How this trio built a Rs 125cr optical business in 8 years
It is not every day that you meet entrepreneurs who have a very minimal social media presence. These are individuals who know that business is ultimately about presenting solutions that increase revenues and benefit consumers. This being the core of their narrative they go after the long tail of the Indian market, which is yet to get onto any form of social media. Three entrepreneurs Raj Pyla, Santhosh Rapeti and Sridevi Singaram, all three in their early 40s, built a Rs 125 crore optical business in less than eight years. Ben Franklin is now a 230 store chain, which retails optical needs in over 107 Indian towns and cities. The three entrepreneurs have raised Rs 40 crore from Venture East last year and are now eyeing to expand their store count to 500 stores in the next two years. They also hope to double their revenues by then. However, all good things have a beginning and have their share of ups and downs.
The UK connection
Back in 2004, Raj was a technology consultant based out of Reading, UK. He had, in his younger days, worked as an entrepreneur building medical equipment and had soon realised that being an entrepreneur requires not just capital and knowledge, but also the acumen of the market that one is serving for. “I had given up the hope of becoming an entrepreneur and had worked in various corporations till I met Srinivas, who was an ophthalmologist, in the UK,” says Raj, Chairman of Ben Franklin. He adds that it was after a game of tennis did Srinivas and he began to think of opening ophthalmology stores in India. “The idea sounded compelling because there were no organised or branded chain of stores selling frames, glasses and lens,” says Raj. Srinivas’s wife ‑ Sridevi, who was a practicing doctor in the UK ‑ too jumped into this idea. Santhosh, who was also a technology consultant and a family friend, joined them within days because the business proposition sounding compelling. They named their company Ben Franklin because it was the inventor Benjamin Franklin who invented bi-focal lens.
Think about it, young people in India will eventually require glasses for correction and lifestyle. The type of frames and lenses also differ based on the requirement. For example, a sportsman will need a shatter proof lens, and those with high eye power will need thicker lenses.
With this in mind, in 2006, Raj frequently travelled to India to study the market. He realised that the numbers were staggering because two-thirds of people in India aged above 40 years needed some type of eye correction. Sridevi stopped practicing medicine to get into the business full time and so did Raj and Santosh, who stopped their consulting business and dived into running Ben Franklin. To their credit, the market was there. There was little competition; there were the likes of GKB Opticals, Himalaya Opticals and the Sunglass Hut. But this was a multi-billion dollar market with very few national chains. This was the gap that Ben Franklin hoped to fill.
Market Scope’s report titled “India Opthalmic Market Report” An analysis for 2015 to 2021” forecasts that over 140 million people in India ‑ who are above the age of 60 ‑ will require eye care due to an upsurge in dietary change-related eye diseases and growing incidence of myopia.
Market Scope estimates that there are more than 180 companies competing in India’s ophthalmic market. Twelve companies (Alcon, Carl Zeiss Meditec, Bausch + Lomb, Genentech/Roche, Allergan, Abbott Medical Optics, Bayer Healthcare AG, Santen, Topcon, Nidek, Cipla Limited, and Sun Pharmaceutical Industries Ltd.) make up more than two-thirds of manufacturer revenues. The market is estimated to be more than $1 billion today and is expected to double by 2021.
After two years of research, Ben Franklin opened its first store in Hyderabad in 2008 and quickly opened 10 stores in high street locations, with the average store size of 800sqft. The company stocked the best brands - like Zeiss, Baush+Lomb and Roche – and combined with their superior service they expected the business to soar. “It hit us very hard,” says Raj. High rentals, low margins and inventory pile up made the business bleed. The rental itself was 25 percent of the sales and when combined with other costs, the company began losing cash. By then, the company had invested Rs 4 crore and was in a precarious situation. That’s when Raj and Sridevi decided to study their own business again and turn it around.
The second coming
Around 2009-2010, the three founders met a doctor who had a large eye care clinic. Upon visiting the doctor, they enquired about the number of lens they bought directly from him. The doctor said he would sell four to five lenses a day and that it became part of his additional revenues. That’s when the trio asked him if he could take 100sqft space in his clinic and retail optical products to increase revenues for the clinic. The doctor agreed and quickly the Ben Franklin team set up a small store. To the team’s credit, the doctor began converting a lot of his patients into customers for the retail store. This model worked like a charm and helped them scale up their revenues to Rs 70 crore in three years. The model worked because it had low rentals, it reduced the manpower cost - as the store was manned by only one or two persons and then it increased revenues because of the captive patients from clinics. There are 10,000 small sized eye hospitals and large clinics - in India - and each of them is yet to have their own captive eye care retail store. The number of stores increased from 50 in 2011 to 230 by 2016. The company had reinvested all the cash into the business and had further invested Rs 6 crore by 2012.
“We began to break the mindset of the doctors and made them believe in our business model,” says Sridevi, Co-founder and director of operations at Ben Franklin. She says that the small store format also coincided with their private label strategy.
Kishore Biyani, Chairman and Managing Director of Future Group says,
Every retail business should be focussed on private labels to increase margins and for that they need to improve their supply chain and manufacturing capabilities.
Increasing revenues and private labels
Around 2011, the three entrepreneurs landed up in Hong Kong to figure out suppliers of frames, lenses and sunglasses. They had no idea who to contact and how to go about it. It took them six months to figure out that they had to meet manufacturers in China to get factories to build their private label frames and lenses. They went the private label route because they did not want to be dependent on distributors that supplied products. Like any retail business, their business is based on volumes and net margins can be as low as three percent. Today, the company has 70 percent of their inventory as private labels. However, lenses and eye care from big brands still account for a majority of their revenues. “We organised our business with our own internal ERP and automated some of the processes by connecting our brand offices on web-based data capture,” says Sridevi. The company had raised some more money (in the form of debt) from friends and family at the time. But their business had crossed Rs 100 crore and suddenly it captured the attention of venture capital funds. Around four or five funds chased the company. “We thought we were not good enough for raising money, and that’s when we realised that young people were raising large sums of money with just paper ideas. So we decided to raise money,” says Raj.
VentureEast managed to invest Rs 40 crore in the business along with some secondary investment from the founding team’s family and friends.
“We invested in the company because the entrepreneurs have an eye for efficiency in operations and management of capital,” says Jagannath Samavedam, General Partner at Venture East. The money will be used to double store expansion and improve the digital play of the company. It will also increase its store presence in Northern India. For the due at Ben Franklin, Rs 500 crore is just around the corner.