How To Build A QSR Chain | SummitUp By Elevation | Episode 8

0:00 you can move the needle in this business by having better store managers Domino's as a brand has become so strong in India that people have three apps on their phone they have a swii zato and a Domino's app we are seeing a lot of companies you know being contribution margin positive even on just delivery as a channel if you create like a 100 150 million kind of Topline business you can create a company valued north of $500

0:20 million creating one or two loved Brands is very tough the qsr business is fundamentally a model where you are trying to find standardization and replicability design choices for Founders to think about your menu your pricing Etc and all of these ultimately affect your throughput it's a very interesting space because it has good characteristics from both retail companies and fmcg businesses food delivery apps for a qsr restaurant right Boon or a bean single brand qsr or multibrand

0:47 qsr ready looking at the camera right I think should we take it again okay hello and welcome to Summit up by elevation capital A series where we talk about the emerging themes and opportunities in the Indian startup ecosystem today we talk about Quick Service restaurants or QSI for short and with me I have chirag and weba from the

1:18 consumer team to talk about the space welcome to the part guys thank you thanks a lot vishy it's great to be doing this with you and it's a topic that's very close to our hearts given elevation has now been investing and tracking this sector for over 10 15 years and finally seems like a lot is changing and we are all seeing signs of qsr mushrooming so very very excited to be chatting about such an interesting topic with awesome awesome awesome I'm

1:43 I'm also glad to be talking about qsrs because my last couple of episodes were on Space Tech and then vertical fintech and I had to pretend like I was understanding stuff but I can safely say I've been eating food for a while so I can talk a little bit more about this that's the beauty about consumer absolutely I love this so qsr right very interesting I am old enough to remember when McDonald's launched in India and it was

2:08 such a it grabbed headlines and I remember making a be line to going to one of the first outlets in bandra and eating there and that just seems like a different life and a different India and We've we've moved a lot since then right and I think especially in the last few years I've seen very significant mushrooming of not just Global players coming to India but also Indian qsr ch sprouting everywhere can we talk a little bit about what's driving the

2:35 proliferation of qsr in India and where do you see this trend going so V you actually right the qsr market has been growing dramatically in the country you know if you look at the 2005 2010 era we were adding around 145 stores annually post 2010 there was a shift you know orbital shift and we started adding around 300 stores annually from 2010 to 2020 post 2020 over the last 3 4 years this number has reached 450 500

3:02 annually so of course this you know this segment has been expanding and the pace of growth has also been expanding with every passing year but the most interesting thing here is that even with such growth it is still a massively underpenetrated category so today India stands at three qsr stores per million population whereas this number for China in 2013 was six and today they are at 13 of course if we compare it with us we are nowhere there because us just as a

3:29 consumer behavior of eating out for more occasions even for functional meals it is much more higher it is much higher there but even if you look at some of these Emerging Markets like Brazil Brazil is at 40 stores per million population so it is 10x India so of course there is massive Headroom for growth just in terms of penetration another interesting thing happening is India is crossing this $2,000 per capita GDP per capita number and as we've seen

3:55 this trend in other geographies also that as the country crosses this GDP per capita of 2000 more and more people start eating out for more occasions it is not only an occasion Le U you know meal that they're having out which is when the casual dining space expands so up until now casual dining had been the focus it has you know massively penetrated but now with this GDP per capita threshold being crossed consumers start eating out for more occasions they

4:20 start eating out for regular meals for functional meals Etc and qsrs become a huge spent pool now so yeah I mean to sum up qsrs have been been growing massively over the past few years over the past decade but still there is massive Headroom to grow just in terms of penetration and of course as the country grows Richer there is more discretionary income qsrs become a key spend pool as can be seen from other geographies and you know the trend of

4:44 other economies so very exciting times and an interesting space to talk about very interesting so I think this is the typical India story massively underpenetrated huge headwinds some demographic some Behavior some economic so obviously I think there is going to be a lot of excitement here but there is also this very old belief that a lot of people have that restaurant business is probably the toughest business right so what makes us believe that qsr specifically is something that we think

5:12 Venture scale outcomes are going to get built why do we think it's an investable business yeah no great question so you know maybe I can answer it in two parts see I think one there is clear precedence of this happening in the past so if you look at McDonald's it's a 200 billion market cap business Chipotle which is a Mexican qsr is at 90 billion Starbucks you know you can argue if it's purely a qsr or not but

