Author

Revanth Sharma

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In the previous chapter, you had seen how the whole idea of starting something on my own turned up and how life changed after that. This post is in continuation of the roller coaster ride called “My Entrepreneurial Journey – Chapter 1

Hanging-On – Last phase of My Entrepreneurial Journey

Within 5 months of me running the franchise many of other same franchisor outlets were closed (whom I had contacted before opening my outlet). The focus was still on improving footfall but there was minimal increase. Repeat customers were good but number of new customers were few.

All attempts in discussing with the franchisor was a waste of time, as they were busy in getting more investors and making believe that business was good. While the reality was almost all outlets which were opened then were steadily closing, however the number of new outlets across India were increasing. So there was no doubt they were selling better and once you paid the hefty initial investment you were just a helpless guinea pig to them.

In addition to this, the operational issues were causing another nightmare

·       The good staff were moving out to newer outlets

·       Menu prices were increased without intimation

·       No alterations were allowed to pricing or the menu

·       Outlet maintenance issues started showing up

·       License issues (with local authorities)

With very minimal control on food, pricing, marketing and operational costs, the only element that I had under my control was improving customer service. But that was not helping either. The brand had taken a beating as there were a lot of negative reviews from other outlets of the same franchisor. While founders were still running behind investors all of us who had invested realized its game over.

Reality Check

After running 9 months of operations, breakeven was still a far sight. I realised that inspite of investing a lot of money to keep it operational there were zero returns. That’s when I decided to take the step to go ahead and close it.

Lessons learnt

Being a first timer to enter business I had the courage to go after the unknown which taught me some hard lessons. Every entrepreneurial journey will be riddled with challenges. If you want to have a secondary income, I would advise you to avoid the mistakes I made.

·       While the concept of Franchisor/Franchisee is enticing for newcomers, remember only franchisor will make money.  Unless it’s a reputed brand you would spend most of your energy creating brand awareness (which may not help your outlet directly)

·       Having your own outlet with positive P&L is better than having multiple outlets with negative P&L. One of my friends said he was making more money having 4 juice shops than these franchisors opening 100’s of outlets. The franchisor was betting on the “Valuation game” at the cost of small and new entrepreneurs like me.

·       Get in the game, if you want to stay for long. And try to achieve break even in 12 months. That means there are no shortcuts. You will have to be on the ground with having complete control on all operational aspects, which I didn’t have at my outlet

·       There is no fixed formula. Try & test is only way forward and you should be willing to experiment. Knowing best practices, talking to experienced people will always help. Be it marketing, product decisions or post sale of the product – having complete control with you is a MUST, which is almost impossible in franchise business.

·       If there is no metric to evaluate or if there is pressure to start soon, take a break. Give it a pause. Do a reality check. Speak with similar businesses on how they are managing.  Just don’t look at affordability, check on practical difficulties that others faced and avoid them early

·       Do not get lured by fancy spreadsheets which promise healthy returns.

Beware – Profits could be existing only on fancy spreadsheets

·       When you attempt a new venture, it is natural to face some amount of scepticism from family and friends. Take their comments with a positive outlook and try to find answers to them. This will help you refine your business plan and give you new perspectives. 

Do not be discouraged if things do not work out. There are life lessons learnt. May be at a cost, but that is ok. This experience is what gives you advantage when you think of starting something new again.

Courage to pick up the pieces and moving on is an essential life lesson learnt in ” My entrepreneurial journey”.

Be a Doer!

In the hub where everyone wants to be an entrepreneur, the idea of exploring beyond a regular corporate job is natural. I was no exception. Like all of us, I also dreamt to start a second venture, with an urge to have a sustainable secondary income and make it primary one day. This thought has taken me on a roller coaster ride in the last few years, and I want to pen down my experiences.

Journey

Like all millennials, my stream in education and profession was not a choice, we all went with the flow of the IT Boom and fascinating stories of traveling abroad, suddenly transforming from a middle class to an upper middle class, etc. Those were really exciting stories; little we did we know that it would not be the case a decade later.

Being an IT graduate and working close to a decade, bored with the routine, regular routine lifestyle; I started exploring various ideas from technology Start-ups to workspaces, from ice cream shops to modern Café’s. While ideas were pouring in, the next step was concluding an idea. That meant doing practical math on my budgets, time I could spare and connect in networks, etc.

While I was clear that I would continue to do my primary job to manage all my existing commitments, possible options that were available were to see a model where operations are taken care of by others, while I focus on marketing, strategy, and sales.  That is when I dwelled more into a Franchise model*

After exploring various franchise models, I decided to go with a food start-up with a vision to cater to the best Indian cuisine from different states and were expanding in Bengaluru with multiple outlets. They also had successful stints in their earlier ventures.

Evaluations, I did, while picking this franchise

·       Their track record in execution

·       Their product mix

·       Checking on operational aspects from other outlets of the same franchise

·       Leadership team

The Business model was simple. They provide all the materials, give the right talent and take care of operations. Based on sales 50% would go to the franchiser for supplying all the materials and with the remaining, we had to manage operational expenses and margins. To summarize I had to take care of the Profit & Loss (P&L) and manage customers as well.

In the Game

With all-stars aligned, the process was quick and within 60 days I was able to set-up a franchise outlet. This was one of the rarest satisfying moments I experienced. Something outside IT, something outside a regular day job. Having your own business was a dream come true which no one in my family ever attempted.

Happy to get a location in a happening mall in Bengaluru, it was all set. Having invested almost 3 years of savings, my next hope was only to recover the invested amount in the next 18 months.

Surprises

After running the outlet for a month, it was time for numbers.  They never matched the expectations.

·       Sales was not great as footfall to that floor in the mall was minimal

·       All the loopholes were showing up, the franchisor was sending more stock which was adding to the cost

·       Rent was high; and also a 18% GST was never included which in turn increased the  operational expenses

·       Fake promises made by the franchisor and the Mall were coming to reality

While this being the scenario, I realized that I had to put more money to keep the outlet operational.  Breakeven looked like a distant dream.  So the immediate focus was to take control of the operational expenses so that I could curtail the losses and increase footfall so that sales can be better.

In the midst of these surprises – I was forced to pump in more cash into the business and break-even point looked more like a mirage. But I thought this is how most of the first time entrepreneurs take off – a little shaky initially and then eventually raking in tons of moolah. I told myself if I worked smart and hard, I would achieve break even one day and profit will follow next. Little did I know that I was fighting against an organized setup.

I will continue my story in the next chapter.

Key Takeaways from Chapter 1

  • Location, Location, Location – the 3L rule of the restaurant business
  • Assess how much of your business is in your hands and how much in the franchisor’s hands.
  • Talk to current franchise holders. If possible – develop a grapevine channel to know the real numbers.
  • Run your financial simulation thoroughly.