Overview of Restaurant Business:
Since we all know that the food industry is the only industry that has a profit margin of (100-200)% and sometimes more than that; it depends on the type of food chain you have. At the same time, at the back of our minds, we have a fear of failing in the most profitable industry. In comparison to other businesses, we have analyzed that the data of failing of the restaurants is very shocking, i.e., 80% of the restaurants shut down within 5 years due to heavy losses and huge debt. Many of them shut down within 2 years. 80% of the remaining 20 % shuts down in the next 5 years. (Source: United States Bureau of Labor Statistics data and some other experts). So, this content is curated to analyze “Why to Open Quick Service Restaurant Over FSR”.
But on the other side, many of us don’t know; what type of restaurants are failing and how?
The answer is simple! Full-Service Restaurant (FSR).
Full-Service Restaurant (FSR):
That means; restaurants that offer complete cuisine, like Chinese, Thai, Indian, Continental, etc. which is good for fine dining and expensive called FSR. Here, people come to spend some time and eat lavish, and so, the ambience is also designed accordingly. FSR usually does not prepare a lot of food in advance because of the variety they offer. Hence, it takes time for them to prepare food.
Now, you must be confused, “what types of restaurants are there in the market and which one should we open”?
Let me clear this now. There are mainly 2 types of restaurants in the market across the globe.
Full-Service Restaurant (FSR)
Quick Service Restaurant/ Fast Food Restaurant (QSR)
Now your mind will ask you a simple question in confusion;
- Whether to start a QSR or FSR?
- How to start a quick-service restaurant in India?
- Which QSR would be more successful?
We will guide you and clear your all queries by giving you the real planning and way of execution. Also, will brief you step by step, “what to start”, “when to start”, “where to start”, “who to start” and finally “how to start”.
Answer with Reason:
If you are passionate and at the same time, want to grow and run your business with various types of revenues, then you should only go for “Quick-Service Restaurant” (QSR). Try to avoid the “Full-Service Restaurant”. It needs a very heavy amount of investment in designing ambience and choosing a place, a team of extremely professional Chefs and working staff. It has a very limited market size. Only lavish and elite crowd can come and spend some time in FSRs. Also, when comes to expansion through franchise and all; it becomes very difficult to scale and sustain. Due to some of these critical factors, it has a greater chance of failure. This content is curated to analyze “Why to Open Quick Service Restaurant Over FSR”.
Reasons for the Failures of FSR:
- Messy and Long Menu
- Lack of Funding
- Less Qualified and Lack of Quality Chefs
- Limited Target Audience
- Lack of Innovation
- Bad Customer Experience- Operational inefficiency, long waiting hours
- Lack of Industry Experience- Only having money can not give you success
- Global Players in the Existing and new Market- Heavy competition
- No Unique Selling Proposition
- Lack of Patience and increasing anxiety in People – Due to hustle life
- Lack of Automation and Technology
Quick Service Restaurant (QSR):
QSR offers fast food at a reasonable price and minimum time. The concept of QSR is evolving fast because today, people neither have time nor patience. Examples are; Domino’s, Mc Donald’s, Wendy’s, Burger King, Starbucks, CCD, Baskin Robbins, etc.
In QSR, the fixed menu is prepared in bulk in the semi-cooked form. So that whenever the customer requires they can provide the food in minimum time while maintaining its quality. Approximately, 70% of the food items are semi-cooked and outsourced already. The centralized and automated kitchen starts serving food in just 15-20 minutes as per the order.
Reasons for the Success of QSR:
To open a Quick Service Restaurant has now become a trend and norm. In the recent list of top 20 startups in India; which is published by “The Blue Oceans Group” in the month of November 2019; approximately 5 startups are from the food industry and fall under the Quick Service Restaurant (QSR). Why is this so? Let’s see the reasons for its success:
- Very Limited Menu and Fixed Food to Order
- 70% Semi-Cooked and Outsourced Food Items
- Huge Market Size and Opportunity
- Win-Win Situation for Franchisor and Franchisee
- Requires Least Investment
- Easy to Manage and Operate
- Easy to Market and Promote
- The actual cost per meal is less due to bulk production and bulk cooking.
