90% of Restaurants FAIL, But He Built a ₹200 Cr Food Empire Ft. AB Gupta

0:00 If you were to have 1 lakh, 10 lakhs, 1 cr, 10 crores and 100 crores. So pizza bakery alone you're saying is 100 plus kores in top line? >> Yeah, pizza bakery alone is doing about 110 150 cr. Paris is about 65 to 70 cr. >> Is there a certain business amongst these which is the cheapest to start? Starting a biryani brand would be a lot cheaper than say starting a burger brand. The local labor workforce in Karnataka don't like doing these restaurant hours.

0:28 >> But the guys coming to the northeast, they know that I'm here for one year. Let's say you have one lakhs today. What is an FNB business that you will start and why? See, when you don't have money to give, got to give something else. Please don't say you want to start an Italian restaurant. Maybe focus on pasta. Let's just say you want to start a carti roll quickly. You need to be obsessed about carti rolls. So between 10 to 100 crores what is now the business opportunity for me? What is it that I can do in this category?

0:57 >> If you look at for example Mna biryani in Bangalore which is the largest biryani player in the country by the way at a city level. I do panasian with also a small Indian menu but I also have a menu that has some French options and you know what if you're coming with your nani no problem. We also about 60% of restaurant businesses fail in the first year and about 80% of them fail in five years. This is really critical. But there are some people who have built a really large brand. Abijit is one of them. He's not done it once, he's done it twice. He is also now doing it for the third time. Pizza Bakery, Paris Panini, Smash guys, all these brands are highly recognizable in Bangalore. He has a 200 cr topline, highly profitable, a person who has built this business bootstrapped. Today in this video, we dive deeper into his philosophy. But more importantly, how do you build a restaurant business when you have a lack, 10 lakhs, 1 cr, 10 cr and even more? We break down the unit economics exactly what you need. How many people do you need to run a cafe?

1:58 How many people do you need to run a restaurant? what are the different types of investments you need to make to make it happen to also discussing rents in an Indranagar or an HSR or a core Mangala. There's a lot of value in this podcast for you to learn if you're thinking of either starting a business in FNB or just understanding this world of how FNB entrepreneurs think and work. Watch the entire episode and do comment your favorite tidbit from the episode.

2:25 Awesome. Thanks Abijit. Thanks for coming on the podcast. Very excited. Okay. So, I want to achieve a couple of things on this episode. One is I have a wonderful question where I want to break down what kind of FNB business can you build at certain price brackets. We'll come to that in a bit. And then the second thing is I want to dive deeper into your businesses as well. Understand the unit economics. What can somebody who's an entrepreneur or likes this space can take away from both u from the perspective of how can they make a business in this category? Yeah.

2:58 >> When they make that business, how can they make it profitable? And of course, when they make it profitable, how can they potentially scale it today? What are the different restaurants that you have? what is the insight behind each restaurant? What is the overall revenue that we are doing? Where is where are we at right now? >> Right now, we have so the holding company is called Popo Ventures. So, Popo Ventures is the firm and my brother and I, Nikl and I, we own 50/50.

3:25 we've never raised a round of equity financing or debt of any sort. we have three brands. We started with the pizza bakery in 2017, November 23rd, 2017 to be very precise is when we opened doors in our Indranagar location back. >> That was our first location. >> First location. Is that the one you visit as well? Yes. >> Okay. So there you go. So your legacy you're part of our legacy then because the OG Indranagar customers really know how we've kind of grown, right? Because the other parts of the city discovered us much later.

3:55 >> and in 2019, I hope I'm not getting this wrong, but yeah, 2019. Yeah, I think it was. Yeah, 2019, we started Paris Panini. >> it was basically a food truck. >> so just on on pizza bakery for two more minutes. What was the insight? Like so many pizza chains exist. Domino's already had a very large chunk of the market. Pizza Hut scaled and then struggled. So clearly there was a lot of action going on in that market, right?

4:19 What what was the inside behind pizza bakery? Why it was different? because it's expensive. >> Yeah. >> It's not cheap. >> Absolutely. >> so so what made you win? >> What we thought with Pizza Bakery was there's a gap in the market, right? We knew that Domino's is doing really well in Bangalore. We knew that pizza is a top selling category in Bangalore. I mean opening your computer and googling that will tell you that it there's a big enough market. We didn't need to worry about market size because we're starting one outlet, right? There's no point doing all this macro analysis, right? So, so with pizza bakery, we kind of figure out some of our strengths.

4:54 we grew in confidence because we realized that ooh we have like this unique ability to take a product that's selling a lot. Throughput in pizza in Bangalore was high. Pizzas were a big category and there were lot there was lots of competition. There was Italian restaurants serving good pizzas. There were the fast food guys. There was some you know independent restaurant operators trying to focus on pizza. So the market was busy enough. what made us stand out was we really dived in head deep first by put placing a big bet on sardo >> and sardo with gourmet ingredients. So the kind of bills that our pizza had now it may be ubiquitous in Bangalore cuz a lot of players try to do the same thing.

5:34 I'm not saying they're copying with us. It's just that the exposure has increased in the market. but back then you know sprinkling feta cheese on your pizza using fod latte for your margarita was not very common. importing your peeled tomato tins instead of using a local tomato sauce and balancing out with sugar and salt was was not the norm to go through that pain to do that. So we went really deep into the product and it was a niche and we were like let's just conquer this niche and I think that's what set us apart from the competition and people at the end of the day you can do all the fancy stuff but does it translate into one single word taste >> and it did because we figured that people who tried it once thought that it's like oh it's a nice you know gourmet experience I'll probably come here once but then they start craving it when you can blend gourmet which is basically high price >> and frequency volume right so high price high volume. It's like the holy grail of any business, right? And I think that's what we were able to achieve. whereas the other pizza players were focusing on you know whether whether it's the Domino's, the Pizza Huts, the Mojo Pizzas, all these guys, they were focusing on low price, high volume >> because they're like we're the more affordable option. We're the more convenient option. We're the more, you know, consistent option. People wanted to move up from that. People wanted gourmet. People wanted flavor.

6:51 People wanted sardo. They felt it like it's healthier, which it is. So we played on those niche characteristics that nobody thought would be a 100 plus revenue business today. But as that niche expanded and expanded that's becoming mass now. >> Wow. >> Yeah. >> Very interesting. So pizza bakery alone you're saying is 100 plus kes in top line. >> Yeah. Pizza bakery alone is is doing about 110 115 cr top line. Paris is about 65 to 70 CR top line. And Smash guys has of course just started and Smash guys right now at with just three locations we're doing nearly 3C cr in sales >> wow >> per month per month. So that's already a 36 cr.

7:34 >> Yeah. In the growth cubs like pizza bakery was like you know it had a certain steepness to it. Paris Panini was you know a little faster because we kind of we were more aggressive. Smash guys is like like a vertical line. It's just gone viral. you know the kind of throughput we're seeing from just three locations you know doing on average a cr per location is something that we never imagined and we never thought possible our business plan and we had like a basic business plan was like 25 lakhs per location four locations in the first year 1 cr >> but when we opened Indranagar itself that just that that became like four locations worth >> incredible and pizza bakery has how many locations right now >> pizza bakery right now has 17 this is a mix of delivery kitchens and dining in locations. Really interesting. So you're saying that pizza bakery alone does 110 to 115.

