Barbeque Nation is banking on tier 2 and tier 3 markets for its next growth phase

Casual dining restaurant Barbeque Nation (BBQ Nation) is now banking on tier 2 and tier 3 markets for its next phase of growth. Earlier BBQ Nation's focus was primarily on metros.

As spending capacity of consumers is growing in these regions, tier 2 cities are developing as growth hubs for restaurant chains. Metros currently have 44% of casual dining restaurants,  small metros have 34% and a very small percentage is currently in the smaller towns.

Kayum Dhanani, Managing Director, Barbeque Nation Hospitality Ltd, said "We have served over 24 million patrons over the last 4 years and are now charting the next phase of growth in our journey." For this next growth phase, BBQ Nation has launched a new business model with comparatively smaller restaurant sizes of 3500-4000 square feet with a capex of Rs 1.9 crore. BBQ Nation outlets of 4,500-6,000 sq ft requiring an investment of Rs 2.75 crore. "Even though the prices in smaller cities are less by 15%, the profit margins are similar to that of our outlets in metros," says Dhanani. They have opened 24 outlets under this new format in cities of Dimapur, Thrissur, Erode, Vellore, Jhansi and Bareilly.  

Another focus area of the brand is opening outlets overseas. The company has already opened three stores in Dubai and is set to open another in Sri Lanka and Malaysia in the next few months.
It is with this focus on international shores and hinterlands that the company claims has made it the fastest growing casual dining chain in India, at 29% year-on-year over the last 4 years.

"Our rent to revenue ratio is 10% which is better than the industry average. We are able to maintain it because of the uniform cover charge format due to which there is no uncertainty in the bill and it becomes preferable for people who want to do an official party or a celebration. Hence, more than 50% of our customers come in big groups of four-five," says  Dhanani. In fiscal 2017, about 17% of total reservations were made through the BBQ App and 58% of the guests made advance reservations. The advantage of that is we don't need to be located right on the main street which reduces the rent considerably, he adds.

The company has also filed for its IPO which is likely to happen this year. It aims to raise Rs 160 crore to fund this expansion and use Rs 85 crore to settle its debt.