also points out that not all restaurateurs are motivated by the bottom-line but by what she calls “creative hubris”. Her point about hubris is exemplified by some restaurants that feature on the World’s 50 best list. And even in India, this can be the case; “a restaurant like Masque in Mumbai, is an example of a restaurant run for other reasons than profit”, she writes. 
 
Ms Vishal also dwells on the relatively recent influx of private equity (PE) money in the sector, which sometimes poses another kind of challenge for restaurateurs. “Not all restaurants funded by PE investments are healthy and profitable.” Her case is that PE and VC firms often don’t share the philosophy of the restaurant’s founders and are in it, “to grow valuations and typically exit in three to five years, many funds allegedly put pressure on restaurant companies to go on adding outlets. And some companies do this without paying adequate attention to their bottom line and store profitability.”
 
In her concluding chapter, Ms Vishal cautions budding restaurateurs, “Shed those visions of glamour, sit down, learn from examples of those who have trod this space before you.”