The greatest leveller in Mumbai is the ubiquitous vada pav. Be it the common man on the street or a honcho with a corner office in a MNC, it is one dish few can refuse.
When McDonald’s entered India in 1996, there was a clamour for its burgers and fries. Yet, the sway of the humble vada pav remained unshakeable.
This got a young Dheeraj Gupta thinking on how he could build a business that capitalised the charm of the dish but adopted the operational efficiency of the giant QSR chains. In 2001, he took a loan of INR 2 lakh, rented a 160 square feet space outside Mumbai’s bustling Malad railway station and launched Jumboking.
Modeled on the lines of McDonald’s popular burger, not only was the snack 20% bigger than what was served by street vendors, it was also sold in a hygienic packaging. By March 2020, the brand had grown to 103 stores and is set to expand to 180 outlets by March 2022 across 11 cities.
However, Gupta maintained that 80% of these stores will be Mumbai-based. He outlines some inflection points in the business over the past two decades and shares his view on why franchising is the path to success.
KEY BUSINESS EVOLUTION
Firstly, the industry has become more product-focused, and Gupta would like to believe that Jumboking’s success had a role to play in this. There are QSRs focusing solely only momos or biryani. Kind of brand specialisation benefits customers who gain from better quality and prices. This was not the case a decade ago, so, it is a huge shift.
Another major transition is how outsourcing has taken centerstage. From wanting to do everything inhouse, like putting up their kitchens or holding on to secret recipes; all players have collaborated with high quality manufacturers.
“The entry of international brands has ensured that good infrastructure has developed on the supply chain
side. Brands are now outsourcing their food requirements to these companies, becoming more efficient,” Gupta noted.
The most important evolution has been the growing adoption of franchising. More serious players are getting into the fray as there is only one definition of adding genuine value to the franchisee. According to Gupta, as business models get more refined, it will result in the emergence of 100% franchise-focused brands that have several advantages over hybrid business models.
And how can one miss out off-premise delivery apps. Brands like Swiggy and Zomato that emerged in the delivery space are fulfilling the last mile promise. They are amongst the most important partners of restaurants.
Another key element is loyalty as a business advantage. Technology has provided F&B companies the opportunity to invest in loyalty programmes. “This was not possible when Jumboking started in 2001 because the technology was not available. Today, brands can focus on identifying and rewarding their most loyal customers,” Gupta recalled.
LEARNING ON THE GO
Rather than worry about the competition posed by international QSR brands like McDonald’s or KFC, one has several opportunities to learn from them. For starters, they have shown how business has to be entirely system and process driven. This is the only way to ensure scale.
“Moreover, their business is all about building investing, training and creating very strong teams. That is how they are able to keep ramping up while maintaining their quality standard,” Gupta pointed out.
If asked to sum up three lessons from the big global QSRs, the first for him is delegating control. This reduces costs significantly. During COVID-19 times, such systems are like earthquake proof buildings that can survive the shocks and its aftermath better.
Another key learning is speedy system-wide implementation. As businesses go digital, speed is the new competitive advantage. Ideas are no one’s monopoly – the one who implements his ideas faster and better is likely to become the market leader.
Gupta has also learnt about the merits of long-term evaluation from these global brands. Companies must rethink the need for relentless quarterly and annual evaluation horizons that compromise long-term resilience.
FAVOURING FRANCHISING
When it started out, Jumboking operated company-owned stores. Today, it banks on the franchising business model. The reason is simple – this model leverages the entrepreneurial energy and collective might of franchisees to offer value to the consumer. Moreover, centralised purchasing extends benefits like economies of scale, which is normally enjoyed by big businesses.
“Also, the discipline of a centralised system naturally ensures labelling items by date and using older items first and minimum overstocking. The menu is created to uses more of the same ingredients. The menu is also tracked to replace low-performing items with continuous innovation,” Gupta explained.
In a franchise business, the back end operation is centralised. Moreover, technology is employed to create better schedules and a more efficient kitchen, thus distributing costs over many stores. Hence, employee cost is reduced to 15%.
Moreover, in a franchising set up, Gupta noted that the kitchen area can be reduced to 20%. This is significant because location is a big consideration while opening any restaurant. Buildings with higher foot traffic may have higher rentals and an entrepreneur would not want to tie up expensive real estate in activities like cooking and preparation. “This particular operating expense takes a lot of thought as it can potentially make or break your business,” he added.
Franchising also bypasses the high costs of initial customer discovery and conversion. As markets recover, franchises will have access to a more robust centralised marketing budget and social media presence which will be critical to thrive against competition.
