Why top restaurateurs are looking beyond metros and opening outlets in tier-2 cities

Posh plates are flying — from metros to tier-2 cities. When restaurateur Priyank Sukhija, who runs brands like Townhouse and Tamasha, invited his friends for a launch, they thought it was for a restaurant opening in another metro. They were mistaken. Sukhija’s Flying Saucer was opening doors in Lucknow in February. This is not a flash in the pan. Riyaaz Amlani, CEO of Impresario, which runs popular outlets like Social and Smoke House Deli, opened Mocha in Kanpur in January. The same month, Zorawar Kalra took his Farzi Cafe to Jaipur. It is not just these three who are looking beyond metropolises. The F&B industry in the country realizes the potential of nonmetro: rents are a lot cheaper than in metros, and there is a ready clientele in youngsters who have evolved palates and sufficient disposable income.

Kalra plans to open 15-18 outlets by March 2019 and is already working on opening restaurants in Belgaum, Siliguri, and Indore. Amlani, buoyed by his recent foray in Raipur, Guwahati, Indore, and Nagpur, hopes to have 40 Mocha outlets in 40 cities as he sees these places offering “good returns on investment”.

Rahul Singh, president of the National Restaurant Association of India (NRAI), cites a study by Oxford Economics that says some fast-growing cities include Nagpur, Pune, Surat, Coimbatore, and Vadodara.

“These cities have seen a rapid growth in commercial areas and better transportation, thereby creating a huge opportunity for the food services industry,” says Singh on why some of the top restaurateurs are looking at these places to set shop. He himself has 40 outlets of his brand The Beer Café in 12 cities. His 2019 plan is to reach Guwahati, Nagpur, and Jaipur apart from Chennai and Hyderabad. “Due to liquor prohibition, we can’t invest in the cities of Gujarat: Ahmedabad, Vadodara, and Surat,” he rues.

Return on Investment

Operating an outlet in a metro is not a cakewalk. A restaurateur says on condition of anonymity that in Mumbai or Delhi, rentals start from Rs 300 per sq ft. In prime spots, it can go up to Rs 700–800 per sq ft. Then come the hassles of getting permission and licenses and hiring the right staff, which comes at a premium. “It costs Rs 1.5-2 cr to set up a decent restaurant today in the main market in a metro. If the rentals alone cost Rs 5 lakh a month and the place does not do well, then the entire investment would go bust,” he says.

Kalra says the big plus is rent. “Rentals in emerging cities justify why we are moving there. They give far better return on investment and profitability per store. Our new outlet in Jaipur has already started breaking even operationally and we expect to recover our entire investment in 18 months.” He says many of these cities are familiar with his restaurant brands: “90% of requests I get to open a new restaurant come from smaller cities.”

For these restaurants, it is not about modernizing laal maas in Jaipur and giving poha a contemporary touch in Indore. Most of these outlets dish out what is called modern cuisine. “These cities have a large young population that is demanding dine-out options,” says Amlani.

The restaurant boom in these cities has allowed a lot of trained staff who had moved to bigger cities for work to return to their hometown. Sukhija says he wanted trained hands for his foray in Lucknow and floated openings within his company. To his surprise, he found that the staff at his outlets who hail from in and around Lucknow wanted to move back. “Delhi and Mumbai may have offered better salaries but the cost of living in these cities are at an all-time high. My staff members requested to be transferred to the new outlet,” he says.

Even app-based food-delivery services are drooling over the growth prospects. Swiggy has started in Jaipur after its recent foray in Chandigarh and Ahmedabad, while Uber Eats has added Jaipur and Kochi to its list of cities. Says Srivats TS, vice-president, marketing, Swiggy: “Each of these cities — Ahmedabad, Chandigarh, and Jaipur — is known for its rich and vibrant food culture. We see tremendous potential there, thanks to great restaurants, millennial population, smartphone and internet penetration and the people’s preference for variety, convenience, and reliability.”

Bhavik Rathod, head of Uber Eats India, is also gung-ho: “Kochi as a city has evolved considerably over the last three years. It is brimming with local restaurants and has a strong tourist population throughout the year. Jaipur, meanwhile, is fast developing with new infrastructure, companies, and offices, giving us a wider base of consumers to target.”

Sukhija says these cities are what Delhi and Mumbai were a decade ago. “Rentals are low and people are looking forward to new, world-class concepts.” These will be if their bets turn right, the next food hubs of the country.

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