Recently we were at a startup event to showcase SlickPOS, our cloud-based tech platform for food business and got an opportunity to hear some great advice for young and aspiring food startups. This post is a set of lessons learnt from the fireside chat that happened with three successful food entrepreneurs in Coimbatore, Ranjana Singhal - That’s Y Food, Premkumar - Velan Kaapi and Arun Kumar - Zucca Pizzeria.
Get the 3 P’s right
A food business is a capital intensive business with a high failure rate. Premkumar says, the only way to make sure you don’t run into troubled times is to be focussed on the 3 P’s - Product, Price and Place. These are the most important aspects of any food business and you shouldn’t go wrong with these.
Work out financials daily
This is probably the best advice from Premkumar - to do daily accounting. For his businesses, he works out daily profit and loss statement, cash flow etc. Other entrepreneurs also stressed the importance of financial discipline. If not daily, one should workout financials at least on a monthly basis.
A food business should know where to mark-up and where to cut down the pricing. It would be suicidal to price a common dish exorbitantly, but at the same time if you have a speciality (like a fusion dish), that’s where you have more freedom. A common strategy across food businesses is to have few dishes priced at rock bottom. Once the customer is acquired they up sell the pricier products. McDonald’s uses a similar strategy, they hardly make few cents when they sell a burger, but when the customer makes it a combo with fries and coke, their profit shoots up by a couple of dollars.
Understand your business lifecycle
If you are into a non-staple food business like That’s Y Food, the golden period is typically 10 years. Ranjana says, you have to be aware of this and plan accordingly. This led her to open subsequent outlets, On the Go and Cafe Totaram, the newer outlets are planned in a way to pickup and take over by the time That’s Y Food starts to decline.
Research, experiment and take feedback
When Ranjana wanted to add Mud Soufflé to her menu, she just did not want to have the regular Mud Soufflé. With months of research and experimentation she came up with 11 flavors and made sure her Mud Soufflé were a crowd puller. We have a similar story with Velan Kaapi, who experimented different coffee flavors with their target customer segment and came up with a minimum viable product (MVP) that was liked by 99% of the customers. Only then, they were able to confidently scale up to multiple stores.
Be physically present
Off late there are many entrepreneurs who try to operate a food business remotely while working elsewhere. Arun Kumar from Zucca had personally underwent a similar situation and he recalls how being physically present at the store changed his metrics from being red to green.
Conduct food festivals
If you are a restaurant that specializes in a particular cuisine, you tend to have a specific audience. So, how do you get new customers to try out your restaurant? Food festivals are a great way to achieve this. Make sure to bring in a visiting chef who specializes in the dishes that are part of the food festival. Your visitors are likely to try out some of your original dishes too and there you go, new customers acquired!
Leverage new marketing channels
The best marketing channel for a food business is of course word-of-mouth. However, recently social media and text splash promotions are proving to be quite effective. Do leverage these channels, and make sure you invest in capturing your customer data.
Stay focussed, yet keep growing
A common question among food entrepreneurs is how focussed should they be and if it’s possible to scale up with a narrower focus. To keep the brand strong, it’s important to differentiate from competitors and stay focussed on your core differentiator. This is why Velan Kaapi does not serve snacks as they don’t want to be seen as a bakery. The best way to grow despite staying focussed is to go for a either a forward integration or a reverse integration. Opening a store in new place, having a franchise model are examples of forward integration. A backward integration approach could be cutting costs by manufacturing your own raw materials rather than procuring outside.
If you are planning to open a new food business, I believe these are really valuable suggestions. I would also like to leave a small note about SlickPOS and how we can help your business in some of the aspects mentioned above. We said that a food business should workout financials every day - to do that you need your daily sales figures. By using a cloud-based Point of Sales solution like SlickPOS, you sales data is readily accessible from anywhere. We also talked about experimenting and taking feedback, SlickPOS provides a great way to get private feedback from your customers. SlickPOS also captures your customer details with which you can workout re-marketing strategies. To know more, check out our website, or send us a message on chat - we’ll be glad to help.