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Restaurant businesses face growing up pains

One of the biggest challenges facing the industry is the prospect of getting licences from municipal authorities and getting clearances from the police, reports Ruchi Hajela.
Hindustan Times | By Ruchi Hajela, New Delhi
UPDATED ON OCT 01, 2007 01:05 AM IST

The country’s restaurants are waking up the challenge of running fast with their hands and legs tied.

Call it growing up pains or inheritance of the Licence Raj, those who make a business out of a growing middle class that loves to eat out in a booming, post-reform economy are realising that they have to get organised about the business of running eateries, which is lucrative but full of roadblocks.

Last week, 513 members of the National Restaurant Association of India (NRAI) gathered in Delhito plot a course of action to collectively reduce their common burden, but are still grappling with the details.

To start with, NRAI is identifying an agency to study the market size, characteristics and growth potential of the industry. That hopefully should give some structure to this unorganised industry, NRAI officials say. The growth pangs are strong. In about a month's time, NRAI hopes to add 200 more members to its ranks.

One of the biggest challenges facing the industry is the prospect of getting licences from municipal authorities and getting clearances from the police. The process is tedious, and not something easy for those who would rather worry about the favourite menus of demanding customers.

Each approval requires a restaurant owner to meet set standards on the dining area, training of chefs and parking space, among other things. Corruption resulting from an "Inspector Raj" is common. "If you have the money, things can get as simple as exchanging a few notes," says a restaurant industry executive.

Difficult conditions have not stopped some from opening restaurants without all the approvals required. "There are a few licensed but unapproved restaurants but thankfully almost seven out of ten don't survive for long," Kamal Sharma, Secretary-General, Federation of Hotel & Restaurant Associations of India (FHRAI), told Hindustan Times.

FHRAI is separate from the NRAI, and clubs hotels as well as restaurants. It has some 1,200 restaurantier members, up from about 1000 members in January. Both the associations are planning to step up lobbying and collective efforts to easing troubles on taxation, approvals and licensing, which includes issues such as serving of liquor, retail pricing, weights and measures, excise and service tax.

Earlier this year, the NRAI successfully moved the Delhi high court to fight a challenge that restaurants cannot charge more than the maximum retail price prescribed on mineral water bottles.

Thanks to malls and franchises, restaurant chains are also gaining momentum. Samir Kuckreja, chief executive officer of Nirula's the Delhi-based eatery chain which is on an expansion mode, is also vice-president of the NRAI.

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