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Global strategy, desi success

Global strategy, desi success

How Dheeraj Gupta used McDonald’s and Burger King as role models when he was setting up his snack food empire.

Dheeraj Gupta
Dheeraj Gupta, 33

Education: MBA (Finance)

Previous work experience: Own business of packaged mithai

No. of years in previous business: Approx one year

Age at starting business: 24 years

Initial investment: Rs 2 lakh (in second venture)

Sources of fund: Family

Company: Jumbo King

Turnover: Rs 12 crore (2007-8)

1. Spluttering Start:

“McDonald’s has its burgers, Subway has its sandwiches, Pizza Hut has its pizzas, so why can’t Jumbo King have its vada pavs,” asks 33-year-old Dheeraj Gupta, managing director of Jumbo King, Mumbai’s local vada pav chain. Gupta’s belief in himself and his idea of providing hygienically packed snacks are the two main reasons that Jumbo King has managed to open 45 stores with a revenue of Rs 12 crore in 2007-8.

But Gupta’s first foray into business was far from smooth. Starting his own business was the most obvious career option after his MBA, considering he came from a business family, which ran a mithai (sweets) shop. “Although my family business was doing well, I was more ambitious and wanted to create something of my own,” says Gupta. So when he decided to start selling packaged mithais—branded Indian sweets with a longer shelf life—his family was not so apprehensive. “My family was supportive and readily agreed to my idea,” says Gupta. Naturally getting collateral from his family for a bank loan too became easy.

He pumped in Rs 15 lakh to set up a plant and the entire back end to launch Manali Foods in 1998. “Just like how you have chocolates, we were trying to see if Indian sweets industry could be developed along those lines,” says Gupta. But the idea was perhaps way ahead of its time, and the venture did not do too well. In mid-1999, he wound up Manali Foods.

Looking back, Gupta admits candidly that the business idea is only 10% of the job. “To execute the idea you need a team, people who are specialists. In my first venture, I wanted to do everything on my own. I didn’t want to share my ideas for fear of losing out,” he says.

2. Second Attempt:

The failure of his first business did not cure Gupta of the entrepreneurial bug. He visited the UK to explore the possibility of exporting Indian mithais, considering the country is home to a large Indian population. Little did he know his visit would introduce him to a different venture.

Gupta stayed with people who owned four Burger King franchises and soon learnt the ropes of how to run a fast-food joint and was keen to replicate something similar in India. “Just like burgers have a mass appeal and are sold in every nook and corner in the US, I saw vada pav as a similar product, which too has a mass appeal,” says Gupta.

Tips on setting up a food business

• Understand customer tastes and preferences; we have launched variants of the vada pavs like paneer, Schezwan and chhole to cater to different palates.

• Ensure you have something special to offer. When we launched Jumbo King, our vada pavs were one and a half times the size that was available in the market at a 10% higher price.

• Minimise your overheads. If possible, buy property, as space is a major entry barrier. If you have to pay rent, you start off with a huge liability.

• Deliver superior quality product at an affordable price. For instance, a railway commuter is not looking for a fancy store, only a decent meal in clean surroundings.

3. Crossing Hurdles:

Consumers do not have to be made aware of a product as common as vada pav. The USP was to offer a superior product. But it was easier said than done. The first big hurdle was finances. Although the initial investment was only Rs 2 lakh, this time around it came with a lot of resistance from his family. After a failed venture, his family was naturally apprehensive. “My family thought I was mad to waste my education on selling vada pavs,” says Gupta. However, his family did bail him out despite the initial opposition. His family’s support meant that Gupta’s personal expenses were also taken care of. “This is an advantage not many entrepreneurs have,” he admits.

Getting a team in place proved difficult. Very few wanted to join an enterprise selling a snack. And then there was the problem of finding quality ingredient suppliers. “I wanted to be like the desi McDonald’s. It was difficult to find good quality bread, which was perfectly round. Bakeries were reluctant to customise since we couldn’t place bulk orders,” he says.

4. Setting Up Base:

 In 2001, Gupta launched his first outlet near the railway station in Malad, a Mumbai suburb, and called it the Chaat Factory. “It was a strategic decision to launch the outlets near railway stations, since this is where our target customer is,” says Gupta. His idea was to remain close to his customer base, which meant paying a higher rent for the strategic location and reducing marketing expenses. He started off by selling vada pavs and samosas in a hygienic environment. But soon Gupta realised it made more sense to concentrate on one product i.e. vada pav, and innovate, since it had a larger mass appeal. The outlet was renamed Jumbo King, since it served large-sized vada pavs.

The shop achieved break even on day one of its operation and a turnover of Rs 40 lakh in its first full year of operation. All the money from the first outlet was used to buying a second store. Gupta realised that for a business like his it was better to go in for a franchisee model, similar to the one operated by McDonald’s. “I have always admired the business model of McDonald’s,” he says.

Today, Jumbo King is run like any western fast-food giant, with standard operating procedures in place for every area of operation. Across all stores the motto is the same: a simple food at an affordable price in clean surroundings.

5. Scaling Up:

Having grown to 45 outlets in seven years, Jumbo King has ambitions of turning into a 1,000-outlet chain in the next 3-4 years with projected revenues of Rs 500 crore. “We have a vision of making Jumbo King vada pav a national snack of the country,” Gupta says. It has already launched its outlets in Surat and Ahmedabad. Instead of being merely vada pav joints, these outlets are full-fledged restaurants that offer a selection of typically Mumbai street food such as pav bhaji and ice golas. In order to suit every palate, the menu also carries variants such as paneer makhani, cheese, Schezwan, chhole and for the health conscious there is also the brown bread vada pav. “Our customers are those who crave to eat this food, but are hygiene-conscious and have a limited budget,” says Gupta.

6. Lifetime Lessons:

“To me, having a role model, reading and education are the three most important drivers of building a successful business,” Gupta says. Reading the biographies of achievers like Akio Morita of Sony, Wal-Mart’s Sam Walton and Ray Croc, the founder of McDonald’s, has inculcated in him a never-give-up attitude. And there has been a big lesson from his own experience: “Unlike my first venture, when I launched the second, I took my partners—backend kitchen service providers, staff, franchisees—into confidence. Only then can you grow,” he says.