8:25 >> Yeah. >> Which you know since you're saying that there are 17 outlets that would account if I'm not wrong 5 to six crores per outlet >> and obviously it's you know it's it's skewed because some of these about eight of these are delivery kitchens. >> Eight of these are delivery >> and and the balance are dining in right. So >> so nine are dining in >> or maybe the other way around. I I honestly lose track. It's either eight dining in and nine delivery kitchen or nine >> and it's the the revenue I'm guessing is a lot more when it's dinin.

8:51 >> Yes, because the din location does the dining in revenue but it's also got the delivery bucket. So the din locations overall will do roughly about 70 to 80% or maybe roughly will do about 60 to 70% more than a delivery kitchen. >> Yeah, because they're delivering as well and they're doing the >> So our math is simple. The moment we convert delivery kitchen which we are right now for example our electronic city outlet let's just say pizza bakery is doing about 25 lakhs there >> we know that by opening a dining outlet the minimum it'll do is 50 lakhs and this is immediately but over time dinin will lead to more delivery because the brand awareness is there cuz delivery kitchens are dark >> you can't really see them correct >> so that din will then again flywheel into more delivery so eventually that electronic city dinin location from 50 it'll become 70 75 lakhs just pizza bakery H so you're saying if you see a restaurant the chance of you ordering that on a like a platform like Zamato or Swiggy is a lot more >> is your propensity to do so is much higher and that's why we have this mantra within the company it's called bricks lead to clicks right ads lead to clicks but ads lead to expenses and then bad unit profitability but just having a good old physical location in a physical industry finally you have to physically take food and put into your mouth is far more valuable than any number of performance marketing ads or Instagram giving gimmicks that you can do just a good old location on a nice high street it will you you'll be amazed how much of a delta you would see with your delivery. So if Indranagar pizza bakery was started as a cloud kitchen, >> right? We would not be doing the numbers that we're doing today because it would have not encouraged us in 2017 if we started a cloud kitchen. We've been like, "Oh, okay. We're doing like, you know, 8, nine lakhs a month. Okay, fine.

10:33 Struggling to I can't afford a head chef. this is not great. Maybe I'd have even kept my travel agency job." But because we took a bet on offline, we didn't even for the first 18 months, we didn't even go on Swiggy. Swiggy was like constantly following up with us. So was Zamato. but we were like, you know what, we want to build the brand offline because when you come into a pizza bakery, right, you eat with all your senses. Whereas in delivery, you just you there's nothing. There's no senses, right? You get it's it's a cardboard box. You open it, you throw it away, then you look at the pizza. Okay, fine. You look at it, it's got to be amazing. Then you touch and then you put in your mouth. But in when you walk into a restaurant, there's more.

11:07 >> There's a smell. The moment you walk into pizza bakery, you smell the fresh dough. you sit down, there's a certain ASMR about the way the waiter asks you what you want, the way he makes his recommendations, that's catered to. So you feel great. Then you automatically have a certain amount of respect to this brand over say like a typical fast food experience because you're like, "These guys seem to know what they're doing. They're like experts." And look at the kind of service they're giving us. Look at this live kitchen. They have twin ovens and you can see the wood fire burning. Wow, what's that about? And the saos looks so pillowy. So they're building this bond with your brand that they're not even realizing. They're becoming quiet fans.

11:39 So that tomorrow when they go back home and they've forgotten about this meal and they see a a few hundred pixels the same pizza bakery, they'll be like, I want to order from there. As opposed to pizza ABC, pizza XY Z or a Domino's or a Pizza Hut where you don't have a bond with it. So, and I guess that's what's going to work for Smash guys as well. That's why Smash Guys, we want to keep it offline, >> right?

12:00 >> So, you've not started delivery in Smash Guys yet >> at all. It's been May 17th. We're sitting here. It's April now. May 17th is going to be our oney year anniversary. We have three locations. None of them are doing delivery. That 3 crores a month can become 6 crores if I just switch on press the toggle on button on Sweden and Zamato. Delivery is huge. A concentrated the whole city's demand going into three outlets. You can you can easily double your business.

12:21 >> Why are you not doing Like what's the because pizza bakery and Paris panini both are in delivery. So you definitely have cracked delivery in some way and in your delivery ecosystems are profitable. >> Very profitable. >> Very profitable. Okay. We'll get to the unit economics in a bit. But why why not delivery then? Because >> yeah so why not delivery? It's because we want everybody's I mean everybody is an ideal situation. So let's just say 30,000 or 40,000 people interact with Smash guys. We want those initial interactions to be offline. M >> have you come into a smash guys are yet?

12:52 >> Not yet. >> You haven't and you'll understand what I'm saying, right? Like I explained that whole thing about pizza with an algaal. You smell the smash guys. It's a it's it it's a sensory experience. Like there's hip-hop music playing. There's clinging and clanging in the live kitchen. you've not seen a burger place like this in your life. I guarantee you it's like theater. It's like you've gone to a show. Then you see guys in yellow uniforms against a back black background smashing patties in front of you.

13:16 then you're like, "What is this?" Like this doesn't look like a regular burger fast food joint where you stand at a counter, order, take your plastic tray, walk back to your table quietly, sit on these uncomfortable, you know, non- ergonomic seats and then quickly leave. this is an experience built around burgers. Now, when you have that, when these 30 40,000 people have that or maybe even more, maybe 50,000 people have that over the course of a year, we know that the day we switch on delivery, they will respect us when they see us on the screen.

13:41 >> And we're not just another commodity. Swiggy right now and Zamato, they're very commoditized. You type open Zomato now and type go to the delivery section and type pizza. You will see every second week you will see a new brand. >> Now are you going to give that brand the same level of importance as a brand that you have physically experienced with all senses? Potentially not right like what's going to make you click. So what that brand that's not able to get you to click is going to do is they're going to spend more on ads and they're going to spend more on inorganic discounts.

14:09 They're going to they're going to pump the algorithm. So matter sales guys are going to be rejoicing, right? And they're going to make you click on it because they just keep showing up. But that's an expensive affair, right? That's like they're trying to pull the customer. They're trying to pull the customer by throwing ad dollars at it. Whereas with Smash guys, I know that the day I go on Swiggy and Zmato, I don't need to spend much at all. There's obviously some certain amount of spending you need to do, but I don't need to spend spend much at all because people are going to go to the search bar and not search for burger. They are going to search for smashed guys.

14:36 >> Then when I show up and they click on it, that doesn't cost me anything. >> That's a free visitor. in which case that 25% commission that I need to pay to Swiggy and Zamato is well worth it because I'm not spent on ads above that. So I think that's the philosophy we in order to make our future delivery business sustainable we want to build the brand responsibly responsibly offline so that when we do go online it's a profitable >> venture >> venture very interesting I'm sensing a pattern here which is you build an experience as you said which is very sensory which is very all encompassing of all the things which make food special >> because it's not just the taste it's also the fragrance it's also where you're having it the location etc so you want to crack that >> and I think that's So if I now go back and see when I started using or I started ordering from pizza bakery after I visited.

15:22 >> Yeah. >> Before I had visited I would just order pizza or a garlic bread from whatever seemed like the fastest, quickest option. Now I wait >> exactly >> 15 minutes extra. >> But it's such a good lesson, you know, now that I if you look back it's it seems obvious but it's not a very obvious lesson that offline people only look at as a form of expansion. Sure, some people look at look it as a form of okay, we're creating a footprint in a market where we don't have a footprint.

