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The Rebel Method: How to build 1000 Restaurants in 24 months?

Jaydeep Barman
28th October 2018

At long last, we decided we needed a new name. “Faasos” will remain the brand for our wraps and we will continue to put massive focus behind growing the brand. But we felt the company needed a name that would signify what we were doing as a team instead of being restricted to the name of one of our many brands. So, as of last week and much deliberation, we changed our company name to “Rebel Foods”.

As rebels building a restaurant business, we asked ourselves a question: “HOW CAN WE BUILD 1000 RESTAURANTS IN 24 MONTHS? AND 10000 OF THEM IN 5 YEARS?” While a normal restaurant business would never ask such a question, we did. And now that we have achieved the first milestone, I thought it would be a good time to reflect on our journey so far and offer some insights into what we have accomplished and how we will continue to blaze new trails into the future.


Today, we can safely say we are world’s largest delivery only / internet restaurant company, and by a wide margin. At 1100+ individual internet restaurants, in 15 Indian cities, we have indeed come a long way in the last 24 months. It’s still Day 1 (as the other JB would say :)), but we know we are on to something very, very big. We have a once-in-a-lifetime opportunity to change a 500-year-old industry.

The explosive growth of food delivery, led by aggregators and of the sales of restaurant brands worldwide (check McDonalds and Domino’s global sales and value growth over the last few years), point to one thing: just like every other consumer industry, Food and the business of restaurants is undergoing a structural shift wherein there are two parts?—?The Brand and The Distribution.

In every industry?—?from FMCG to Durables, Clothing, Travel, and Entertainment, there are strong global brand owners (Unilever, Nike, Disney, Marriott) and strong retailers (Walmart, Amazon, Expedia, Netflix). Until just five years ago, Food was the only vertical where the brand owner and retailer/distributor were the same?—?you walked into a Starbucks for a coffee or a McDonalds for a burger. That is changing rapidly. Today there are Restaurant Brands and Distributors (Swiggy, Zomato, Ubereats, FoodPanda, Doordash). Of course, like every other consumer sector, there will be private labels from retailers / distributors and brand owners will have some retail presence, but the broad split will be there. Otherwise Amazon would also be Apple and Mariott would be Expedia.

This is an irreversible shift, because it’s more efficient and the world generally moves to the most efficient frontier. It is more efficient if restaurants focus on brand building, supply chain, culinary innovation, robotics-led process and quality production, and if Aggregators focus on ordering choice, fleet management, drones and other logistics innovation?—?Data and Technology being the common factors for both the Restaurants and the Aggregators. The benefits are tremendous -

a) Customers will have increasingly better food and faster delivery,

b) The food delivery market will expand tremendously with lower CAC, and

c) Specific innovation will drive down the cost of business.

This primarily meant, delivery-only restaurant brands could be built on internet, without worrying about building distribution / retail. A few quarters back, we saw this trend and thought, “we can scale Restaurant Brands 10x faster than today”. With only 100K restaurants in India (compared to 7Mn+ in China), and with 90% of them unorganized, we realized we had a terrific opportunity to build India’s largest restaurant brands, riding on our cloud kitchens, supply chain network, culinary expertise and technology. And on exploding Distribution, as recounted above. And thus came our idea of “ One Cloud Kitchen = Multiple Restaurant Brands”.

 
 

After testing the hypothesis, we took two momentous decisions:

a) Build multiple restaurant brands riding on the same kitchen network and

b) Becoming channel agnostic or omni-channel, so that customers can enjoy offerings regardless of the distribution partner.

These two decisions changed everything; putting us on the path of actually building 1000+ restaurants in 24 months. We worked on seven individual delivery only / internet restaurant brands in large categories such as Biryani, Meals, Pizza, Dessert, Chinese, World Cuisine, and Beverages and scaled each of them to most of our cloud kitchen network across India (176 kitchens in 15 cities). The pace of restaurant count and revenue growth far outstripped the number of kitchens built. Our number of restaurants across India grew exponentially, while we added only 50 more kitchens. And, our revenue grew exponentially as well?—?5 times in 24 months. And with that came the economic advantages of a low rent-to-sales ratio, kitchen break-even in < 3 months, super-fast pay back on capital, and zero location risk, all of which I outlined in my earlier story.

Below is a snapshot of what we built:

 

Admittedly, it took us some doing. The concept of “one cloud kitchen=Multiple restaurants” may sound an obvious one, but it’s essentially the tip of the proverbial iceberg. We realized this as we got down to execution. 24 months into this journey, we can now say that we have got the playbook figured out to a large extent. We had to build five strong competencies / pillars, as described below, to execute on this idea, some of which we already had and some others we had to build on the fly, while growing super-fast.

