 "food, delivery, freshmenu, faasos,")
Twigly, FreshMenu, Inner Chef and Faasos are the likely survivors of a meltdown in the food tech space in India.
All of these firms have adopted a model in which they control the experience — from cooking to packaging to delivery through their own teams, and not depending on restaurants to run their businesses.
FreshMenu claims it is profitable in its hometown Bengaluru, and is on track to earn profits by March in Mumbai and Delhi. Twigly, the kitchen-based model start-up from Delhi, says each and every order of theirs is unit economic positive and they will be expanding to Bengaluru in the next six months. Similar is the case with Faasos and Inner Chef.
The kitchen-based model gives the start-ups complete control over the process and quality of food, which is lacking in the aggregator model, and helps them reach profitability faster. These firms collectively deliver around 130,000 meals a day.
"Scalability for these start-ups will not come with opening more kitchens. It is about making a customer come back and order more. This can be achieved only by maintaining quality and a delivery experience. The more a customer order and the more frequently the customer order is the process of the start-ups being more profitable, " says Vidhya Shankar, Executive Director, Grant Thornton India LLP.
At its peak, India had over 179 food ordering and delivery startups, according to Tracxn. Many of these firms were aggregators allowing consumers to book food from restaurants on their app.
Unlike traditional businesses, where they charge a fee, these firms offered discounts to order food on their platform burning money for each transaction. The slowdown in funding help bust these unviable businesses. Several of these firms shut shop. It includes EazyMeal, Zeppery, SpoonJoy and Dazo, while even taxi aggregator Ola discontinued its food delivery wing Ola Cafe.
Founder and CEO of FreshMenu Rashmi Daga said the idea was to make sure that the food from beginning to the end is under their control.
"This is unique as we felt that aggregators will not be able to offer control on quality of food. If we were to be an aggregator we can not change anything on a consumer's experience on food, which is very important in this category," says Daga.
The firm claims it has a bank of 1,200 recipes, of which a select is offered to customers, four out of five who buy them regularly. It claims customers order three to four times a month on its platform.
Sonal Minhas, co-founder of Tracxn Labs-backed , Twigly which currently operates in Delhi says that most Indian and international food chains have been working on the similar principle that has helped them scale up very fast.
"Food is a non-standardised product. Therefore one has delivered quality which in this case is taste and freshness, one has to control the underlying product. Take for example KFC, In China, they roll out around 500 outlets in a year there. This is a gigantic scale. But it works because there is template already ready. In food, it is important that the business is completely backwards integrated, " says Minhas. Twigly in July raised $600,000 from Tracxn Labs, Hyderabad Angles, Kunal Shah founder of Freecharge.
Minhas said while initially, the model puts barriers in terms of scalability on the longer run it is much more scalable with just the cost of setting up more kitchens. Minhas says that all food companies have hefty margins and owning the raw materials and base products make profit margins even better for them.
Faasos, another food tech startup went from customer front serving locations to a cloud kitchen locations after they launched their mobile app for ordering. Revant Bhate, co-founder and senior vice president, Faasos said once the company launched their mobile app and saw a significant amount of traction there they realised that there was no need for a retail location as the mobile app acted as the menu for people. Hence, after their first 40 locations the company has only done cloud kitchens or dark kitchens.
"This helps us in terms of availability of location, as since it is a dark kitchen it need not be on the main road itself. This lead to an expansion of business being much faster we are now in 13 cities with 140 kitchens. Also, rentals is a big aspect of any retail business however with dark kitchen concept that becomes an irrelevant number. This reduced our fixed cost as well leading to each sale being much more profitable," says Bhagte. Backed by Sequoia Capital, Faasos is profitable at a network and city level and earns revenue at the topline of Rs 10 crore a month.