15:47 But I don't think I've ever heard this point of view that we created offline to create an experience which people crave for but because they can't keep coming offline then when you switch on the online tap that online tab keeps running on and on and on and makes the business so profitable. >> Absolutely. >> Because what breaks companies is CAC. You know what breaks companies is customer acquisition cost and >> online is a really crowded market. Very very interesting. and just one more thing I'd add to that Aush is every time someone tells me that their first experience with pizza bakery I I know at scale it's like I said it's an ideal world I want everyone to first come offline and then order on Swiggy. And I'm glad that you said that you did that but even today when I meet people and be like oh pizza bakery yeah you guys have outlets. I've never been to an outlet.

16:32 I' but I've ordered online once or twice. It kind of breaks me a little bit, but I'm like, when you do come in and you have a see see what we're about, you see how seriously we take pizza, right? From the ordering process to the way the live kitchen is set up to our dough and you actually see it being needed, >> your you will your appreciation with the for the product will improve. >> So, I know we can't do that at scale. There's still a lot of people who will discover pizza bakery online, but at least the first 100 200,000 customers, we would love for them to be offline customers who then become online champions. And where do you find the staff? Like I'm sure it must be very difficult to find and hire, right? It's a very people based industry. Like I I face the same problem here. Like the reason we have a couple of schools is so that our access to talent is is much more easier. But but how do you do that?

17:17 >> It's very difficult. Aish you know right now as you're saying this my kind of heart is sinking a little bit because we're going through like a severe I mean we're sitting now in April 2026. we're going through a severe staff crisis. most of you know the labor pool that operates within this part of the world this part of the country south India they're all from northeast >> okay so they have west Bengal you know Nepal Assam you know Manipur Nagaland these kind of places right and West Bengal is a big one especially for us so the elections are going on now so we have lost like over a hundred 100 staff who have all traveled back to their hometowns just one controversial thing that I'd say on this >> I don't know I might get a lot of hate for this but >> what we've noticed and This is purely our experience and may maybe not true for other people in the industry is that the local labor workforce in Karnataka don't like doing these restaurant restaurant hours >> because these are late nights.

18:14 Obviously, it's not binary, right? Like there are some people, we have a lot of kadiggas, local guys who work insane hours, super hardworking people, super kind. They understand, you know, our culture and they're able to adjust with me as a boss cuz I'm also born and raised in Bangalore, right? but it's harder to find a local guy who's willing to close up and leave the restaurant by 1:00 a.m. as it is to say find someone from West Bengal because the West Bengal guys or the northeastern guys come here and they are coming with a mindset of I am going to stand and work late because I'm coming with the intention to work in FnB. And the other point is most of our local roots in Bangalore, our FnB roots are Darinis.

18:55 Darini culture is very different. They opening open in the morning for three four hours. They're opening in the evening for three four hours. It's a very comfortable, relaxed day. >> Not like Pizza Bakery or Smash Guys or any of our micro breweries these days or the larger industry that's open from 11:00 in the morning till like 1:00 in the 11:00 in the morning till 1:00 a.m. That's like, you know, 14 15 hours a day that you're open.

19:15 >> So, you have two shifts of staff. So, sometimes you need to work late, sometimes you need to come in early, then you have events, then you have catering. So, this is a hard labor industry. And I feel like our local guys have easier options. So, they tend towards those. But the guys coming they know that I'm here for one year. >> Interesting. >> Intent is much higher too. >> Intent to stand work and toil is much higher >> and we try to you know give them a good work life balance give them breaks give them good hours so that they're not overworked.

19:46 >> but it's still a very tough industry of standing on your feet for 8 n hours right. So you need to be willing to do that and we've found that people from the northeast are far more willing to do that. Very interesting. Okay. So, Smash Guys is good, Pizza Bakery is good, Paris Panini, what was the thought inside? How did that work out? >> So, Paris Panini was you know it's and like I said, ambitions you know can be scaled. You know, you don't have to think about the whole orchard. You just think of one tree first.

20:13 >> So, our one tree for Paris Panini was Nikl and I in the Indranaga space. We were paying rent for the driveway. And if you you've come to Peter Indra, right, you can show like a B-roll of this or something. So you walk through the driveway and that's like it's just a way to access our first floor because the staircase is kind of at the back of the building. So you have to walk through a left then take the staircase and come up.

20:35 >> We're like are we we're paying rent here. We're thinking typical like BA style thinking right. I'm not a BA. I'm south Indian Telugu. But so we're like why are we paying rent just for people to walk and get in? We need to do something with this space. And we kept thinking for months what can we do here? What can we do here? What can we do here? because we we like that per square foot revenue has to come from there also.

20:55 >> Yeah. >> fast forward like 6 months, Nicl my brother Nicl happens to meet my current co-founder Nicholas in the gym, the next door gym. We worked out at Bolt. and Nicholas was running this food truck called Laskrut and Laskut was doing well, but he was struggling with legislation. Food trucks were being cracked down upon. He had too many issues. And Nicholas said he's you know he needs to find u someone find an investor or find a partner or he's going to you know have to move back to France because it's he can't sustain this way and then Nicl came and discussed with me and both of us were like you know why not and I had tried Nicholas's food before this as a customer with no connection to that the fact that one day we might be talking business and I loved his sandwiches and I'm like this is perfect we should get his food truck and park it on this driveway. we had this wow >> that's all it was and we like let's partner with him you know we'll we we kind of understand the Indian consumer quite well we'll redo his menu there's a lot of things that in it that may be too French we'll kind of you know adapt it to suit our local pallet let's have a conversation with him within a week deal was inked we kind of absorbed Nicholas and his food truck into the Popo Ventures umbrella and the rest is history so we started off literally with the idea of putting a food truck there. Unfortunately, due to some sort of logistical issue, there was a tree that was blocking the driveway, so he couldn't actually fit it in. We're like, "Oh, shit." So, we can't fit it in. So, what we ended up doing was taking the neighbor's driveway also and joining it to make the first Paris Panini outlet. It was like a 24 25-seater and we launched it. We removed the name Luras because I myself still can't see it. it's hard.

22:39 it doesn't travel and of mouth is our biggest tool, marketing tool. So we like let's call it something that rolls off the tongue and I immediately said Paris Panini while we were in conversation with Nicholas and and Nikl and it just stuck. wow >> it just stuck and we were like let's go with Paris Panini and it's easy to say >> and yeah people have been saying it for six seven years now. >> Very very cool. What a story man. I think you know scaling any business to 200 kores is is a task and that to bootstrap I think you've done incredibly well. One of the things I'm very excited about today is I this question I've been thinking of since yesterday night which is if I were to start an FNB business today.

23:18 >> Yeah. >> At different stages what should that FNB business be? I think FNB as a definition is very large right technically but restaurants is just a subset of an FNB business. >> But if you were to have one lakh >> 10 lakhs 1 cr 10 crores and 100 crores >> respectively and we'll go one by one. Mhm. >> Starting with one lakhs, let's say you have one lakhs today, >> what is an FNB business that you will start and why?

23:47 >> Got it. So with one lakh, I I would keep the entire one lakh pretty much all of the one lakh for sort of working capital, salaries, things like that. I so I would not actually invest it in in any sort of physical assets because you can't really buy anything. I mean what what can one buy you these days? you know if you're looking at kitchen equipment you know you're not you're not going to get very far.

24:14 similarly you're not going to be able to lock down a rental right because even if you even if you get a small little hole in the wall let's just say for you know 120 square ft right your deposit and your first 3 months rental itself will eat eat up into the one lakh entirely and then and then you're completely out of money. So I wouldn't rent a place either. So I would not do capex I wouldn't rent. What would I do?