5:38 let's say a branded food chain 80 85 90 billion somewhere in that zone now these market caps are not small even if you say you know these are Global businesses but these are very comparable to fmcg so let's say Koch market cap would be 250300 billion meles is 8090 billion ion so it's not like the these businesses end up being smaller than let's say package food or cpg now let's understand why so you know

6:10 as we was mentioning casual dining is where outside home food consumption starts but you know what's that use case it's a birthday party it's a dinner with your family it's a maybe a post office dinner meeting with a client you are fundamentally seeking newer experiences and variety every time you go and do that and therefore you know so many casual dining places will come up it it is a market that is designed to be very fragmented because the customer is

6:38 demanding newer fresher experiences every time they go out and that's why the restaurant business is also tough because you know it's it's one part of the problem is establishing a value prop today but it's even harder to sustain it over a period of time on the other hand if you look at the qsrs the use case is a lot more functional speed is of essence you know you're looking for going in for a quick lunch getting a

7:02 comfortable snack and walking out not PE people don't spend a lot of time sitting in these restaurants in fact how fast do tables turn is actually a very important metric for for these qsr businesses so what the customer is fundamentally looking for is you know a consistent reliable fast experience over time and therefore the market lends itself very well for concentration and therefore there will only be 3 4 five great brands in each subcategory within the food

7:33 space and that's what you know that's why if you build a great brand you acre a lot of value over a period of time second if you look at it from a very bottom of Poe right on how the financial metrics stack up so in fact one discussion we keep having internally is that it's a very interesting space because it has good characteristics from both retail companies and fmcg businesses so if you look at India retail story right we are all saying

8:00 you know there's massive headro for growth people will have a more income they will go out more often and therefore there is a same store sales growth that keeps happening you set up a store today next year if your value prop is intact you will do lot more revenue from that same store and that same store sales growth creates a lot of operating leverage because a lot of your costs are fixed in nature you've signed rent is a

8:23 fixed cost Manpower I would say doesn't scale as fast as as as as sales scan and so on so sales same store sales growth keeps creating operating leverage in some of these businesses which is the goodness of any retail company and at the same time qsrs end up being a negative working capital business now you've been at un you know the power of that distribution right like when Distributors pay you in cash and then you pay material suppliers much later

8:52 it's it's a extremely Capital efficient model and the same thing happens in qsrs because your customers walk in every day and pay in cash and you know you are paying your vendors with like a 30 40 50 day credit period so as the business scales you actually generate cash versus you know consuming it versus any other retail category you need to keep inventory in the store and then it will sell at a certain rate so growth

9:15 requires more Capital so as an investor you know fundamentally these characteristics make it a very very interesting business and therefore we see these businesses also commanding great Revenue multiples in in public markets interesting interesting you know just to add a little bit there even on the even if you see the Indian U you know ecosystem a lot of investor wealth has already been created you look at your deanis you know jubilant Fe Food Works sappire Westlife they are all the

9:42 master franchises for these Global Brands right your Domino's Burger King McDonald's Etc these people are all listed and they've been creating immense shareholder wealth over the last 5 seven years and you know if I think of myself as an early stage founder seeing some of these Journeys already play out and create so much wealth it is very inspiring for me and as chag was mentioning these businesses are fundamentally very robust so even if you create like a 100 150 million kind of

10:06 Topline business you can create a company valued north of $500 million and this 100 150 million Revenue can be done quite easily in the top 10 12 15 cities so if you think of it this way this Playbook is very replicable and you know you can create a large outcome with a in a fairly short amount of time in a very Capital efficient way and hence it becomes a very lucrative business from an investment perspective also even there are a lot of Indian

10:32 brands that are doing it right we have so many examples of companies that were started in the last decade in this space and who are creating a lot of value we can take chaios for example V Momo there's Theo broma so there are number of examples you know in the Indian ecosystem who have just started a fresh Rod this wave and have created wealth for everybody inv worlded one thing I want to add to the occasions for which

10:54 people step out and eat I think the most famous one for me is when I don't know what to tell the cook what to cook so like might as well solve that problem by stepping out but yeah you you speaking about the Playbook right that Indian Founders can sort of look to replicate as they start building out on qsr yes can you elaborate a little bit on what are some key aspects for Founders to think about yeah see I think

