After a trip down busy Mint Street in Chennai and sampling the vada pav at a small eatery there, 24-year-old Lingesh Waran, a self-confessed foodie, succumbed to the charm of this Mumbai street delicacy. This immediately set him and his friend Deepak Bhattad on its trail in Chennai and later, Mumbai. The journey culminated with the genesis of ‘Vadaa Paa' kiosks early this year in Chennai. While it's early days for Lingesh and Deepak, initial indications appear positive, with certain outlets having footfalls of 300 people a day.
Vadaa Paa is one of the latest entrants in the food kiosk space. The last few years have seen many players such as Burgerman, Nirula's Express (fast food and beverages) and Go Chatzz (North Indian street food), offering both Indian and international cuisine. Salad Chef, Big Mos' Rolls and Wraps, Yo China, Chai Garam, Chokola, Candy Treat, Sweet World, Mr Orange and HAS Juice Bar are the other names heating up the space. The market is not just brimming with Indian players but also has some international players such as the UAE-based Star Engineering Group, which plans to launch a chain of ‘Chickeez' kiosks retailing hot dogs and burgers across India.
What's ticking with the kiosk model in food retailing? BrandLine finds out.
With small capital and fewer overheads, the kiosk model is certainly compelling, especially for first-time entrepreneurs such as Lingesh who started Vadaa Paa immediately after completing his management education in New Zealand.
The infrastructure needed is basic – a reasonably large central cold kitchen with blast facility (for freezing food) and kiosks to dispense food. A typical kiosk costs about Rs 1 lakh and there is no need to invest in seating space. “It has relatively lower operational costs – a limited menu and staff, consumption of fuel, the water and electricity is also consequentially lesser than for other formats,” says Pratichee Kapoor, Associate Director, Retail, Technopak Advisors.
Running costs are also less. “We just share commission with retail space owners – 10 per cent of sales,” says Lingesh.
With real estate costs escalating each day, the kiosk model is a sure winner. Kaati Zone, the Bangalore-based QSR chain which started with the dine-in format, has now chosen to go the ‘kiosk' way. The reasons? “To battle escalating real estate prices and to give the grab-and-go convenience to people,” says Kiran Nadkarni, CEO, East West Ethnic Foods, which owns Kaati Zone.
Kiosks also do not need too much space - typically the size of a kiosk could range from 30-100 sq. ft; it also offers high portability and flexibility in terms of its location and placement, says Kapoor.
It is like producing in an assembly line. The food is pre-cooked in the kitchen; the kiosk is used to just heat and serve. “Complex food preparations can't be done in the kiosk due to space and other constraints,” says Gaurav Marya, President, Franchise India. Since the overall investment is in the range of Rs 1-3 lakh, the model is highly scalable and replicable, he adds.
Variety is also something kiosk owners can experiment with and feedback is almost instantaneous. For instance, the ‘Petawrap' kiosks, which are shaped like autorickshaws, offer wraps in dizzy combinations – vada pav wraps, Lebanese falafel wraps, masala chana and Punjabi paneer wraps, chicken kebab and Chettinad chicken wraps and more! Bangalore-based Cane-o-la offers sugarcane juice in flavours such as mint, ginger, salt and pepper, chaat , and natural flavour.
The menu can be localised to the extent of catering to a specific locality/area within a city. For instance, a kiosk at an office complex and one near a college campus can have different offerings on the basis of customer preferences and what sells most, says Kapoor. And if you thought this concept works well only with the youth, think again. Says 28-year-old Rakesh Raghunathan of Chennai-based Petawrap (which owes its name to a popular Tamil movie song ‘ Pettairap ' – roughly translated it means song of the masses), “We not only have children and youngsters eating, but also so-called conservative people over 50 years of age. Vegetarian and non-vegetarian is made in two separate grillers and all our staff wear gloves, so we don't compromise on hygiene and safety which is critical in this business.” Petawrap, which draws its inspiration to serve healthy food from the burritos in the US, had even set up stalls at Chennai's Chepauk cricket stadium during the last edition of the IPL. Its kiosks are present in the Cognisant office campus, at Pantaloons outlets and near Krishna Sweets in Chennai.
While kiosks offer several advantages, there are certain challenges too. The major challenge is in getting the supply chain and delivery mechanism right. The food has to be delivered to the kiosks at farm-fresh quality. Maintaining quality safety standards across all outlets is tough. Stock-outs and spoilage due to improper storage are likely as there is not much scope for back-up storage in the kiosks. If this critical piece is taken care of, a business can break even in just six months and get a return-on-investment in 12 months, says Marya.
Although the kiosks are made from good-quality glass and steel (there are enough fabrication manufacturers in India), one cannot avoid the effect of the rains, says Lingesh. Also, footfalls depend on the location. So one must take advantage of high-traffic locations such as outside a petrol bunk, inside a mall, office campus IT parks, colleges or training academies.
Competition from local vendors is high especially as the latter are normally out of tax reach and enjoy the cost benefit, which ends in more competitive offerings. Even among the kiosk operators, competition is building up. Vadaa Paa has a predecessor in Goli Vadaa Pav which today has 100 kiosks in Maharashtra, Tamil Nadu and Karnataka. Cross-product competition is also building up as consumers today have various on-the-go foods to choose from – from ice-creams, salads, and soups to rolls, wraps and candies. And even sugarcane juice!
Cane-o-la, a Bangalore-based company, transformed the consumption pattern of sugarcane juice in just a few months after its launch. Prakash Baliga, Senior Manager, Cane-o-la, says the unhygienic conditions in which the drink was being dished out kept away consumers. On seeing the potential for the desi version of an instant energy drink, the promoters of Cane-o-la launched a long-term R&D project that lasted almost three years before the rollout of the brand started in 2007.
“We created a high-quality ambience, offered takeaways and various flavours,” says Baliga. Cane-o-la now has 14 outlets across Bangalore, Mysore and Cuddapah. The QSR chain has outlets at corporate campuses of Infosys, Wipro and Toyota Kirloskar Motors. Cane-o-La also has kiosks in retail chains such as Big Bazaar and Spencer's. In addition, the company has tied up with the State Government to set up kiosks at public places such as bus terminals.
Baliga says business peaks from January to May with outlets selling close to 400-600 glasses per day. Cane-o-la is now looking at expanding to other States, but sugarcane availability would be crucial.
Whatever be the challenge, kiosk players stand to gain through expansion, especially through the franchise route. Petawrap, which has six kiosks in the city, is looking at 15 by the end of 2012. It is also in talks for expanding to Bangalore, Hyderabad. Vadaa Paa is looking at three more kiosks in Chennai, before moving to other Southern cities next year. It is also exploring the franchisee route. .
Being an easily replicable model, kiosks lend themselves well to franchising, says Marya of Franchise India. “But the municipal corporations need to come out with administrative rules and safety standards to govern kiosks so that illegal ones don't crop up. Currently, there are no clear guidelines. If guidelines and standards are in place, the gadiwallah too can become a franchisee – he just needs to evolve and get organised and maybe get himself a brand,” adds Marya.