24:38 I would spend a certain amount of money doing a lot of trials. I would find a friend who's a chef. I would incentivize a chef to kind of help me out and and you know try to craft a pop-up >> with him so he maybe he can you see when you don't have money to give you got to give something else. You got to give status to people maybe. So find a talented chef, a young junior upcoming chef be like, "You know what? I have this idea for a taco brand or a vapa brand or whatever it is, right? Biryani.

25:08 And I want to do I want to do this sort of taco or this sort of biryani and I only have one lakh. So I can't pay you very much. I can pay you a little bit maybe a small stipen and you're a young talented chef who just graduated from culinary school. >> So maybe I can cover all your costs and you know a little bit over that 10 15,000 rupees a month. Get three months of his time. keep the rest for food cost and trials maybe 10 20,000 worth of trials and immediately do a pop-up. M >> there are places in Bangalore >> like u you >> you know that you can find that you can rent to do like a one day or a one session popup >> interesting >> to build your coffers Instagram is free you don't have to pay put like a little flyer out spend a little bit maybe 500,000 rupees 2,000 rupees on boosting it just to get some share it with all your friends and family tell 20 30 of your friends that they have to come not >> on this problem >> not yeah whether they like tacos or not they have to come and support you And they will, if you ask like that, if they're really your friends, they'll come. Tell 10 of your 15 of your family members. You've already got, you know, 50 people just like this through your own WhatsApp network before you even post on Instagram. Instagram will help you get another 50. Let's assume everything goes well. These people are going to start saying, "When's your next popup? I want to bring this friend.

26:21 Dude, he loves tacos. He wants to come. I told him about it and he can't wait for the next one. Please tell me when the next one is." Suddenly, you have a wait list building. Then you use AI and make a free weight list onepage app and you say, "Ask your friend to sign up on this weight list." Suddenly you have this contact numbers, you're building your customer database. That's a big asset. >> And then all of a sudden you have you wouldn't you'll be shocked. You'll have three or 400 people who have signed up.

26:43 >> Now because there's clout and because you have only 50 seats or 100 seats, you have 300 400 people waiting. You can do a pre-booking. >> You can now charge them the 500 upfront that has now derisked and you can find a larger place. Maybe you can accommodate all 500 people or 300 people or 400 people. suddenly you're getting paid up front. So you're destroy your thing. You do more pop-ups. And as you do more pop-ups, then you start earning a couple of lakhs through pop-ups. And one day you have enough money to pay a deposit and get a small restaurant, maybe 3 400 ft².

27:16 >> Okay. So one lakh is very clear. You start with pop-ups, you experiment with your product, you achieve early success, reinvest some money back, do more pop-ups, eventually do a small restaurant, >> and hopefully your journey takes off. Yeah. >> should we move to 10 lakhs or do you think it's better to move to 1 cr like what >> 10 lakhs would just be one lakh amplified you can kind of reduce the number of popups you're doing and straight away you know get that 200 ft² place and then start from there. So that would be 10 lakhs.

27:41 >> And do people rent kitchen equipment or do people directly buy? You can rent but you know I I think it would make more financial sense to buy secondhand rather than renting because your rental cost can kind of accumulate or like over a 6 7 month period you'll be like man I would rather have just bought this microwave why did I spend like 6 7k renting it when I could just bought it for 10k. >> Is there a certain business amongst these which is the cheapest to start?

28:09 >> Yeah. and of course you can keep on adding more things like is coffee cheaper than a pizza or a burger cheaper than let's say a sandwich place. >> Sure. >> How is that pleased? >> Sure. So I would actually not split this up between product category because between panini burger and pizza there's almost no difference. There's ne negligible amount of difference and it's very debatable. You could like you could say that you know woodfired pizza is more expensive because you have to build that oven but then you could also say that you can achieve the same result as woodfired pizza by using an electric oven which is a lot cheaper than building you know handmade ones like we have a pizza bakery. So it's debatable but rather I would say compare compare cuisines or styles entirely. So for example, it's a lot cheaper to start a coffee outlet because all you need is a coffee machine, a train barista, milk, raw ingredients. Coffee doesn't really it takes a while to expire. So your spoilage wastage and stuff is is is a lot easier to manage in a coffee chain. You do that and you don't need the hood, the exhaust, the HVAC system to take the grease out, you know, your like a you know, your gas. You don't even need gas in a coffee shop. you just need electricity and a place to plug in your coffee machine, right? It's so it's far more low cost to do something like that.

29:28 I would say biryani is a lot cheaper like starting a biryani brand would be a lot cheaper than say starting a burger brand. >> because for a burger brand you need tawa you need u you know and I'm talking I'm talking gourmet, right? Like if if you do a burger brand properly. >> Yeah. properly like you know you you want to do a live grill station you probably have a charcoal grill there's more complexity you want to have a smash burger then you do you know you need to have a separate flat top you need a salamander to melt your cheese there's a lot of complication you know you need you need a you need a rational or a good rotary oven to bake your buns so there's a lot of different elements that come into what seems like a simple burger >> whereas biryani it's like one hundi on gas stove maybe another small little four burner to make the smaller ingredients like your third car your you're done >> and and you're done you toss everything in close it and that's why biryani can be super profitable if you attain a certain amount of volume >> okay so let's come to a cr I think that now cr is a significant amount of money cr is what you had about 1.2 2 crores.

30:33 How do I deploy this capital? Do I deploy it all at once? What is the process? What should be the category I should pick? should I do cloud kitchen? Should I do like a restaurant? I think this is where things get more interesting. So over to you. So how would I deploy 1 cr in capital? So firstly, I think before deploying the capital itself, the fact that you have 1 cr right now and you're thinking of deploying it, you have to have a certain checklist. Now what I would urge people to think about food entrepreneurs is build a restaurant around a product >> not around a cuisine. Please don't say you want to start an Italian restaurant, right?

31:12 >> Maybe focus on pasta or pizza or something specific. Focus on the product. Don't say I want to do Chinese. Maybe do a specialty fried rice brand, Chinese fried rice brand. >> Right? Focus on the product. don't say you want to do Mexican a Mexican restaurant. Maybe focus on burritos or just tacos because when you become a product expert, you're competing against a lot less people, a lot less players because if you look for Mexican restaurants or Italian restaurants or Chinese restaurants, there's dime a dozen. And how do you differentiate? One guy may be good at you know noodle soup, one guy may be good at fried rice, one guy may be good like medium at all.

31:51 So the in the customer's mind there's no clear winner anyway, right? And you don't want to become one more in this noise, right? The the world needs a lot of things. They do not need one more cuisine restaurant. At least India does not, right? Controversial opinion, but it's my opinion. >> So you you're saying that because it's easier to then get into the market. >> Not not that it's easier, it's because you'll actually stand out. And finally, you're putting one core into this. You want eyeballs. You want ROI off that one core, right? By saying I'm starting a you know a Japanese restaurant, you're not going to stand out. But say but the same thing framed differently. Say that I am the ramen expert.

32:28 >> I want to be the best ramen that you have ever eaten in India. Now that resonates with customers. Now coming to how this 1 cr needs to be deployed. If you have 1 crore, do not skimp on the most cliche thing that you will hear, location, right? It is really location, location, location. you know and if you have one you can afford a good location like even if you can't afford like we're in Bangalore so I'm going to talk about Bangalore even if you can't afford say church street or Indranagar 12th main or 27th main in HSR at least be in HSR right at least be in Indranagar at least be in church street because >> interesting >> you have one core you can afford these rents that will be your first thing second thing is pay a good interior designer Get your interiors to be super comfortable, warm and unique, right?

