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.
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.
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.