Recipe for beefing up business

When it comes to the business of food — there’s one metric that matters more than anything else — ‘turns’. ‘Turns’ refers to the speed, volume and frequency of turning over the food to customers.

The number of customers that a restaurant serves, how quickly tables get filled and rotated, how soon items move off the shelf – all determine ‘turns’ in some manner. Successful companies in the food business – be it restaurants or packaged food - generally focus on achieving high ‘turns’.

The more expensive and esoteric the food, the more slowly it moves and the less fresh it is for consumers. To avoid loss due to wastage, the companies end up preserving them much longer than it is safe.

Gradually consumers realise the drop in quality and stop patronising the product/outlet. Word of mouth spreads and soon sales nosedives making the whole operation unviable. What this means is that the high turns strategy is safer compared to the low turns strategy.

Increasingly, with both spouses working, eating out and buying ready-to-eat food for the home has become common in urban households in India. This has resulted in a huge boom in the food business — be it off the shelf products or restaurants — with many listed and unlisted companies investing heavily into this space.

Take any local newspaper and it is easy to see that restaurants are the largest advertisers next only to real estate and movies.

Although most restaurants still belong to the unorganised sector and are one outlet wonders, the trend of professionally run national/ regional restaurant and fast food chains is increasingly catching up. The recent listing of Specialty Restaurants and Jubilant Foodworks is a case in point.

It appears there are certain key elements that enable successful Indian food chains to generate high ‘turns’. Here are a few:

Not too fussy ambience: An exotic and lavish ambience may attract people for a couple of visits, but it takes good food to keep bringing them back. No restaurant can survive without a strong patronage from repeat customers. Successful restaurants understand this and save money by not going overboard on the ambience.

Fast food and takeaway model: The faster the turnaround time to serve and the less dependency there is on seating restrictions, the more customers the restaurant is able to service. This translates to high revenues per unit cost (in terms of both capital expenditure and operating expenditure).

Consistency: Successful food chains take pains to standardise everything from ingredients to the serving portion, so that customers know exactly what to expect every time. Consistent taste, quality and service are given high priority. Such process standardisation helps reduce turnaround time to serve.

Avoiding bloated menu: Food chains that have achieved high profitability have managed to do so by saying ‘no’ to scope creep i.e. they limit the scope of their menu to a manageable limit rather than trying to offer everything under one roof. Focus enables them to guarantee superior taste to their customers while reducing time to prepare.

Large customer segment: Food chains cannot achieve high ‘turns’ by targeting a narrow/ highly niche customer segment.

Hygiene: Popular restaurants know the difference between hygiene and opulence. The latter, while more expensive to provide, need not imply the former, which is really what most customers want. It doesn’t cost much money to maintain acceptable standards of hygiene, but it takes time and effort, and is critical for upholding reputation and high ‘turns’.

In summary, the secret to achieving high ‘turns’ in the food business may sound simple, but may not be so easy after all. No wonder new restaurants have one of the highest failure rates among start-ups.

(The author is a business consultant. The views are personal. Feedback can be sent to >perspective@thehindu.co.in )

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