33:22 Because you're going to build this brand offline. Don't do this online stuff because if you have 10 lakhs, maybe do the online thing. But since we're talking about one code, build offline, good design, get don't skimp on architect interior designer. >> Bring some soul into the place. Food speaks no doubt. But people, like I was saying earlier, eat with all their senses. So you need to capture every sense. And then post which you know you keep a a good amount of money away for working capital because the first menu that you put out people may not stand up and clap for it.

33:49 >> how big would be the pizza bakery outlet? >> The Indranagar. >> The Indranagar is huge. It's not the best representation. So I would say for the average pizza bakery outlet that we are looking at now should be about 2,000 ft². >> 2,000 ft. >> Yeah. >> This includes the kitchen, the super builtup area. this the builtup area >> builtup area and this includes the kitchen, the waiting area, the main restaurant, >> everything everything 2,000 square feet you can just say just to make it easy for the viewers 2,000 ft² carpet area is what you ideally because built up in carpet there's barely any loss right it's just the walls and certain interiors >> so okay so and what is the rent like in these top locations like let's say Indranagar Kor Mangala HSR what is the rent like in commercial >> yeah so if you're looking at the core high streets so for example if you look at Indranagar 12th main you're looking at today anywhere from you know 200 rupees a square foot to 300 350 also like it's just like I mean it it's >> it's a it's a sellers market and the most bold buyer the most bold previous buyer kind of sets the market standard so if one crazy guy say comes in from like a Delhi with like a huge pile of capital and be like I'm going to sign this and some of these stories have happened I'm going to sign this location at 400 rupees a square foot it ruins the market for everybody else and this happens and then every broker after that is telling every landlord that see they do 400 sir we can get you also then they start hawking his property because their lease is about to expire to other people saying 400 ft this restaurant also closed last month for this much so that kind of spoils the market but overall it kind of corrects I think Indranagar at a steady state in Indranagar 12th main will be about 200 250 >> so you're paying four to five lakhs a month on rent >> yeah for a 2,000 ft definitely >> if somebody were to rent four to five lakhs and the security deposit also would be >> yeah so these days it's a lot more forgiving earlier you know Bangalore had this horrible habit in the industry of charging 10 months deposit but most landlords right now are charging six and there is an expected correction in the industry that's going to make it even more realist realistic for new FnB entrepreneurs because the deposit is going to come down to four months I hope this happens sooner than later some older landlords are still stuck with this 6 month >> old mentality of six >> yeah 6 months but at least it's moved away from 10 right >> so if you're four five lakhs a month that's another you know 30 lakhs 25 30 lakhs in >> Got it so in a CR let's say I take a 2,000 ft² or should I take smaller when I have a cr >> when when you have a cr I would definitely take like I said 40 seat is what we started with right so take 1,000 square ft so you can just have it >> so you're spending 2.5 lakhs a month I'm guessing you keep at least 2 3 months of rent so >> plus you're paying like four five months of security deposit which is roughly again let's count 15 lakhs as security >> so 15 lakhs gone in security deposit 3 months of rent is 7.5 lakhs so that's 22.5 lakhs gone in your base location.

36:37 >> Yeah. >> So now the rest >> so I'll tell you before this. So this is you're talking about day one >> but there is a huge day zero here. Day minus one to day zero >> where you have spent time hiring your team doing food trials all behind the scenes right? You've rented rent rented a test kitchen somewhere to test your recipes or if you don't have a test kitchen then you >> way before the restaurant >> way before you you've already burnt through like >> ingredients paying freelancers chefs this and that. already you know probably burned through about 10 15 lakhs.

37:05 >> So 15 lakhs is gone from >> this is testing >> and does this also include prep like branding for the restaurant menu making all of that >> that is additional. So I I would say 15 lakhs is just getting your menu and you know do doing your basics in place paying your initial staff hiring people you would have paid salaries for 2 three months before you actually launched the outlet because you need those guys to actually hit the ground running right they can't be freshers.

37:28 >> so 10 15 lakhs keep for that. then your branding agency and stuff. Now if I'll tell you what we did for pizza bakery we did not you know we did not really hire a branding agency. we had like a freelance graphic designer and NL and I kind of sat on Google one day and said we like this, we like that, we like this font, we like this little icon and we made that pizza bakery logo that you still see today.

37:53 >> Wow. >> So that was kind of made by Nikl, myself and this freelance graphic designer named Mani. shout out who and we still have that and and we still have that logo till today. So don't overspend on branding. Nobody cares. Focus on product. But >> interesting. >> Having said that, one two lakhs will go here and there. You'll have to do packaging samples. You'll have to pay some vendor to do some printouts of your menu or your butter paper or something like one two lakhs will go.

38:19 >> Interesting. Okay. So one two lakhs in sampling, branding. >> Yeah. Yeah. Small things. 10 15 lakhs in your previous salaries getting a chef, experimenting with dishes, burning through ingredients about 6 months you would have done that homework. >> Yeah. >> So that's the homework that you're spending in. >> Okay. Very interesting. Now comes the actual place. I think what you said interiors matter a lot, right? Because you want to look a certain way and look also differentiated.

38:46 >> I really like this place. Alien kind. >> yeah, very cool. Very cool spot. >> I I've never actually I've only ordered online. so I'm that customer for them which is not good but I just got like really intrigued by the branding and the way they've done interiors. So interiors is important >> is important. >> So how much money per square feet generally is being spent on a good restaurant's interior. How should you spend it smartly? What's the math like?

39:09 >> So there's two kinds of entrepreneurs. Some entrepreneurs have no sense of aesthetic or design. >> So then in that case please get interior design on board. if you do then you could a lot of this you know you could do quite in a nifty way just just yourself you know just just just thrift shop go to commercial street buy some basic things. we did that a lot of that for pizza bakery you know we I like the wallpaper I I got that Mona huge Mona you saw I found it on Pinterest.

39:35 >> Okay. >> And then we got some freelance artists >> to recreate >> to we said you know just do this and you know we want and can the hand come out. So this was completely from my brain like there was no designer that we had to pay a fancy fee for. But if you have a sense of design, if you have an aesthetic and if you're if you can back yourself on that, save the money.

39:54 >> But if you can't u a thousand square foot project with a simp a basic interior designer, your design fee if you find a younger firm say who's not too established in the industry so you can pay less will charge you about say two two and a half lakh design fee. >> Understood. so the design fee will that much and then doing up the outlet the interiors and everything for thousand square ft. you can do it within u ideally get a place since you're getting thous get a place that doesn't involve too much civil work so you can just do the interiors and you don't need to start doing civil work too much civil work >> I would say >> in a simple clean way you spoke about daily sushi right the interiors are super clean super simple very smart >> like for a th000 ft I don't think those guys spend on interiors more than 20 25 lakhs and this is a guesstimate but if you're doing a simple clean ambiance like that you don't need to spend more than that so there's your 2025 But very interesting. So at this point we've burned through about 25 and then 40 about close to 50 lakhs you've burned through >> in 3 months of rent >> and then homework etc. So we're now left with 50 lakhs.

41:00 >> Yeah. >> So do I keep this in the bank or is there any other cost? >> yeah so you'll need to obviously to have a running restaurant >> tie up a lot of this capital. I mean it's still on your balance sheet as an asset but you'll need to tie it up in stock. so you'll need to buy packaging material. you know you can't be doing a just in time kind of thing. You'll have to have a store with enough you know chopping boards, knives. You have to have some backup, spoons, forks, all of those things.