11:19 you know the qsr business is is fundamentally a model where you are trying to find standardization and replicability therefore you know you have to think of the business as a box like there is a unit that you set up somewhere in the country and this unit has to fundamentally work once you figure out what it takes to get that unit going the model is very very replicable and then there are certain set of standard capabilities that need

11:48 to be built which we can maybe talk about later but talking about those day one choices right of of what you will need to see so I think first you you have to find you obvious I'm I'm guessing anyone starting out has a cuisine in mind but then there are also several iterations you can do within that so let's let's say you pick any cuisine what use cases are you serving what occasions are you trying to serve is it a lunch heavy menu or a

12:16 dinner heavy menu even if it's a lunch heavy menu can you do something to add snacks and so on and so forth those are the important considerations to think about what I would advise Founders is that you know to simplify this statement maybe one metric to think about is throughput per store which is how much revenue can one unit do in one month let's let's maybe start with that problem statement now you know throughput per store the reason it is so

12:45 important is because as I was mentioning earlier the a lot of the costs in this business are fixed and therefore you know the higher your throughput the more it it helps your profitability and you know it it also helps you invest more into the business so let's say a lunch business does a certain amount of Revenue which generates money you can plow that back into you know making a more elaborate store putting in better fixtures better

13:09 Furniture so on and so forth so the higher your throughput the better you can make customer experience and therefore that's worth solving for and to solve for througho you have to think for your own category how many people can walk into the store what will be the average check size that each customer spends now to solve for this throughput maybe you can think of it as you know number of people in a catchment that that will come to your store

13:35 they'll come in at a certain frequency because of the use case that you're serving and they will spend a certain dollar value you know based on the meal and your proposition so you have to sort of go deep dive into all of these three factors and do a lot of customer immersion a lot of qu qualitative research to figure out what is the proposition I can build you have to do it within some constraint which is the

14:00 menu can't be very elaborate it can't it the brand has to stand for something you can't really have a pizza place also sing Biryani I I don't think that's going to work so within the realm of your Cuisine if you can do a lot of customer immersion to solve the throughput per store equation I think that really sets you up for success and and can help you establish that early early pmf no I agree and to and you know

14:25 just to double click on that a little bit when you're talking of optimizing your throughput per store chag mentioned about number of customers who are walking in what frequency they are coming to eat at what is their average aut value if you think about all of these two three levers what are the design choices that you have to you know affect these or impact these see one important thing becomes this Cuisine that you are you know operating in or

14:47 the or the yeah the menu design choices that you have and if you look at Global examples you'll be amazed to see you know people actually tweaking Cuisines and menus to affect one of these three things I can take a live example right so McDonald's introduced maafe see McDonald's in the US was always a lunch heavy carb heavy meal people used to come for lunches or you know late dinners Etc they introduced maafe and the coffee offering so that people would

15:12 come in the evenings also so they were increasing the frequency also there was certain senior citizens who did not have Coke with their meals so they thought that these people will have coffee so for the same TG they were not increasing frequency they were increasing the aov because they were not having Coke they will have coffee so you see these many menu design choices tweaks Etc to increase one of these three things right it's either your frequency or your aov

15:36 Etc and these are things that are in your hand so when you're thinking about your menu when you're thinking about your Cuisine you should think about all of these things which can help you make better design choices things can go wrong also for example let's take the example of dunin donuts right so dunin Donuts or any of these donut chains where when they launched in India they were perceived as a pastry shop because it's very sweet it is a sweet

15:57 offering and pastry shops you will go maybe once a week maybe once in two weeks because it's a very sweet offering you're going there for some occasion you know when you're coming back from Office you pick up a box of donuts and you reach home Etc and they were neither able to get the right frequency nor were they able to get the right aov so it was a little bit of tricky path and then you know they had to tweak their entire menu

16:16 design they brought in coffee they brought in Burgers they brought in multiple other things to actually solve a lot of these things similarly to achieve througho you know another easy way out might be just reducing your pricing because you reduce your price more people will walk in frequency will increase or the number of customers who are walking into your store you're increasing that although your aov may take a slight hit but you know that is an easy lever to increase your

