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A Fine Dine Dilemma

The Indian Restaurant Industry has taken shape in the following

ways in the past 10 years.

The Indian Food Industry has seen an exponential growth over the past 5
years, with the Indian economy continuously improving.
The Indian food

industry is poised for huge growth, increasing its contribution to

world food trade every year.

In India, the food sector has emerged as a high-growth and

high-profit sector due to its immense potential for value addition,
particularly within the food processing industry. The Indian food
industry is expected to grow at the rate of 104% to 482 billion
dollars by 2020.The 70% share of the food industry comes from the
retail sector. This is where the restaurants and the food joints of
the country come into account.
The Indian Restaurant industrys net worth is Rs.75,000 Crores with
the organised sector only occupying 10,500 crores.


Valuation Metrics

Publicly Traded Restaurants

Apart from the positive macro outlook, lack of listed pure play
restaurant companies in India driving up valuation multiples India
India
Companies

EV*/Revenue

EV**/EBITDA

Speciality
Restaurants

3.8x

19.6x

Jubilant FoodWorks

5.8

31.7x

Worldwide
China Bistro, Cheesecake
Factory

0.9x

7.7x

Darden Restaurants,
Buffalo Wild Wings

1.0x

7.8x

Dominos, McDOnalds and 7

others

2.1x

9.9x

*EBITDA : Earnings Before Interest,Taxes,Depreciation and

Amortization
*EV : Enterprise Value

The industry is highly fragmented with 1.5 million outlets. Out of

this only 3000 outlets form the organised sector.However, the
organised sector is rapidly growing at a rate of 16%. Quick service
sector leads here with 21% growth. The restaurant industry is well
set to expand in the next 5 years to a much higher level, but with
the increase in the market size, there will be a far greater
increase in the competitions and much lesser revenues for the
individual restaurant owners.
Here are some stat pieces to describe the situation in Dwarka area
of New Delhi:-
1. The population of the Dwarka area has doubled up from 5 lakhs
in 2009 to 10 lakhs in 2016.
2.

The number of bars have increased from 5 to 30.

3. The number of restaurants have increased from 40 odd to more

than 150.
4. The electricity which used to be a monthly Rs.35,000 has
quadrupled to close to 1.5 lakhs.
5. The cost/plate which used to be around Rs. 2500 in a 5 star
hotel 5 years back has rather declined to Rs. 2000 in 2015, because
of the immense competition in the market.

6. The staffing cost which used to sum up to Rs. 70,000 is now

Rs. 5,00,000 annually.

Problem Statement

You are an aspiring entrepreneur. You have been wanting to open a new
restaurant in Delhi-NCR. Your investors have allotted you a budget of INR
2,50,00,000 for the same.

The given analysis is the report prepared by you market research team. You have
to take all the important decisions regarding :

Location

Type of Restaurant including la carte.

Budget allocation for aspects including:

Land

Infrastructure

Staff

Raw Materials

Further, you have to prepare a detailed analysis of the following to be presented to

your investor:

Customer Acquisition strategy for first 3 months.

Sales projection for the first year divided quarterly, clearly mentioning the
break even point (if you meet it)

Customer Retention strategy, including marketing campaigns.