41:25 >> So equipment will now >> Yeah. Your CCG is what we call it in the industry. >> CCGs, >> cutlery, crockery and glassware. >> Cutlery, crockery, glassware. >> Glassware. So your CCG expenses, you know, will be like a couple of then all these small things, right? Then you you know you realize you need you need you need stationary because you need to buy the the rolls for your billing system. I mean and then you need to pay your boss vendor because you start at the restaurant and then you're like, "Oh, I need a boss vendor. He has an annual subscription fee." and then you need a customer feedback thing that you take on a tablet or the WhatsApp thing. Then you have to you have to pay from day one. You start having these monthly subscriptions for all these different tech tools that you use. So you got to keep around 10 lakhs aside for that stuff and not that it's going to go you know on the first day say five six lakhs may go in stock of CCG four five lakhs will go in deposits to all these tech vendors that you have >> and then the balance you know just just keep it because you don't know what else is going to come up one day there's going to be one plumbing explosion or your grease trapp you have to pay one lakh to redo the plumbing line right so you need that's why you need that working capital >> correct >> so yeah I think I I think that's it's important to out of the 1 cr to keep about 30 35 if you can 40 lakhs untouched for the first 6 months then when the money starts rolling in and your unit economics makes sense and and and the companies the great thing about FNB is from the first day it's cash and carry >> nobody come like you're in the media business I can't imagine what your follow-ups you probably have a team following up on clients who've not paid >> yeah we have some 6 months old payment pending there's a large amount of money stuck at any given point of time in fact there was a time when my entire year's profit was just stuck in like you on the market. It was really horrible.

43:07 >> There you go. So FNB industry has a lot of pitfalls, but thankfully this is not another one. Like we need some relief somewhere, right? So at least people literally eat and the next minute you give them the bill, they pay and leave. >> And how many people are required to run this space? Like this thousand ft² space which is now servicing what 40 50 customers. >> What are what is the manpower required to run this?

43:29 >> So I'll tell you and this has to be anecdotal because everyone has their own recipe. It depends on cuisine. You know, you can run it, I mean, if you're a chef restaurant, you know, you can run it with two kitchen helpers and one service staff and two helpers. You can run it with like a team of six, seven people. With pizza bakery, when we started the first indag, the first floor that you know about >> the 40seater, we had about 12 or 13 staff.

43:51 >> Wow. Okay. What is the distribution of this 12 13 people? >> About seven or eight were kitchen and about four were service on for the floor. >> Interesting. And maybe there was so yeah so seven four plus I think we had one housekeeping guy doing all the cleaning washing that's it >> very interesting tell me something I'm sure time is a big like when I enter a restaurant like both me and my wife have horrible schedules when we enter we enter like panicky >> you know we don't like waiting we generally book you know we book the place in advance if we can >> and we really love restaurants you're quick >> you are slightly more evolved than the average and you and guy both of you are slightly more evolved than the average Indian customer because you know maybe you've you started off much earlier you you start doing this stuff m so today you look for speed convenience you know you're a busy entrepreneur you don't want to waste time you know Gri is running a whole AI division and so so you you guys have things to do you're that archetype most Indian customers are not like that >> okay >> right so they want to come to a place they want a consistent product experience they want good service they want a comfortable time for their family, right? See, this is a big treat for them. Coming to a pizza bakery, coming to a Paris panini, coming to a smash guys, whether you're a college student, right? College students have all the time in the world to kill.

45:12 Taking an extra 10 minutes to get your burger, they don't care. But the burger has to be good. They will always remember and they'll tell all their batch mates that this burger sucks if it sucks. But they'll not they if instead of 10 minutes, if it took 20 minutes, they'll be like the burger is good. They'll be like that burger was so good. It was worth every second. A lot of these a lot of these people are waiting two hours outside smash guys >> on Friday, Saturday, Sunday. So where is convenience? Where is time? Where is what? Right? And once once they walk inside the burger comes within 10 minutes, >> right? So people have time to invest.

45:41 >> It's not they're not wasting it. People have time to invest >> because going out in India is still we know as a as a as an economy we're still not at that stage in the west where you know they eat out like some 8 10 in Singapore. I think they eat out like some absurd numbers like 15 16 meals a week or something like that they eat out in Singapore. That's like that's like two times a week they're practically eating out 7 days a week twice. So they're you know convenient like you know you're done with ambiance this that you just want you know give me my consistent product give it fast I need to go I have work to do like this is not some great experience in India people are still at one time per week one time in two weeks. So when they go out, especially to a place like ours, they want an experience. They want to sit.

46:21 They want that ASMR. They want the theater. They want the waiter to be nice to them. They want the the the the matriarch or the patriarch of the family wants to feel like, you know, they they've worked hard all week to be able to take their family out and their family looks up to them for that. It's all these softer things. >> Yeah. >> if you're a college student and you're taking your friends out, you guys just want to have a good relief from that teacher who's been annoying you.

46:41 if you're if you're older, if you're like, you know, in your 50s, 60s, you have all the time in the world to kill anyway. >> U so I don't think speed is really that important and we don't pay that much attention to it. We pay attention to it because we want our tables to turn fast. and and and you know, our revenue is dependent. We don't want someone obviously coming and sitting there and sipping on a coffee for 3 hours on a busy Saturday night.

47:02 >> What happens then? Like I'm sometimes that customer where I would go to a third wave and I'm there for like 5 hours. What happens? it's it's it's that's part of the program. I mean in Third Wave they kind of want you to always they actually want you to spend time there. So the outlet looks busy. It's a vibe and you know that's they're in the business of spend time here you'll you'll eventually buy a coffee.

47:22 But we are in the business of table turns. >> For us it's it's really not a good thing on a Saturday night if if there's one customer sitting on a three-seater table and sipping on one beer for two hours. that's not a good use of revenue per square foot. But that's why, you know, we've found that sweet spot of 65 to 70 covers as being our sweet spot for a restaurant size because we can afford to have a few of those tables that are a little slower. It's okay.

47:48 >> And what is the table turning math? Like how many times do you need to a how many tables if you fill in a regular pizza bakery outlet, you'll be profitable? >> Yeah. >> And when I say profitable, not like edge profitable, like good profitable. >> Right. Right. >> And what is how many times are those tables turned? >> Right. so I can give you an example of like one location. Yeah. >> So >> our church street pizza bakery has an average table turn of six times >> in a day.

48:17 >> In a day >> each table sees >> six times, right? And that's like the extreme. So that's like >> that's good, right? Like >> very good. Okay. >> That that's that's very very good. Like I mean the the smash guys right now is it about 10 times. >> And what would be the industry like is there any benchmark that people look at in the industry? So I think see it's a function of sales like if you're just doing there's a lot of restaurants who literally you know the extreme high-end restaurants that do one sitting in only in the evening right it's a question of your APC which APC is your average per customer >> you have the average order value that >> yeah exactly so if you're in that sub 800 sub 600 sub 500 rupee thing and you're that 1 cr guy and you're paying you know two and a half lakhs a month in rent you and your you know your average perhead is about 5 600 rupees and your average per bill is double of that.

49:05 Let's just say two is your average bill size two covers is your average bill you need people to spend say 1,200 rupees for a couple right if they're spending in that range you're in the range of you know some of our brands like Paris Panini pizza bakery and stuff in that case you need at least two turns a day now those two turns a day you may not get every day right some days you'll get one like on a Tuesday or a Wednesday you might get 1.3 1.4 four. As long as on a Friday, Saturday, Sunday you're doing like four or five, you can make up an average to it about a two, two and a half, you'll have a healthy business.

