The next five years will see the survival of the fittest (and finest) as food and beverage (F&B) entrepreneurs face rising rents and high employee turnovers.
But there's good news for restaurateurs and entrepreneurs. A leading independent provider of business intelligence, Euromonitor International's 'Consumer Foodservice in India' report states: consumer foodservice value sales grew at a strong 14 per cent in the country in 2006, second only to Vietnam and Indonesia. A robust economy that put more money in the hands of consumers, growing disposable incomes, increases in the number of working women, and the convenience offered by these outlets all contributed to growth.
Mumbai, too, seems to have to have it good as Kamlesh Barot, managing director of Encore Hotels, pegs the growth rate of the city's restaurant trade at nine per cent in 2006. A D Singh, who owns premium Olive Restaurant in Khar, believes the market has matured tremendously. "There is a huge growth right from the vada pav business to the very high-end restaurants," he said.
But Nilesh Shetty, committee member of Indian Hotels and Restaurant Association and joint secretary of Hotel and Restaurant Association (western India), feared that smaller players, like udipi joints, will face a setback. "Many south Mumbai udipis are shutting shop as they cannot afford rentals and overheads when they're selling idlis for Rs 7," he said. "Also, the floating population in south Mumbai has declined considerably since offices have shifted to Andheri and Bandra-Kurla Complex. As a result, only stand-alone restaurants in the north-western suburbs of Mumbai are doing well."
Two problems haunting restaurateurs are high rents and employee turnover. "The next five years are a crucial testing time for restaurateurs," said Amrish Arora, managing director of Fountain Hospitality. "Rents have sky-rocketed, and only if you have a fantastic product can you survive in the business."
Said Shetty, "Owing to more job opportunities for unskilled labour in housekeeping, malls, fine dines in the Middle East, and the opening of secretarial posts, there is tremendous shortage of labour in the restaurant business."
But the fast food industry is thriving. According to Euromonitor, India saw the most dynamic growth within fast food in the Asia-Pacific region in 2006, witnessing value growth of more than 20 per cent that year, while McDonald's remained the leading consumer foodservice player in 2006 with a 13 per cent share of total chained consumer foodservice value sales. As players continue to build strong regional brands, the franchising of outlets is expected to become more commonplace between 2006 and 2011.