16:37 throughput again it has both pros and cons so if you take an example of Starbucks they launched this Pico sized beverages very small so they're actually reducing the pricing but they are expanding the TG there so it's very well thought through that okay there are some college goinging kids who can't afford my coffee they can come it with this lower lowest pric point coffee they will get hooked onto coffee and then they'll graduate to my higher

17:01 priced coffee so there's a lot of strategy going on there and it is not negatively or adversely impacting the business they've done it beautifully it's a very tricky part but they've done it beautifully we can take the example of Pizza Hut who actually to compete with Domino's launched a low priced pizza but there was no thought around who will be the TG for what occasions will they purchase it so what was happening was their same customer who

17:23 used to purchase Pizza heart was purchasing it for a lower price point now so that brand image also took a hurt their actual throughput actually reduced because the Trum of customers was not increasing the frequency was not increasing so I mean these are design choices for Founders to think about your menu your pricing Etc and all of these ultimately affect your throughput but there's no one right answer there are all pros and cons for everything and you

17:45 have to be thoughtful and every lever will have some impact on the business so yeah interesting ways to think about it okay that was very interesting so a lot of things for a Founder thinking of building in qsr to sort of think about clearly pmf early pmf is going to be determined by through put per store and there are many levers to impact that smart menu choices that drives both frequency High aov Etc once somebody has figured out that sweet spot of a

18:12 great through puta store looking to scale and figure out how to make that business a lot more defensible what are some modes for a Founder building in qsr yeah no absolutely see I think maybe I'll cover how to scale this business first and then we can come to modes so see once you found the right unit econom unit model or which is this box right that works in one place then you have to open 10 20 100 of them now for that to

18:39 happen the number one problem is consistency of customer experience and let's say the most critical part of the customer experience first is the food itself so you have to get the food back end right now what does that mean you can't really have you know skilled chefs operating out of all of these locations a casual dining restaurant often markets itself on the name of the chef you know there's a famous chef from some place his signature style dishes are served here a

19:09 McDonald's cannot do that so the back end has to be completely standardized consistent across locations usually we've seen two distinct models work well here number one is you know people adopt a frozen supply chain where you're almost producing this product in a factory like manner centrally freezing it and moving it to all stores which is where it is then heated thed mixed with other ingredients and then served to the customer so for example let's say for McDonald's the Patty Works

19:41 in that way and once you've Sol that then it's just Burger sauces that need to be assembled the other model is what is often called fast casual which is you know you don't need this Frozen supply chain but you are doing assembly of ingredients at the store itself and these are often fresh ingredients so for example if you've ever been to Chipotle in the US what they would essentially do is that you have let's say all the

20:10 ingredients like a corn a chicken rice beans Etc lying there in front of the customer and you can sort of customize Subway in some way is a very similar operating model where they procure fresh ingredients and then they would assemble there right in front of you now in both of these models you have solved for scalability to a very large large extent because there is no longer a people dependence or a chef Reliance to build your 100 store finding 100 skilled chefs

20:36 is very very hard and and it just can't happen so let's say the food is sorted beyond that you know you also need consistency of experience the ambient has to look similar there is economies of scale in procuring things so all of that needs to be done centrally so I would say broadly you know operational excellence is a very key part of a very strong qsr business and any company that is successful as a qsr there would be a

21:04 very heavy emphasis on just operational exdents managing Logistics reducing wastage centralized procurement all of those would fit into that bucket really you know at the core of this business is also a lot of people in fact through our experience of working with companies what we've realized is that more than your corporate team the business you can move the needle in this business business by having better store managers they are really the ones running the show every day they are the

21:34 ones responsible for whether you know people working in that store are motivated they are the ones who can come up with ideas around you know clever local marketing campaigns they can give you competitive intelligence about what's happening in that micro Market what is the kind of customer coming in so training that store store manager is an extremely important problem in in fact in some companies we've often seen you know stores that are not doing well you put all your head

22:04 behind it you know did we get the wrong location is it are we paying higher rent what really went wrong and sometimes the tweak is as simple just bring your best store manager in and he will solve that problem on the ground for you so people training is an extremely important skill set there has to be a heavy emphasis on training on Sops how do you keep you know people in the stores motivated for example if you look at Starbucks in the