49:38 >> Basically, how does the math work? Like for example, if I have 10 tables, >> do you first calculate, you know what, I need to fill seven on 10 tables. >> Mhm. >> Two times a day. Is that how the math works or do you average? >> So, so we'll break that down further. So, if I have 10 tables, how many cupboards do I have? Are those 10 four seaters or they 10 three-seaters or 10 two seaters? Right. So, let's just say an average of three. Some will be two, some will be four, right? Three is like an odd. So, we'll So, say 10 tables, you have 30 covers. 30 carbs in your restaurant. Now your 30 cars in the restaurant across the day you need to have 60 people coming and dining at your restaurant >> that and and these 60 people right so that's 30 bills if you take an average size of bill of two so so these 30 bills that you generate should generate an average of say anywhere from 1,000 to,500 rupees.

50:23 >> So you can make about 45 40 to 45,000 bucks and and and remember this is just dining in you'll also do some takeaways. M >> we're not even getting started on Swiggy Zamato, which is excellent for your lean times between 3:30 and 6 p.m. All your chefs are just standing around there doing nothing, doing misl getting ready for the evening service, right? In that interim, if you can get a few swiggy orders, people like to complain about, you know, there's no margin, I don't make money, but even if you're making 10%, it's the same capacity. You're still paying that guy to stand there and do nothing. At least a Swiggy order is coming. You you made that 5 10% at least.

50:54 >> And do you advertise on Zamad and Swiggy? So the way our relationship with Swiggy and Zamato works is so we're a large account right but let's just say at a for a first outlet for the first pizza bakery we will always experiment we will try so when pizza bakery first went on Swiggy we tried certain ads the Swiggy sales executive and the Zamato guys will be like you should get on this offer or you should get on this you know there's gourmet delights there's this page you know we would like to add you to that page but it costs you know whatever x amount of money per month so we do that kind of stuff we take subject objective decisions and sometimes it works, sometimes it doesn't and sometimes we don't know whether it's worked or not >> like >> no attribution. I mean, yeah, they'll say, you know, this many people clicked.

51:36 but, you know, how do you really know that those people discovered your brand because of that? Maybe they would have come anyway, right? this could have been your existing customer that just found you on the homepage and clicked because you wanted pizza bakery anyway. So, it's a little hard to attribute your ROI on Swiggy and Zamato. but yes, we do spend on ads on Swiggy and Zamato, but it's a very small percentage. >> From whatever I've understood, of course, every business on paper looks fairly easy. but I can see first principles math in building this business and that's how I judge a business right which is can I break it down to first principles are things do seem doable but still like I'm seeing most restaurant businesses fail right why why why is it that I mean why why have we not seen more entrepreneurs tactically bu building in this business and growing it to a large scale >> yeah u because and this is I think reason number one there's a million reasons But I think most people getting into this business are getting in into it for the glamour.

52:39 right, they're not actually people who have a flare for food or a a real passion. I mean it should bother you like if you're you know I keep taking this example. Okay, let's just I'm done talking about tacos. I mean to me so let's just say you >> are you starting a taco place? >> No. No, I'm not. I'm not. We're done starting new brands at Popo Ventures. Have our hands full. But let's just say you want to start a sushi brand, right?

53:04 Or give me another cuisine. Oh yeah. Okay. Let's just say you want to start a carti roll company. >> Now you need to be obsessed about carti rolls. You need to it needs to bother you. You need to lose sleep at night over why that carti roll wasn't tasting the way it does. You need to travel around Bangalore, go to Lucknau, go wherever and you know research carti rolls. But because it's glamorous, what do people want to do? They want to hire a chef or a consultant and be like, "Boss, I want best carti rolls. You make best carti rolls for me." And then then you do trials. And then that chef, because you don't have the pallet for what you want, you don't have a clear idea and you're not anal and specific about what you want.

53:41 >> You're going to buy whatever the chef tells you, right? Because this is probably something he's made elsewhere. So what do you have? You don't have a unique product. You just have something a certain recipe that he's just used to and then you he's he's made the best version of it. Nothing wrong with him. He's tried his best and you have not added your input. Where are you different? How are you differentiating this? How is this the king of all carti rolls? Are you obsessed about making it that most people are not? They want to have nice ambiance. They want to have like a bar along with the carti rolls and they also want to have a live band and they want their friends to come and see how cool they are and you know this is a money burning activity. So most restaurants the core of it is outsourced. Kana consultant or chef ambiance architect interior designer no soul no no personal input no flare for it where are you in the launch day you are the one cutting the ribbon you're there for all the photos and you're like this is my restaurant >> right >> so I think just a lack of >> passion of of of yeah just a a lack of product obsession it comes back down to that >> product obsession >> and then the so this is one right this is at least there's a product mindset here in this example The other example is other people they go abroad or they go to travel to Thailand, Singapore, London, wherever and they experience a certain kind of restaurant or certain kind of ambiance. They take photos and be like, I want to have a restaurant or a bar like this. It's glamorous, right?

55:07 It's nice. This will work in Bangalore, this will work in India. without understanding, you know, what makes you really different from the next person who's going to come and do better ambiance. The lot of them are playing ambiance playing the ambiance game, not the product game. I am an Indo pan I do panasian with also a small Indian menu but I also have a menu that has some French options. And you know what? If you're coming with your nani, no problem. We also have some dalmaki.

55:34 >> Right. Right. So, right. This multi-quisine mindset and then you invest in like multiple kinds of kitchen equipment. You have a fanciest bar. You have on Thursday night you have ladies nights. on Saturday night you have like a big party for the first 3 4 months it goes amazingly your sales are off the charts >> but then it's one experience your dal makney wasn't that great because you're also serving some panasian your panian is not that great because you're also serving something else >> there's no >> there's nothing people are craving for >> there's nothing what are you really doing >> so between 10 to 100 crores and we can also combine this answer >> what is now the business opportunity for me fundamentally speaking what is it that I can do in this category >> right so I actually believe in having some constraints in life because that will just make you a more responsible spender.

56:22 >> Yeah. >> There are so many real estate 100 craties and that tens of craties who are coming and throwing their money into like you know building a fancy bar and it works for one or two years and then boom it's kaput it's gone. Let's say in a 100 rupee pie how much money does on a top level rent takes like what is unit unit economics like ideal unit economics I'm sure it changes >> of a restaurant >> right so and ideally what you want it to be and you know what it kind of is for us as well is your rent needs to be about 10% or less ideally right you know >> at po ventures we have a really good rent percentage u so it's like you know sub 10 it's like it's it's low so you know that that just goes straight into our >> profit very frugal I've realized in these businesses your negotiation your marvari skills >> like my wife's a marvari and she negot negotiates so differently >> yeah absolutely and and and also see >> at a certain point it's about saying no and letting go of opportunities so that's that's what it needs to be at your food cost and this includes your wastage spoilage everything needs to be within 30% Now I know that I've said this in a previous podcast and I got like there's so much thrown at me.

57:38 They're like, "Oh, this guy's talking How can food cost be 25 30% you know impossible?" So a lot of restaurants who are watching this may be in Indian or biryani or doing a more mass product at a much lower price. so you know a lot of biryani brands have their food cost at 40 45 even 50%. The problem is they are not able to command price. M >> if you look at for example Mna Biryani in Bangalore which is the largest biryani player in the country by the way at a city level.

