After working for four years with MNCs like General Motors and McKinsey & Co, 30-year-old Karan Tanna decided to venture into foods and beverages sector. His start-up Yellow Tie Hospitality is following three-pronged strategy: Bringing international brands to India, developing own brands and investing in promising hospitality brands. Edited excerpts:
Business Today: In a market where consumers are spoilt for choice, how do you differentiate yourself?
Karan Tanna: I quit Mckinsey to open a restaurant of my own in Ahmedabad called Goodies in early 2012. Within one year, I brought equity in a company called Kutchi King, an organised street food chain. From 2012 to 2015, we grew to 209 outlets, and during that growth I realised that India is second-largest populated country in the world but we don't even have single F&B brand that has made a national mark through franchise. If you look at the US which is one-third of our population, it has more than 300 brands which have more than 100 stores. Historically, all big brands like McDonald's, KFC and Subway have grown through franchise.
During Kutchi King, I had made certain mistakes so I decided to sell my stake, and started Yellow Tie Hospitality as India's first restaurant franchise management company. Whatever brand we take under our portfolio, we make sure that they are scalable and sustainable. Our vision is to produce home-grown brands which do not only make national but international mark. We have developed strong back-end capabilities in terms of recruitment, training, R&D, operations and technology. Broaster Chicken was the first international brand under our portfolio which currently has more than 25 stores across India besides that we have over 22 stores of Dhadoom, which is a brand in partnership of chef Harpal Singh Sokhi. Wrapchic is also International brand from the UK. It's a Mexican Burrito with Indian filings. There is no QSR brand in Indian Food which growing so fast as Wrapchic. It has 25 stores in UK only, and has presence in Dubai also. Wrapchic is UK-originated brand and Yellow Tie brought in India. Another international brand is Just Falafel, which is a Dubai-based brand. Recently, we have signed Chachago and Billboard. We have taken a license to opens Billboard bars in India and Chachago is a Taiwanese brand.
Dhadoom, Taste of Tadka and BB Jaan are three brands which are developed by us in partnership with celebrity chef Harpal Singh Sokhi. Teddys is Yellow Tie's own brand. It's a soft serve brand known for modern day softy flavours of ice cream like bubblegum, and charcoal. Since we had a vision of producing homegrown brand and taking it up to International level, we developed a big infrastructure.
Yellow Tie's another vertical of business is incubation of restaurant brands that have potential to grow through franchise. We identify brands that have a proven unit-level economics and the possibility of scaling up due to its friendly menu. We invest in these companies giving them growth capital and our back-end infrastructure support. These brands are led by passionate founders and Yellow Tie plugs in required investments and mentoring to grow these brands. Under this vertical, we have brought majority stake in Umraan and Wok this Way.
BT: How many outlets are operated by Yellow Tie Hospitality?
Tanna: Yellow Tie Hospitality currently has more than 55 operational outlets and 30 in the pipeline. In the case of Chachago, we are the only Indian company to procure franchise rights for Chachago in India Bangladesh, Sri Lanka, Nepal and the entire Middle- East. It is a huge investment and achievement to get franchise rights for International brands.
Every brand under Yellow Tie Hospitality is a unique. Broaster Chicken is the category leader in pressure fried chicken in the casual dining format with alcohol. The chicken is made in a pressure fryer which is patented by the Broaster Company (US). Umraan is known for curries and Biryani from regions of India. Wok this Way is a unique concept - a vegetarian, oriental make-you-own wok concept. Just Falafel is known for Mediterranean food. Each brand has its own strategy. For example, Wrapchic is a mall-based brand that's very urban.
BT: Are you also into fine dining space?
Tanna: We have fine dining restaurant BB Jaan which is in the Cabbana Resort and Spa, a five-star resort in Jalandhar. It is a high-end Hyderabadi food brand but we see brand expansion in the international market as well.
BT: But casual dining is the fastest growing category in the F&B market?
Tanna: Fast casual is an emerging category these days.
BT: What has been the growth rate of the company?
Tanna: We did Rs 5 crore revenues in the second year and in the third year, which was 2017/18, we did Rs 9 crore. In 2018/19, we will do between Rs 14-15 crore of business, and we are profitable from the first year. We work at 20 to 25 per cent EBITDA.
BT: What about funding?
Tanna: We are a bootstrapped company but we plan to raise fund. We are planning an SME IPO towards the end of the next year. We would like to be listed because it will help in attracting foreign investments. A lot offoreign investors are hesitant to invest in India but this will help in building their confidence in Yellow Tie Hospitality.
BT: Where did you get information about international brands and whether there's a market for them in India?
Tanna: If we come across a new brand and find it interesting, then we do back-end research about the scope of its growth. For example, I went to London and saw how Wrapchic was serving Indian food in a modern way. Then I saw it online and during that time there were only 10-12 stores of Wrapchic. We come back to India and did research about the awareness of burritos amongst Indians. Will they eat that kind of food? Where it will grow? And finally we found that there is an opportunity, and we spoke to them regarding the franchise of Wrapchic in India and the entire South East Asia.
BT: Tell us about the 1,000-outlet target of Yellow Tie Hospitality.
Tanna: In 2020, we will be able to achieve this target. If we will have 800 outlets in India then 200 will be in the international market. In 2019, we will start our international expansion. Right now, the company is in the brand acquisition phase. We need to start scaling up the restaurants. This year, we will focus on rolling out the brands.
BT: Since you want to establish a food-focused company, you will need to rework your menu often since consumers get bored easily from the menu...
Tanna: We have a dedicated team of 12 chefs who always create new recipes in the R&D kitchen.