Having raised Rs 5 crore in funding last week, the founder team reveals its secret sauce for creating a chain of cafes that has been profit after tax (PAT) positive since inception.
As the funding-downpour of 2015 was offset by a funding drought in 2016, investors have, in general, been exercising caution while staking their claim in the Great Indian Startup Story.
A strong bottom line, the scope for profitability early on, and a calculated passion in the team form the main criteria for startups to seem appealing to investors – and Chai Break, a Kolkata-based chain of cafes, checked all three boxes. The founder team of Chai Break, after all, grew up in the city that has “cha” running in its veins, and the startup claims to have been profit after tax (PAT) positive since its inception. Upon raising Rs 5 crore from Venture Catalysts and an array of HNIs, Founders Anirudh Poddar and Aditya Ladsaria speak to YourStory about this big “break.”
Back to basics
“Entrepreneurs always dream, so did we — and with the intent to create the biggest F&B brand of India, we started Chai Break,” says Anirudh.
Anirudh (35) holds an MBA from Amity while his partner, Aditya Ladsaria (34), studied BCom (Hons) from St Xavier's College, Kolkata. Sitting in a coffee shop wanting to have tea, the two realised that there were no cafes which served good hygienic tea as opposed to the hundreds that offered coffee. “So, we thought of creating a place focussed on tea,” recalls Anirudh.
Chai Break is a chain of roughly 1500-2000 sq.ft. cafés that serve Italian, Chinese and Indian cuisine with mocktails and various kinds of tea. “We are one of the only few places which sell Thin Crust Pizza, Algio Olio with a cup of Kesar Chai. We further differentiate from major MNCs in the sector by having a live kitchen in all the cafes,” he notes.
The two belong to the old order: they believe that a business is healthy only if it turns a profit from the start. “We have been profitable since inception in all our outlets. This was made possible through two simple things — picking a strategic location which can garner the attention of our target group, and at the same time, combating overheads like not having very high rents,” says Aniruddh.
Wanting to become the definitive chai-boutique of the eastern region, they were also aggressive in their initial marketing strategy — launching a loyalty programme to create repeat customers from the beginning. They claim to have received 52 percent repeat customers so far. Currently registering a run-rate of Rs 1.5 crore per month, they are on course to achieve a turnover of Rs 18 crore by March 2018.
The growth story
They started with one small outlet in Kolkata. “Our initial growth was slow due to the scarcity of capital and also because we wanted to master our process.”
However, with a focus on profitability, they managed to expand to eight outlets in Kolkata, two in Bhubaneshwar and one in Durgapur, taking the total to eleven so far. “One of the most important things we’ve learnt in all these years is that if the quality of the product is good, you’ll always have takers; so our focus has been on providing the best quality product at affordable price,” he says.
Anirudh counts the launch of their Bhubaneswar operations amongst their biggest successes – for not only were they profitable from the second month, but also won the “best restaurant” award within a span of five months.
A challenge, however, that plagues the entire F&B space is the high turnover rate of manpower. “The manpower in the industry switch jobs very fast. We tried reducing it by incentivising them on sales and by paying them a salary on the first of every month,” Anirudh reveals.
Chai Break raised Rs 5 crore through Venture Catalyst, Mumbai – the lead investors in the deal being Anand Ladsariya, Siddharth Ladsariya, Venture Catalyst Co-founder Apoorv Ranjan Sharma, and various other HNIs like Veikram Soni, Pratik Kedia, Abhishek Agrawal, Nitin Agrawal, Neeraj Goenka, Bhavesh Choudhary, Anirudh Damani, Vikas Agrawal, and Manish Agrawal.
“For investors, the F&B sector is one of the most innovative spaces to be in currently, with a unique opportunity to be a part of successful, next generation brands. The F&B startup segment has the highest growth potential in the market today,” says investor Siddharth Ladsariya.
The food industry was Rs 1211.7 billion in FY 2015, contributing 1.1 percent of GVA. It is expected to be 2.1 percent of GDP by 2021. The “Cafe & Bar” category contributes to 12.5 percent of the above numbers.
“Chai Break is the latest addition to our network of startups because of its impressive growth and expansion in the eastern market, as is evident in its goal of achieving Rs 18 crore in revenue in this year itself,” says Apoorv Ranjan Sharma, Co-Founder and President, Venture Catalysts, Mumbai.
Anirudh and Aditya want to conquer the entire East-Indian region by setting up shop in cities such as Jamshedpur, Guwahati, Siliguri, Shillong, Gangtok, Raipur, etc. – and then take on Bengaluru as their first base in the South. “We plan to achieve a turnover of more than Rs 50 crore and reach 10 more cities in the next two years, with a special focus on Tier-2 locations in the country,” he says. They are also planning to expand in franchise format in FOCO Model.