Who wants to be a restropreneur?

The start-up sector is rife with newbie entrepreneurs dishing out novel recipes for success. Even professionals from varied backgrounds are chucking jobs to dive into the restaurants space, a segment fraught with cut-throat competition, restricted margins and overflowing expenditure in terms of rentals, décor and marketing.

Positioning their elegantly decorated ventures as "restobars'', "gastropubs'' or "microbreweries", these entrepreneurs are exploiting their talent and resources to carve a niche in this friction-laden space that sees more closures than openings. In fact, for every successful restaurant, there exist 10 unsuccessful ones that have closed shop within a fraction of time, as per industry data.

"But food and restaurants still echo a lot of promise, especially for entrepreneurs like us," says tennis player-cum-restropreneur Prarthana Pratap, co-founder of Rever Hospitality which runs Sotally Tober, which is positioned as a "neighbourhood bar".

"The biggest decision I made was to leave the corporate world in which I was doing fairly well, which is risk-free and cushy, and to embark on a journey that requires your attention and time 24x7," says Deepti Kat, partner at Lady Baga and an alumnus of the London School of Economics.

Their inherent zeal for food and dining is what compelled these women to don the entrepreneurial hat. And, of course, the magnitude the restaurant business is likely to scale was a big attraction. Growing at 10% per annum, the restaurant industry in India is predicted to cross $126 billion by 2020, according to estimates by Aaron Allen & Associates, a global restaurant consultancy.

Now once into the game, the restropreneurs admit towards encountering a host of challenges.

Malika Suri, who practised child psychology before foraying in hospitality with the launch of Mimansa, an urban wellness cafe under Azure Hospitality, says, "A superficial first impression of the restaurant operations makes one believe that this is an easy business with low to medium investment at the start."

But unlike entrepreneurs who operate on technology-driven models in the foodtech space requiring very little physical infrastructure, the challenges for restropreneurs commence way too early. The women admit restaurants are highly capital intensive, needing lakhs to crores of rupees as initial costs. Then follow the skyrocketing rentals, manpower training costs and other overheads.

"When one's brand is trying to create something unique, something as simple as sourcing chemical-free produce becomes a challenge. Creating awareness even within our teams is a tough task as many individuals are unaware of the going-ons in the food industry," says Suri.

With increasing market competition, margins remain elusive. According to Suri, profitability depends on the model one is operating upon. "There are penetrative volume-driven models or high investment-high return models. On an average, margins can be anywhere between 5 and 30%.''

Double-digit margins, even though they exist, are rare, especially for upcoming restropreneurs.

Says Kat, "If one runs on a tight budget, a restaurant can succeed in making an overall profit margin of 20-25% in an ideal state. However, in reality, it is more likely to range in 12-20%. The effort-to-reward ratio in the F&B (foods and beverages) business is relatively low." Kat adds that it is far easier to open and sustain a retail store in India, as even though the margins are narrow, "retail is a far more organised sector with fewer entry barriers and offers better longevity.''

Given the challenges, restropreneurs are planning to go slow in terms of expansion, embracing the "wait-and-watch'' approach.

Payal Shah, co-owner of the pub Bootlegger in Bengaluru, says, "We are currently looking to expand to other cities. But our main challenge is to understand the laws and licensing, as each state has its own rules.''

Pratap of Sotally Tober says they are focused on market research to identify the right markets that can suit their business concept.

According to Kat, although Lady Baga did a series of expansions in the recent past, at present, "given the uncertain environment and the trend of ever-changing rules, it is more important to expend our efforts into consolidation, rather than expansion."

Nos:

• $126 bn - The restaurant industry in India is predicted to cross by 2020
• 10% - Its growth rate per annum