22:32 US they are you know very popular for having been the first company to offer health insurance to store stuff and you know a lot of companies used to do it in the past but they also gave it to part-timers now that was beautiful because it improved their retention and reduced their cost of training so what feels like an expense that now you're having to give you know health insurance out to people it was actually reducing cost because it brought down the ch in

22:58 terms of store employees so you have to keep people at the center of your thinking and and you know invest in their training and employee satisfaction and that solves a lot of problems in terms of scalability of this business lastly I would say you know the there's one more very important piece of this puzzle which is great business development how do you be in the right locations see because the reality is a lot of these categories are impulse

23:24 purchases sometimes you don't plan to go to a certain food place you just happen to be in an area around it and see this option and it it it is a convenient place to go so Business Development which is finding these properties and being aware of it and setting up the stores is an extremely important capability where and I often joke that capability is almost like running a VC business when you start out you know you have to see all the deals in the

23:51 market a lot of them will not work for you and you still keep saying no but then there will come a point in time when you will know oh this this deal that I have I have a gut to say this is 20% more efficient than the average deal or this location will fit perfectly for a brand and then you sort of go after it so yeah I think just to sum up standardization of back end is very

24:14 important operational excellence can become a strong mode you have to keep people at the center and Business Development again is a very important function for any qsr to build out over a period of time yeah yeah and just to add one more thing as you scale up you know this brand becomes starts becoming a mo I personally believe that U you know if there are two Mexican outlets in front of me a Chipotle and a Taco Bell I will

24:38 choose one of them to walk into and it will mostly be because of the brand I associate more with or the Affinity I have towards a brand but yeah you you know every customer develops an affinity for a brand and you know it's not intangible see with if your brand becomes stronger I can take the example of dominoes in India right if your dominoes as a brand has become so strong in India that people have three

24:58 apps on their phone they have a swii zato and a Domino's app and usually you order on the Domino's app because you know it'll be fresher or whatever it is you just have that Affinity towards that brand and because of the direct order Domino does not have to pay a lot of commission to these food aggregators and it can get more money to reinvest in brand again so this flywheel keeps on rotating and as you become larger you

25:18 know this brand image that you've developed becomes a very key Moe in my opinion and when I say branding I don't mean that you spend a lot on branding right typically you see qsrs will not spend more than 3 to 5% of Revenue on branding compared to some other New Age digital sectors this is peanuts because as chag was saying it's a box model right it's micro Market focused etc etc so you don't need to spend a lot on branding it's about doing

25:40 the simple things right and you know with enough consistency you start creating a brand that people start loving and that can become a huge you know moot in the long run you know when you're looking at a scaled company so for me I think just to add one more Point branding can also become a mo yeah brand is the outcome of everything else you do is something you can solve for nice okay so that's a great segue to

26:03 my next section B because you set me up for it when we talking about dominoes and their ability to have moved away from to a little bit of their dependence on delivery apps right so I have a bunch of questions which are which I'm guessing would be key consideration for anybody thinking about this and I'm going to you know pop them across you one by one so the first one is food delivery apps for a qsr restaurant right

26:28 Boon or a ban 100% a boon there's no doubt about it see one as we were mentioning in the beginning right the sector is now at an inflection point I think food delivery is one reason it is at an inflection point today because what food delivery essentially does is that you know let's say if someone wanted to build out a Mediterranean chain or a even a even the coffee businesses or the beverage businesses for that matter you know because food

26:58 delivery exists you can now set up a lot many more stores versus what you would have been able to do without it let me explain why you know let's say the building blocks of your business are such that you you sort of break even at a store level at let's say 10 12 lakhs of Revenue now maybe half of that can come from food delivery and you know that food delivery order can also come from 5 km 6 km away the dining

27:27 customer is very unlikely to come from 6 km away and therefore I actually feel a lot of the proliferation we are seeing in terms of new Cuisines is because entrepreneurs trying to get into newer formats of qsr are now able to set up their businesses and let the brand grow you know you you start out in a location you your dining footfall will keep growing at a certain same store growth month on month but delivery revenues can come from day one and that

27:56 gives you a lot of base in some way to start covering your cost and therefore be a lot more experimental so 100% a boon and we'll keep helping companies down the line the the reason why a lot of people people feel negatively about it though is also intuitive which is that it comes with an added costline item which is commissions now see you have to be smart about it and figure out how to price your products how to change the menu in