Culinary Innovation Center

In the last 24 months, we launched and scaled 280 different menu items across brands, as we kept iterating to get the product-market fit right for each of the brands. This was possible because of our core team of super-chefs, who kept working relentlessly on delightful recipes. However, it was not enough to innovate on products alone, it required building scalability around it, so that we could launch them across the nation without the requirement for skilled chefs in each of our kitchens. Biryani is a prime example of how this took many iterations before we could find the formula for making biryani fresh in every kitchen. This was a game changer for us.

End-to-end Tech Platform

From distinct google polygon architecture (dynamic delivery radius) for a multi-brand operation from a kitchen to managing each step of the kitchen ops?—?queueing, load / prep time, batching of orders, out of the door algorithms, to inventory prediction based on consumption data, personal recommendation engine, deep integration with every aggregator, last mile delivery app, everything was built on a tech stack developed by our Engineers and Product Managers. This enabled us to tackle the massive complexity of a multi-brand operation while keeping the inventory and operations management super efficient. We have an inventory variance (including wastage) of <2%, quite a feat even for standalone, one-brand, low SKU-diversity restaurants. This also enables us to take data driven approach to opening new kitchens and launching new brands. Going forward, the tech stack is getting ready to bring in AI and robotics into our kitchen processes, to build a virtual personal butler using machine learning, and to create a big data / analytics brain to predict food trends that we can ride for decades. It’s another matter that the Engineering team believe that we can now create a SAS business unit selling “cloud Kitchen management software”.

Pan India Supply Chain

If I have to talk about “the moat” around our business, then I would say this is right at the top of the list. We can now move best possible ingredients from one corner of the country to another without any trouble. This was the backbone, riding on which we launched products- haleem during Ramadan, Puranpali during Ganesh festivals, navaratri menu during Dussera, plum cake during Christmas and so on- each in a span of 6 weeks or less. This is the reason, we can scale a brand across the nation within weeks rather than years, once a product market fit is achieved.

Brand/Product Launch Playbook

Typically, every brand is owned by a Brand Manager?—?from inception to scale up. He / she is the parent of the brand and has the sole responsibility of making the brand ready for the big bad world. In last 24 months, we launched at least 20 brands, but scaled only 7 pan India. Brand managers lead the process of incubating a brand / product (it involves zero capital spend, as the brands / products are launched in existing cloud kitchens only) in a couple of locations, iterate, iterate and iterate till the brand achieves product-market fit, defined by ratings, NPS score and brand economics. They would constantly work with the Culinary Innovation Center to get the product right. For the more technology oriented reader, you can think of the brand managers as product managers and the Culinary Innovation Center as the Engineers in a typical technology set-up. These two groups work closely till the product-market fit is achieved. Once it is achieved, the brand manager would then lead the scale-up phase for the brand in question. The following diagram represents our playbook for building brands:

 

Cloud Kitchen Network

Finally, our ever growing cloud kitchen network comes into play. This is where the moment of truth happens, this is the place where an order is prepared and delivered to the customer, on-demand. Our cloud kitchens are equipped to handle all sorts of different processes- from baking to grilling to wok based cooking, conveyor preparation of pizza, frying etc.- supported by a very robust tech infrastructure as described above. However, the secret sauce of our kitchens is not the hardware, it’s the software?—?as characterized by probably the most entrepreneurial micro-teams out there. Each kitchen team is led by a CDO- Chief Delight Officer, who is the real CEO of our business, as he / she is responsible for everything from building the kitchen team to ensuring tremendous experience every single time both for the customer and our employees, to delivering the economics of the kitchen, training of the kitchen team, and inventory management. The CDO role is probably the hardest and most satisfying general management role out there as it teaches people how to manage a business from the core. We have minimal attrition in our kitchens, and people routinely ask me why this is the case. I think, more than anything else, we have been able to create a culture of entrepreneurship at the grass-root level, where people come to work with a singular purpose of delighting every customer and thus manage their “own business” beautifully. And low attrition builds muscle-memory, which then helps tackle complexity, an unavoidable aspect of our multi-brand kitchens. We have produced CDOs out of entry level team members coming from extremely under-privileged backgrounds, and this has helped us grow the company tremendously. Every six months, our national CDO meet makes me believe more and more in our ability to create entrepreneurs across our company. We now have 176 capable CDOs and several hundred more getting ready to manage our upcoming kitchens. This pipeline building of leaders to tackle the moment of truth, in my mind, is the biggest reason why we could execute on our first-of-a-kind, category creating strategy.

And, as I said at the outset, we are just getting started. We will keep creating / scaling relevant brands in specific markets (India and beyond) based on demand, trends, and efficiency. And to do that, we don’t have to keep building physical locations. Instead, we can grow and delight customers for decades to come, without the burden of massive capital investment. After all, “the ability to build and scale strong brands efficiently” is the only thing that is better than a “strong brand.”

We are now working on building a network of restaurants that is five times larger than any other in India and thereby becoming the largest Food player (internet or not) in the country?

Specifically, 10000 restaurants in the top 500 micro locations within five years.

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