Casual dining segment has witnessed the interest of investors during the past few months. The segment has spiced things up for the investors, particularly PEs who are increasingly innovating with their existing brand by incorporating new items on menu.
With investment scenario changing in the country, PEs are today in great demand when one is planning to expand their restaurant business. Nowadays, investors are building the business on their own by creating the back-end ready to introducing the brands in the country.
Cashing in on demand
India is witnessing a lot of F&B activities happening around. “Indian F&B industry is luring for investors today. As an investor, we like the strengthen cash flows at the business level, especially in the casual dine segment, where a store generally becomes profitable in the first year itself. So that excites any investor,” says Ashish Saxena, Partner, TVS Capital and CEO, Tex Mex Hospitality, which owns brands like Chilli’s Grill & Bar.
At the same time, fine dine space in India is very limited. There are very few brands running under the fine dine segment without scratching the surface of fine dine. But casual dine segment caters to the major brands in the country like Yo! China owned by Moods Hospitality, Smoke House Deli and Salt Water Grill by Impresario Entertainment, Barbeque Nation, Olive bar & Kitchen by AD Singh are amongst others who are looking to raise funds through the PE route. Not only this, Impresario is planning to secure around Rs 120 crore from PEs. At the same time, AD Singh’s Olive Bar and Kitchen, which has outlets in Mumbai, Delhi and Bangalore, is also planning to raise Rs 200 crore from a fresh round of PE funding to further scale up its operations.
Fine Dine vs. Casual Dine
The other thing which bars investors to invest in a fine dine segment is the limitation of stores. One can have around 8 to 10 fine dine restaurants in India and that too only in the major cities where people can spend more on eating. In the QSR or casual dine segment, the boxy economy is slightly more dependent on the economies of scale. So you need to have at least 20 or 30 stores in a city to get the economies of scale to make the business profitable and it takes a lot of time to build that kind of network.
Throwing more light on it, Saxena explains further, “For an investor to have ‘low profitability or no profitability period’ is very painful. Hence our preference at TVS is towards casual dine sector, where you have to manage a limited number of stores getting the immediate profitability. You can break-even in the first year itself and start generating cash flow in order to get the returns”.
Ashish Kapur, Managing Director, Moods Hospitality, who owns brands such as Yo! China and Dimsum Bros is ready for his second round of PE funding, after having received an initial investment from Matrix Partners. Commenting on the same he confides, “The key for any investor is the scalability and casual dine segment is the most scalable segment today when compared to a fine dine segment. The success of Domino's, Barbeque Nation and other successful restaurants has become a proven track record for this segment.”
Sharing the same idea, Siddharth Bafna, Partner and Head, Corporate Finance, Lodha and Co, reflects “Unlike QSRs, which takes time to get profitable, casual dining has become a sustainable format and can be scaled up in a profitable way.” Not only this experts believe that casual dining is experiential and not transactional like QSRs and hence, this segment is attracting more PE attention.