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How Profitable Is A Restaurant Business In India?

. 6 min read
How Profitable Is A Restaurant Business In India?

Starting a Restaurant Business? Here's a complete guide!

Introducing a restaurant business in India is a valuable prospect. However, it is not an easy business as there are all kinds of restaurants you can enter, based on the menu type, preparation procedures, and pricing.

There are multicultural, fast food, simple casual, casual dining, fine dining, fast service, family-style, barbecue, cafe, restaurant, cooking tabletop, etc., to name a few. India's food industry offers massive market and investment prospects, equipped with technologically advanced food activities.

The Margin of Benefit Depends on Quite a Few Variables:

  • Menu (Costing of Indian food is lower compared to cuisines not natural to India).
  • The kitchen team and the chef in particular.
  • The vendors like if you have a strong distribution network that sources raw materials at lower prices without degrading the standard. You can see a dramatic decrease in the cost of your food.
  • Regulation on wastage & storage. Many people ignore this, yet believe that these are key to profits.

Quick Service

This type of business is mainly dependent either on frozen foods or locally sourced cheap goods, prepared and sold cheaply at a small price. Such a company's management style relies entirely on the amount of revenue you obtain. For example, a vada pav joint selling 1 piece for INR 10 makes at least a healthy profit of INR 2 per piece. Take at least 20 percent of the net profit margin. But if you gain INR 2 per piece, then you would need to sell a ton of pieces, regardless of the margins, to see a meaningful profit. In this business, the key cost is not labour, but since the revenue volume is not high, the raw material is not high. And that's the recommended way to find a Fast Service source when people are not in the mood to pay too much. Higher quantities are feasible quickly.

Casual Dine

This model of business is usually a restaurant that serves at least one cuisine. For such a company, the actual cost allows you to invest more on both the raw material and the strength of man. As the rivalry in this sector is considerable, you will also have to invest more in the interior of this place. People are still searching for something new and something different from the range that the customer already has available. This makes the expense very high. The cost of food in this model does not exceed the 28 percent threshold if you have qualified workers. It'll start eating into the net profit margins if it does. Your waiting staff must be moderately educated in this model of business, and your kitchen staff must be qualified. In this market model, the profit margins range from 35% to 50%.

Important Steps to Start a Profitable Restaurant Business in India

1. Check Whether or not the Restaurant Industry is for you

It can be hard to effectively scale up the brick and mortar restaurant market. It needs upfront capital investment, operational costs (particularly rent) and other problems. In comparison, it is incredibly difficult to keep a restaurant alive and kicking for four or five years. The healthy habits, the ordering essence, and the sales policy of your restaurant must be continually evaluated.

2. The Theme of the Restaurant

This is the first step you need to evaluate carefully. This unique decision will be based on the other corresponding steps. It depends on the investment potential, and the dining patterns or inclination of the local demographics to decide the particular restaurant type. You will decide the menu, interior theme, seating type, etc., after evaluating the design.

3. Franchise or Own Restaurant

You will currently find a lot of domestic and foreign brands that offer pan-India franchise opportunities. Certainly, it is an easier choice to open a franchise company than to start your own. Opening one's brand guarantees some benefits though. You do not need to split the benefit if you start your brand. In comparison, the franchise fee would not require you to invest money.

4. Finance

You would need to get funds ready for the opening of the restaurant after estimating the start-up budget. If you're an entrepreneur of the first generation, then starting a restaurant with your fund is better. However, you can also apply for a business loan or an investment in venture capital. Banks usually ask for collateral protection, so you need to arrange that.

This is another significant factor you ought to remember carefully. You would need to include the name and logo of the restaurant at the time of company registration and licensing. The name and logo give the consumers of your company their first experience. So, keep the name  simple, relevant & catchy.

6. License & Registration

First of all, the basic licensing condition depends on the precise location of the restaurant where you operate. However, you'll find some of the criteria are general in India. Let’s talk about the basic criteria for licenses and permits required.

  • Business registration is a must. In addition to operating the restaurant as the owner, the enterprise must be licensed as LLP, or Pvt. Ltd., or Business Ltd.
  • To get the GSTIN number, you will need to register with GST. If in various states you have more sources, you need to submit state wise.
  • Get the central Municipal Authority Trade License. It's a must-have. And this license may only be given by the local company.
  • FSSAI stands for the Indian Authority for Food Safety and Standards. An FSSAI registration is a must for a restaurant or eatery service.
  • You will need to acquire a liquor license for your restaurant if you sell alcohol. It takes a lot of time to acquire a liquor license, and it's usually pricey.
  • With Trademark Registration, protect the logo. You should use the TM symbol initially. And you should use the R sign after getting the final registration.

7. Online Food Delivery Apps - The Game Changer

Food ordering applications have transformed the face of restaurants, and the preferences of consumers about restaurant food delivery. Due to the simplicity and ease of use these applications provide, food delivery apps are being used widely. With such trends setting in, several start-up entrepreneurs are introducing their food ordering applications to compete with the increasingly competitive food ordering and distribution app industry. Here is a list of only a couple of the benefits provided to consumers by food delivery applications, which in turn have become a game-changer for restaurants.

Advantages of Online Ordering Food From Restaurants that Make a More Profitable Business:

  • More clients prefer to order from various food portals, or restaurant websites and applications.
  • Now, more than ever; thanks to smartphones and tablets, people can conveniently order online as it's only a click away. In a nutshell, because it's practically in their hands, the clients want to buy food online.
  • For online shopping, the consumer states all preferences explicitly, so there is no room for confusion or misunderstandings.
  • Your restaurant may not be available 24/7, but it is certainly your online ordering system. And even as you sleep, it will help you make money.
  • Creating and maintaining a nice looking menu that can drive the customers to order from you any time they see it, is much simpler and significantly cheaper (or even free) to build and maintain. You not only get rid of the printing pressure and relieve yourself of the printing fees, but you also get a lot of freedom to change the menu anytime you like.

Food costing doesn't increase after a certain point. Staff costing and rent increases. So naturally, it depends on sales to make profits, and online ordering is one of the game-changers for restaurant owners to make a profitable business.

Also read:

1) How to Open a Restaurant? 10 easy steps to help you open a Restaurant of your own!
2) Top 10 Businessmen in the Industry & What You Can Learn From Them
3) Top-5 markets in India every businessperson should visit
4) Where to Get a Small Business License?

FAQs

Q. How long does a restaurant business take to be profitable?

Ans. The typical calculation of how long it takes a corporation to be successful is two to three years. That said, there are numerous initial costs and ways of calculating benefits for each start-up. A corporation may become instantly profitable or take three years or longer to make profits.

Q. What is Online Food Ordering in India?

Ans. Restaurants create their website and app or opt to give the contract for restaurant-completed online food orders. When you plan to set up your website, you will ensure that your program effectively handles your orders, and ensures you can process multiple orders at once that will help the customers to order food online without the hassle.

Q. What is FSSAI and how is it important for a restaurant in India?

Ans. The FSSAI is the  Food Safety and Standard Authority of India. This restaurant license not only constitutes a license; it also acts as the authority's permission and guarantees that consumer food in this specific restaurant complies with Indian food security requirements.

Before beginning any food business in India, it is mandatory to acquire an FSSAI permit. Both food company distributors, suppliers, restaurants must have a 14 digit license number written on their foodstuffs.