28:28 in a way that even the delivery economics start working for you but it is possible to do that we are seeing a lot of companies you know being contribution margin positive even on just delivery as a channel and scale beautifully one thing to be mindful of though is that the food delivery Revenue pools are capped at a city level so let's say in a city like Bangalore maybe you need you know 40 Outlets to be 3 km

28:54 away from any customer in the city now if you go from 40 to 100 it's not like your volumes are going to grow manyfold so maybe somewhere in that Journey you know you your your dining proposition independently has to work and and I would say dinin can still scale you know irrespective of how many locations you are in because it's very impulse and sort of more micromarket heavy nature micromarket focused in nature versus the delivery Brands so that's the only thing to keep

29:24 in mind as you scale with the mix of deliv and dining but 100% a blessing in dis guys for food entrepreneurs very clear awesome one for you single brand qsr or multibrand qsr I think this is slightly one of those tougher ones you know not a very clear answer I think see what are multibrand qsrs multibrand qsrs are one of those Cloud kitchens through which you can serve multiple Brands why do people want to do multibrand qsrs or multibrand CL Cloud

29:53 kitchen see the thinking is a customer is eating three to four times outside his home once will will go for a desert once you will want to have a Biryani once you'll want to have a pizza so you can't just serve one Cuisine and satisfy or create a large business you need to have that one kitchen that serves all of these Cuisines so that you can capture maximum wallet share of the customer and build a large business so that is the

30:12 entire thinking behind why you need multibrand Cloud kitchens Etc and of course it has its own advantages right because as we were talking about optimizing for throughput per store or in in the cloud kitchen model be through put per Cloud kitchen right so with Biryani you can do maybe X laks you add Pizza on the same infrastructure you can do X mold ax then you add desert on the same infrastructure you can do X mold ax

30:32 so your throughput per Cloud kitchen is theoretically increasing and it has its own advantages you know all of those you don't need to invest in a larger space of course after a point of time you get cbed out but these are all these advantages of running multiple brand qsrs but if you look at it from the customer point of view there are no synergies so if I'm scrolling through swiggy I don't know if this biryani and

30:51 this pizza is going to come from the same place and for me those are two separate Brands so when I want to eat Biryani I will compare the Biryani brand with 10 other you know maybe only single Biryani brand qsrs and you have to capture mind share there you have to pop up there with your own Biryani value prop and when I'm doing Pizza I will compare you with your Domino's Pizza Etc other single brand pizza places and you

31:13 have to again spend the same amount on marketing or you know capture customer share in the same way there as well so while there are advantages on the backend side and theoretically financially it should make sense from the customer side there is limited synergies and chag and I and you know we are elevation believe that creating one or two loved Brands is very tough you know brands that have that customer fandom you know there is strong

31:36 following there is a lot of love it is very tough so creating multiple such Brands is a very tough Journey anyway maybe these multi-brand qsrs or multibrand Cloud kitchens Can it can be sort of an experiment where you find out that one brand that is working very well for you and then you double down on that so yeah I mean as I was saying not a very clear answer both are yes and or no there are pros and cons and maybe you

31:57 know one of these Founders will come us and tell us how it is to be done outstanding interesting okay we continues to sit on the fence one last one for you owned Outlets of franchise models as qss scale got it so you know different answer for different stages of business if you look at all the listed companies in India which web mentioned jubilant West Life safire deani they're all you know India Master franchises of global Brands now now the reason those Brands

32:29 choose to operate in this manner in India is because you really have to be in the market and get a pulse of it to run a business which is physical in nature so many stores so on and so forth I mean even getting licenses in India is non-trivial you need to manage people you need different sorts of permissions it's it it's it's a ball game where you need local expertise to operate this business you know but what the global

32:54 brands have done is that they have found one Indian company or two in some cases to run their pan India business versus let's say an approach where you have thousands of franchise is running this business for you in fact Subway in India used to operate in that model in the past and is now sort of transitioning our view is that you know for Global Brands this master franchise model will continue to be the way to operate in India and it makes

