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FOOD FRANCHISE: SHIFT IN DEMAND FROM DINE-IN TO QSR AND ITS IMPACT ON BUSINESS

28 Feb 2020

FOOD FRANCHISE: SHIFT IN DEMAND FROM DINE-IN TO QSR AND ITS IMPACT ON BUSINESS

In this rapidly changing world one thing which is constant is the Demand for Food and how much busy you are in your work, you always take out time to diminish your hunger. There was an era when people have enough time to manage their all day schedule and food was one of the important milestone in their routine or we can say that “people work for food” but as the time changes and we have landed in the era of fast pace life with no-time to even think, the saying “people work for food” has also been drastically changed to “people have food for work”.

In the older era the main focus was on home cooked food and people will only go to dine-in restaurants to spend quality time, for changing their routine taste buds, organizing or attending party’s etc. but now they only dine-in for some special occasions that to once in a while.

This shift in the preference has been happened due to the lack of time, travel and disposable income and over and above the Home Delivery and Digital Aggregators have also taken a toll on the Dine-In business as they are providing a door step delivery which is now convenient for the families (majorly where both the partners are working) to enjoy the ready to serve meals on their Dining Table without any efforts. Now they don’t have to waste time in getting ready to go out for the dinner and the general phenomena is they order food in-route to home from office which saves their time and energy both.

Globalization and technology are also one of the key drivers to explore the various cuisines and prompting the taste buds to experiment and as this part of the world has the highest younger generation which are majorly deposed from their hometowns and floating in the nuclear format fuelling the pace of online ordering.         

This drastic change in the thinking has opened the flood gates for the Quick Foods, Junk Foods, Ready-to-Eat Foods etc. which has given the birth to sea of brands catering the demands of the end users. In the last five to six years the technological advancement has supported the Indian Traditional Foods also and a concept has been evolved for longer shelf-life products and easy to cook and serve options which promptly support the delivery options.

Now we have understood the reasons for the shift due to the rapid changes at the front side of the counter (Consumer Side) now let’s move towards the back side of the counter (Business Owner Side) to ascertain the impact on the Business in totality.  

As we have now reached at the back side of the Counter so first let us get into the shoes of Business Owner to understand the situation amicably. A business owner has to be typically juggled around the Investments, Overheads, Revenue Generations & Return on Investments and above all he or she has to maintain and constantly improve and upgrade the hospitality.

Let’s understand this by numbers; typically a dine-in restaurant requires atleast 1000sft of usable space with minimum seating capacity of 50pax. and to handle the operations around 20 people workforce is required to run the show right from the Manger to Housekeeping. So now there are two types of expenses which are required for the business which is CAPEX & OPEX.

CAPEX stands for Capital Investment which is one time investment and required to setup the Restaurant. So when we say one time investment the value wise it ranges from 50 lakhs minimum to 5 Cr. depending upon the space usage and the specifications of the interiors and facilities involved.

OPEX stands for Operating Expenses which is also known as recurring expenses and is required for smoothly running the operations of the restaurant. E.g. Rent, Manpower Salary, Electricity, Raw Material Cost (Food Cost) etc.

So to run a typical Dine-in Restaurant first you need to invest heavily on structuring or shaping the premises and then to maintain and run the show you have to shell out on an average 10 lac – 20 lac monthly in which almost 30% - 35% is the Rental Value of the property.

Now to manage the Monthly expenses and to look for the Return on Investment you need to target month-on-month sales which would cover your expenses and  generate profits for you which is biggest headache in the current scenario due to the shift in the usage pattern of the consumers who are now more inclined towards ordering at their own bay rather than travelling and availing the services of Dine-in concept.

As we have seen the expenses and challenges in establishing and running of Dine-in restaurants, now let’s talk about the QSR (Quick Serving Restaurants) setup and expenses to inculcate the business trends and the reason behind the diminishing demand of Dine-in Concepts.

Again let’s understand by numbers; typically a QSR requires atleast 200sft of usable space (In case of full menu kitchen) and QSR concept does not require large seating facility and can be run with minimal or no seating arrangements. This concept has a small frontage which is used for taking orders and delivery of foods for take-away & delivery orders. This concept does not require more than 4 – 5 people workforce and the aesthetic looks and the appearance of the manpower doesn’t matter a lot. In this concept the only thing which matters a lot is the TASTE of the Food and the Hygiene.

So the CAPEX and OPEX in this concept is also much lesser than the Dine-in concept but the business revenue is way higher than the previous concept. Here you will be reaching to the customers more than customers reaching to you to avail your services which in-turn increase the area of operations (delivery of the foods) and to assist them there are lots of food aggregators who are assisting big time in this concept to make it more successful and easy to handle concept.

So basically QSR concept is liberating you from a particular behaviour which is required to have while visiting Dine-in restaurants. The QSR concept is giving you the privilege to create your own rule in your own place to consume your meal without any fear that what others will think. Also you are saving a lot of money while using the QSR concept as you will have a lot of options available in terms of ordering the portions of food and due to the lesser operating expenses the prices of the meals in  this concept are way cheaper than the dine-in one. Same with the Business Owners also as they have to shell out lesser investment to start the QSR concept and the operating expenses will also be at the minimal and easily manageable which gives the synergy to sustain the business and achieve the desired ROI in the shortest time period as compared to Dine-in concept.

By – Gaurang Mohan; Mentor, M.D. & CEO – FranchiseNeed (Building Entrepreneurs)