About food, tech and funding in India

How technology and local menus have seen a rise in funding for quick service restaurants (QSRs)

Indians are foodies and their palate is used to red hot chilies. McDonalds, after experimenting with Western style hamburgers, learnt this lesson and filled its offering with Indian curries. KFC launched in India with a fiery menu realizing that Indians like to eat chicken with tears rolling down their cheeks. The fast food industry, especially the home delivery model was epitomized by these two, along with Dominos providing pizzas with Indian toppings. It therefore didn’t come as a surprise when another food delivery startup, Fasso’s, entered the market in Pune, but it certainly raised eyebrows when Sequoia Capital decided to invest $5 million in Faaso's way back in 2011.

When my daughter first tasted Fasso’s veggie wrap, she called it Chappati (Indian flat bread made with wheat) filled with vegetables. My wife declared that she could make better stuff at home. Slowly its menu changed and probably also its fortune. Fasso’s received another big dollop of funding of $20 million this month. And now sitting at my dining room table, the first question which came to my mind was this – why did this enterprise receive funding while many others are languishing in the backyard kitchen?

First off, I realized that Fasso’s is not the only one which has received funding. Obviously a slew of investors are salivating at the prospect of making big money out of quick service restaurants or QSR. Box8 started off as Poncho with a Mexican menu. Typical of young entrepreneurs, Amit Raj and Anshul Gupta quickly realized which side of their bread was buttered – the Indian side. They threw in the Mexican towel and donned an Indian avatar. They converted to Box8 and seem to have hit the sweet spot. Funding from Mu Sigma and Indian Angel network in 2013 has allowed it to set up 16 outlets in Mumbai city. The high cost of real estate in Mumbai is however a major concern and probably, Box8 will have to think outside the box to manage this.

Hello Curry, a Hyderabad based QSR is planning to raise anywhere between $6-10 million in a second round of funding to fuel its expansion plans. Its menu has always leaned towards the Indian taste and it doesn’t seem to be in a hurry to change the menu. Incidentally, Hyderabadi curry is famous for red hot chilli flavor which the locals relish. Outsiders are however advised to taste local cuisine at their own risk. There are numerous other QSR in the fray. Ammi's Biryani serves customers in Bengaluru and aims to double the number of stores to 150 this year.

Frankly, attracting funds for eateries and food joints looks like a herculean task. I was therefore curious to know the ingredients of success. Pedigree seems to the most important factor in attracting investment. Jaydeep Barman and Kallol Banerjee, the promoters of Fasso’s didn’t know much about the food business when they launched the venture. What probably helped them get funding was the fact they were alumni of Indian Institute of Management (IIM) Lucknow and INSEAD. Moreover, they quit their high paying jobs at McKinsey & Company in London and Bosch in Singapore respectively. Venture capitalists like commitment and pedigree which they both had in ample measure.

The guys behind Box8 have a similar background. Raj is an aerospace engineer from IITKGP and Gupta a chemical engineer from IIT Bombay. Manish Jethani, founder of SpoonJoy, a QSR from Bengaluru received funding from his erstwhile colleagues, which includes Flipkart's Co-Founder Sachin Bansal and Chief People Officer Mekin Maheshwari.  10000startups, a NASSCOM initiative has promoted QSR’s through various channels. It held a panel discussion in their Kolkata warehouse on food industry in November 2014.

There is another factor which is common to the QSR’s which have received funding – technology. Fasso’s success hinges on its delivery process. It has used social media tools to spur growth and used Twitter to generate orders. So much so that when it launched in Bengaluru, it asked customers from Pune and Mumbai to Tweet orders for their friends. It has even released a mobile app recently and reported 70% sales from this channel alone. Fortunately most of it customers are from younger generation and are extremely tech savvy. Youngsters also like to experiment with the menu.

Another important part of Fasso’s tech menu is business intelligence and data analytics. The company heavily rely on analytics to create and sustain customer base. Barman, co-founder of Fasso’s claims that a major portion of recent investment will be spent on technology related matters, both backend and frontend. 

Box8 is no different. It also depends on technology to drive sales and recently launched an Android and iOS app for placing orders. The food from Box8 is packed in five different layers. “We use an innovative presentation that gives an amazing burst of flavors,” says co-founder Raj. This is an important concept since foodstuff in India is likely to perish faster given our warm climatic conditions. Innovations such as these are probably crucial to the success of QSR’s in India.

However you look at it though the food business is extremely risky. Even McDonald’s, a well-established eatery, had to struggle to hold on to its customers by cutting down its menu. Now customers want to be fed faster and with a healthier diet. The scenario in India is far more complex. North Indians want Chole Bhature while people from the South prefer Idli and Dosa.  Customers want freshly prepared items. Yet use of perishables means you have to bear losses. QSRs who find innovative solutions to tackle these issues will survive.

Technology alone will not guarantee success. You need experience, energy and the money to sustain losses till the business becomes profitable. In the end, it’s the menu which will decide their future.