33:23 sense to pick one or two meaningful Partners who can build this business p India for you and the same thinking should apply if a startup at some point is trying to go International where they should you know find some meaningful partners and let them build the business in those geographies but let's say for a startup in very early stages less less than 20 stores less than 100 stores Even in our view we feel the company operate

33:47 company owned company operated model is the way to go you know between company owned company operated company operated is a lot more critical not doing that takes takes away from customer experience you know in the franchise business you dealing with an entrepreneur who has to manage his own pnl therefore you know there might be periods where you are taking a long-term call but that person has to optimize for the short term their ambition their

34:18 working capital conditions their cash flow requirements put your destiny at at their Mercy and and all of these things you know affect customer experience and the scalability of your business in some way so company operated we feel is like a non-negotiable if you are in early phases of building a brand which which you want customers to love the company owned part I think you know it's almost like thinking of it as a source of capital so if if you have

34:48 Equity capital or access to debt again and the business model Works where each unit sort of generates money then we don't see any reason why you know you have to sort of give it away to a franchise I mean for a company that is able to generate healthy economics Bank debt will structurally always be cheaper than you know getting another entrepreneur in who has to make more than his cost of capital so we feel company owned is a capital allocation

35:16 call if if your Economics work it's always better to do it in house and Company oper operated let's say till the time you're a well- Lov brand is almost a non-negotiable factor if if if you're trying to build a brand that customers love understood super so now to those Founders who who looking to scale up through the company owned model and H are looking for Venture Investments we clearly have a very clear thesis and a point of view on what it takes to

35:42 succeed in this space what would be your advice to Founders building over here what what do you see our markers for us as elevation to be invested to be interested in their business so I think to any founder starting to build in this space space I think one thing you know V at elevation look at is you know whether it is a qsr business or a casual dining business right qsr businesses are very scalable you know

36:06 standardized backend supply chain is sorted you can open more stores rapidly and grow from there so it is very important to be a qsr business versus a casual dining business and once you've identified that it's a qsr business then that golden metric that we've been talking about through put per store because this one metric tells you everything that you want to know about the business from you know whether the customers are accepting it how much are

36:26 they willing to pay for it how will your economics look down the line etc etc so yeah for Founders who are think looking to build in this space these are the two things that you should keep in mind and these are the two things that we also look at when we are evaluating businesses to begin with I'll just add few more things I think you know if you're building in in this space you know what we would

36:47 like to see is you know maybe execution in some micro Market or even in one city but with a lot of customer love and with a very clear Playbook sort of emerging I don't think we are necessarily looking for businesses that have scaled so much that you know we have evidence to say it works in Bombay and in Delhi and in Bangalore but you know it works in a city this is the clear operating model and this is the Playbook that is

37:14 emerging in terms of what use cases do we cater to therefore what kind of properties do we identify and and what do we do in the store I think it's that Clarity of thought which which which we try to dig into when we meet entrepreneurs in the this space I can also share learnings from chaios right given it's a company we've had the privilege of partnering with for so many years see I think ntin and Raga both

37:38 super customer obsessed entrepreneurs the amount of time they spend in the stores even at even when the business is 150 200 stores is is just insane and and that I think is very very critical because you know the market and consumer behavior is evolving very very fast so in early days for example we felt you know no one walks out of their home thinking I'll go to a chaios you and therefore chaios stores need to be in

38:05 high footfall areas and that's how we cater to this audience today that behavior is changing we are seeing very different sort of personas come into the stores U so many startups are getting built out of chaios now which is very interesting to see at the same time you know the way the business development function runs the very clear guard rails on what rent per square feet can be open what are the type of properties we are

38:26 going after it runs methodically versus you know out of the whims and fancies of someone running that business so you know I think there has to be inordinate amounts of empathy towards customers U Obsession about understanding and iterating on some of these behaviors and at the end a realization that you know this business has to scale like a Playbook versus through very opportun opportunistic decisions I think if we are able to see those things in

38:57 entrepreneur we are very very excited to partner with them along the way okay thanks chag and that was a very interesting conversation I think we're ending on a good note you vetted my appetite I think it's time for us to step out and grab some food but if you're a Founder who's been watching this if you are building in qsr or are interested in the space I'd urge you to reach out to the team and we'd love

39:22 to hear what your thoughts are about building in India in the qsr space thank you thank you wishi thank you