58:08 >> Wow >> it's an incredible business. So Mna biryani is not the cheapest biryani. >> It's it's actually reasonably pricey >> fairly expensive for that. >> So whereas a guy who is you know has a cloud kitchen and has a biryani brand and is trying to get eyeballs is trying to be affordable because the moment you drop price in India you get more demand but is it profitable demand? Maybe not. Magna biryani may be doing it at a 25 30 35% food cost but a guy you know who's an upstart who's watching this podcast is probably wondering what I'm saying 25 30% is not possible that's because he's not able to command price is that percentage of his food cost has shot up so that same biryani if he was able to sell if it cost him 50 rupees to make if he's selling it for 100 that's you know not great but a mega is able to command 180 rupees for that 190 rupees for that >> so the food cost is a percentage of what price you're able to command right so make sure you're able to command a good price and your food cost goes down but ideally let's aim for 30 is what I would say so rent you have 10 food cost you have 30 your employee costs again even employee costs it really depends on your top line right and your top line depends on your price your price depends on your footfall and your demand but let's just say keep it at 15%. This includes your you know >> it includes everything like you know you may be giving your staff meals, you may be giving them uniforms, their salaries, employee related cost try to aim for 15 15 18 it's fine.

59:34 >> marketing you you could take another 5%. This could be a combination of your maybe offline activations and your sweetm if you need to spend any more than this on marketing you probably don't have a good enough word of mouth which means you probably don't have a good enough product. So go backwards. I need to pump more in marketing. Oh, I need VC funding. Oh my god. Worst trap. I I'm I'm not unit profitable. I'm not able to get enough customers through the door through word of mouth. I'm So I'm going to raise money to by telling myself a lie that more marketing will get me more eyeballs and more sustainable sales. But that sales won't be sustainable. They'll come once and they'll go because you're throwing discounts at them.

60:13 >> And then your utilities, your gas, electricity, all these utilities will cost another 5%. rough rough. So broadly you're at 65%. Right? And this is like a this is like a dining location, right? So you have a profit of 35%. Now people he's talking There's no way he can make 35% profit in FNB this and that. But if you're not able to fix your core to price and demand, you're not going to be able to do it. If you're >> But you're saying people can technically speaking make 30.

60:43 >> Absolutely. >> Of course, ups and downs. I'm sure first year would be >> our first outlet pizza bree in I remember when it peaked it was it was making a profit per month of 35 40%. Wow. >> Right. Because we the certain costs are fixed like the rent is not going to increase whether 100 customers come to me per week or thousand the rent is fixed. Right? But if thousand customers and the thousand becomes two like you can make 40% also right. So it's about the throughput. How much you're able to juice the asset out. How many pizzas you can keep flying off the shelf. how you can use utilize your spare capacity.

61:18 And on top of that how you can use Swiggy and Zamato to supplement your lean times. All of this can make these percentages sway wildly, right? But this is the ideal thing. You said ideal. So ideal your cost structure should give you at a den outlet level 35% profit. And I'll also tell you why. Because if this is happening, then you can also afford to keep the same cost base, right? All these same variables and also switch on Swiggy and Zamato who will take 25% of this.

61:45 >> Then if they take 25%, then you're left with 10. So then you still have a profitable online business also. >> Interesting. So a lot of restaurants are sitting there saying I'm making only from this din outlet I'm making 10%. How will I give 25% to Swiggies but you know you you have spare capacity it's not costing you. So it's a different way of looking at it. It's just I'm sure the unit the math changes right because >> but very cool. so so technically you could make this and and I say this the same about agency business as well.

62:12 I think even an agency business should make a net of 35 but I don't know a lot that do. Of course, there are smaller players who operate at 60% 70% net profit. >> But that's but that's not that's not good math because they've not seen the scale up costs yet. They've not seen, you know, the churn of team members. They've not seen the office and they've not seen so many like hidden costs which come >> the minute you go beyond the 30 40 team member mark.

62:37 >> but interesting. I'd also like to add another very quick and easy way >> for someone to if if they're insistent despite everything that I've said in this podcast to go and start a delivery kitchen or a cloud kitchen. >> Yeah. >> plug and play. So you can plug yourself into I mean there's brands like speed kitchens in the north and Bangladesh kitchens at you know there's a whole bunch of cloud kitchen service providers. They will charge anywhere from say 5% to 7 8% of your top line and they'll you know they give you a space which has all the utility corrections. You just have to put in your equipment rearrange the layout do some minor maybe electrical and plumbing work with their consent and get going. So lowcost way to start a cloud kitchen. Your only variable cost that 7% odd that you pay.

63:24 >> very interesting >> right 7% odd that you pay and you have staff you have your food cost you have your marketing expenses and the utilities are charged at actuals so you can very quickly realize if your cloud kitchen venture is going to be profitable instead of investing in an independent thing just plug and play >> very interesting I didn't know this exists >> yeah so all our Bangalore cloud kitchens are in kitchens at facilities >> oh >> we don't have any like random building floor we have taken because then we need to do a h the investment goes up.

63:54 >> Yeah. >> So with a kitchen at kitchen our investment into a cloud kitchen for a pizza bakery and a Paris pony combined is around 15 16 lakhs. >> Wow. And you recover that in how much? >> I mean we are an aberration. We are recovering that in like one or two months. >> Two months. but you know like a newer brand an upstart can look to recover that hopefully in six six seven months. >> many brands will never recover that because it's hard to stand out like for the reasons I mentioned to get discovered. It's very hard with a cloud kitchen.

64:23 >> Very interesting, Abij. Thank you so much. Learned a lot. I think lots of notes that I'm taking, but I think my major takeaway here is product obsession. if you I think your core advice was that you know what, if you want to start in the FnB space, don't don't take a cuisine. Take a single product and find a differentiation in that product and make sure that product also is bloody good. >> And when it is that good, people will come back.

64:49 >> Absolutely. And that's huge, right? I use what you just said. if you order a pizza bakery once a week and your average cart value is say thousand bucks. Yeah. you're doing that say even if not 52 weeks a year say you're traveling and stuff you're doing even if you're doing it 40 weeks a year right it's it's become a habit you're you're a 40k per month subscriber and you're in the marketing space you know so >> which is very high >> LTV of you Aush for pizza bakery is huge >> this is one year >> I don't know hopefully you know we'll keep our product up to par and you'll do this for several years so hopefully we'll keep you know >> and the best part is anytime a new person comes my parents came I'm like I took them to pizza I have a picture with them. I'll hopefully put it on the podcast.

65:28 >> First time they came to Bangalore, I'm like, "Let me take you to a, you know, they love pizzas." >> That's my marketing, >> you know, >> that's my word of mouth. >> So, so I think that's what that's what needs to be cracked for anybody who's watching this potentially starting. And it's and you know, so inspiring to see that even for a new brand when you have a base. I'm sure you have the capital. You still went ahead and did a pop-up for a smash guys before you go you went all out.

65:49 >> Yeah. >> I think that sort of you you're practicing what you're preaching, which is really powerful. >> But thank you so much. I hope you had a good time. Thanks for taking all the time and and thanks for like giving all this knowledge. >> No, I really appreciate it. You know, a lot of my followers on Instagram have been asking me to do some sort of course or and you know, for some reason that doesn't motivate me. I I don't feel like becoming a teacher just yet.

66:13 >> But thank you for giving me a platform where I'm able to fulfill some of their wishes. And I hope this was useful to any upcoming entrepreneur, not just in FNV, but in any business. So >> awesome. Thanks. >> Thank you. My sword.