- Easy to replicate; so, sales volume increases.
- Outlets are ready whether it is Mall, Railway station or Market Area.
- Delivers Tasty Food within 10-20 minutes
- 80-90% QSRs don’t Fail
Important Checklist Before Opening QSR:
- Continuous Innovation in Product and Cooking Process.
- Process of Orders, Billing, Inventory holding, Backend support of Supply Chain Management, and Managing must be Digitalised and Technologically Equipped.
- Standard Operation with Centralized Procurement, Receiving Supply (Good quality, Delivery, Stocking) and Inventory Management based on Fast Product, Slow Product, Non-Moving Product.
- Strong Hold on Quality Control such as Cooking, Delivery, Packaging, Services or Billing by Continuous Audit.
- Continuous Evaluation and Audit on Hiring, Training, Handling Complaints, Making Reports, Quality Service, Safety, Cleaning, and Maintenance.
- Positive and Pleasant Staff including Chefs at affordable cost (no need to hire famous or celebrity Chef as all the standards are fixed and you are not running FSR).
- Maintain the everlasting taste of your food. Like Amul and KFC are maintaining the quality taste at the point of their inception.
- Speed of Delivery must not be Compromised. It has to be Speedy Service. Else you will lose the retention on a large scale.
- Try to do Cross-Selling and Maintain your Average Ticket Price. For Example, Combo Meals Provided by Mac Donald’s, Burger King, KFC, etc. It will increase your Revenue and Profit Automatically.
- Cloud Kitchen Based Model
1. Active Sources:
Revenue from direct sales i.e., Per Plate Order
Door Delivery Orders
One Time Party/Bulk Catering Orders
Regular Meal Catering Orders
Being a Vendor for Special Events, Conventions, and Festivals
2. Passive Sources:
- Write a Cookbook and Sell it.
- Earn from Instagram, Fb and other social media channels via uploading Videos, Blogs and Ebooks.
Master Franchise Model:
In this model, a contract exists between both the parties. The Franchise charges a Franchising fee from the sub-franchisees based on certain criteria. For example, a fixed percentage of total sales in a month. The Franchise can open its outlets or have an agreement with sub-franchisees that in turn open outlets under the Franchisor trademark and international retailer charges royalty fee. Eg. Domino’s Pizza, McDonald’s, KFC, and Pizza Hut.
Company Owned and Franchise Model:
In this model, the international franchisor establishes their own office in the country and helps the franchisee in setting up business. Eg: Jumbo King, Goli Vada Pav, Berco’s, Pizza Hut, KFC.
Joint Venture Model:
In the JV model of franchisee, an international entity enters into a joint venture with a local entity to create a new entity that acts as a master franchisee. Eg. Burger King entered into a joint venture with Everstone Capital.
Company’s 100% Ownership:
This is quite risky which is afforded one-side. Brands set up their business with own investments. Eg. Cafe Coffee Day, Haldirams, Fast Trax and Bikanervala, and international brands like Taco Bell.
Closing Key Note:
The detailed analysis is done by the apex industry body “Associated Chambers of Commerce and Industry of India” (ASSOCHAM) on the Quick Service Restaurants and it is found that the QSR industry is growing at a compounded annual growth rate (CAGR) of 25%. Also, it is likely to reach up to Rs 25,000 Cr. mark by 2020 from the current level of Rs 8,500. By 2020, it is expected that 35% of India’s population will be in urban areas by 2020 totalling 52 crores compared to the current urban population of 34 crores.
Due to affordable, recession-free, active crowd, scope of continuous improvement in services, and innovation in product and process, low investment and scope of generating various revenue sources it the critical factor of the huge success of Quick Service Restaurants(QSRs).
If you want to be an entrepreneur and looking to establish yourself in the food industry. Then you should go with QSR and build your brand, image and huge reputation in the market. This industry is waiting for you to step in into this business. And I hope from this blog you must be understood “Why to Open Quick Service Restaurant Over FSR”.
Also Read: How to Start a Quick Service Restaurant