With his existing restaurants serving goodies by the table-full, Vasudev Adiga now plans to go national
- Started in 1994
- Number of outlets 12
- Number of cooks Around 25
- Sales (FY12) Rs 70 crore
- Bet you didn’t know The founder has an engineering degree
It is the only place in the world where holiness (Brahmin) and intoxication (Bar) co-exist, and are uttered in the same breath, that too in full public view. Old-time Bangaloreans swear by it. The fanatical among them maintain that it’s coffee (yes, coffee, what were you thinking?) is not just the best in the city, but in the country
|Adiga’s will expand to 200 outlets over the next five years thus giving it a pan-India presence|
. One such fanatic is KN Vasudev Adiga and rightly so, for his late father KV Nageshwar Adiga was responsible for founding Brahmin’s Coffee Bar, the much loved idli-vada landmark at Basavanagudi. Founded in 1965, the small fast food outlet still gives newcomers a run for their money. Vasudev Adiga should know, having moved on to start a very successful fast food and restaurant chain bearing his family name. The Adiga’s chain today comprises 12 restaurants and, along with its event and institutional cateriacng business, logs in a turnover of Rs 70 crore. In its current avatar, the restaurant business makes Rs 4 for every sales rupee the catering arm pulls in, but its 7% net margin is half that of the latter. To achieve what he has attained today, Adiga had to go through a rough and long grind. That included dealing with irate customers and undisciplined employees. Not to mention the scolded employee who vanished, but not before mixing bleaching powder in the batter meant to be used next morning. It was unknowingly used, served to a few customers and then immediately dumped in the waste-bin once the matter came to light.
Twist Of Fate
The seventh of Nageshwar Adiga’s eight children, Vasudev, after completing his engineering from BMS College, Bangalore, wanted to go to the US to get a master’s degree, but the Chennai US consulate denied him a visa. While his father asked him to join his siblings at Brahmin’s, Vasudev was mentally chalking out plans to create his own path. The other thing playing on his mind was a possible souring of sibling ties once his parents passed away. Combing his ambition with pragmatism, Adiga decided to continue in the food business instead of continuing with the job that his engineering degree helped him land. He took over a sick restaurant run by his cousin. But, despite all his attempts, business just refused to pick up. As the cousin ran deeper into debt, they were forced to throw in the towel. But Adiga was no quitter. He recalls, “I borrowed Rs 70,000 from my father and also asked him to back me for a Rs 1.7 lakh bank loan to buy a place.” Soon after he started, many other fast food joints came in and started eating into his business. As he went about investigating what the others were doing differently, Adiga learnt some home truths — more menu items, better ambience and hygiene matter. He decided to renovate his outlet, calling it Adiga’s. “People liked the new package and the business clicked. I started earning Rs 15,000 a day from the earlier Rs 3,000.” From there on, there was no looking back. Within a year, he came across another sick restaurant in Jayanagar and turned it around. Banks from there on became increasingly willing to fund the phenomenon called Adiga’s.
Adiga, though, is far from content with what he has achieved. He wants to turn his namesake into a national restaurant chain. Now in a country like India, that has its own challenges, the toughest among them being matching up to taste expectations. Yet another is access to funding. Adiga, who plans to open 200 restaurants in the next five years, has managed to address the tougher one by roping in private equity from New Silk Route Advisors (NSR). Though financial details of the deal have not been made public, it is safe to assume that NSR might have valued Adiga’s at around four-to-five times FY12 sales. In the case of Sagar Ratna, which reported a similar topline in FY12, India Equity Partners is reported to have paid Rs 180 crore for a controlling stake. As for their rationale for buying into Adiga’s, NSR partner Jacob Kurian says, “We see tremendous potential in Adiga’s as they have combined strengths in two different formats — restaurants and event catering. Our aim is to help Adiga’s expand initially in Bangalore and eventually across India so that it can become the country’s first homegrown national chain of restaurants.”
Digging in: Adiga’s serves a plethora of mouthwatering culinary delicacies making it a favourite among locals
Sticking With It
The biggest challenge for Adiga’s lies in making a success of its best-selling dishes all over India. And for that, it has embarked on a massive process of recipe standardisation. While it may sound innocuous, it comes with its own set of problems. As he moves ahead with his expansion plan, Adiga has to maintain a delicate balance between maintaining professional standards and guarding his trade secrets. Incidentally, the first cook that he hired is still with him and is his closest confidante in the recipe standardisation project. Adiga is confident of maintaining quality despite the standardisation. So, how will it work? Adiga explains, “We will pack and keep the ingredients. But the proportion in which the ingredients have been mixed will be kept secret. For example, the cook can call for 10 kgs of pulao and will get proportional ingredients be it rice, vegetables, garam masala etc. He simply has to put it together and cook it.” As the water used, too, is important, he will be installing purification plants at all the existing and new outlets.
The big difference, then, compared to the ready-to-eat segment is that ready-to-eat food is precooked. In Adiga’s case, it is non-precooked raw materials that are being standardised. Right now, whenever a new cook comes in, he works under an experienced hand till he learns the ropes. Once recipes are standardised, it will not only address the issue of cooks playing truant, but also make the learning curve for those who stay on much steeper. Still, going forward Adiga would want to have more experienced cooks then less. He justifies, “In this industry, getting reliable cooks is very difficult. Sometimes they ask for leave for 15 days but turn up after one month. Another reason we work with back-up cooks is because we undertake outdoor catering. So we do additional business and that compensates.” Though Adiga also has a flourishing and very lucrative catering arm, focus there is deliberately muted. That is because, “Catering is difficult to scale up. Each day we have to go with a separate set up and separate staff at varying time. Then you have to chase payments as well.”
In-house training is being provided not only for kitchen staff but also for all personnel and that includes teaching security staff and cashiers to be courteous to a fault. Adiga defends, “It is not the intention of my staff to treat customers badly, but majority of them are uneducated. At times, they will not speak to the customer properly. So the customer will misunderstand them and feel ill-treated.” Even in cases where his staff is not at fault, they make it a point to pacify the customer. “We apologise as we don’t want to lose a customer. If our reputation spreads through word of mouth it can also be destroyed through word of mouth.” But one can never be too careful in the restaurant business, more so with hygiene as well as kitchen safety. That is why Adiga’s does not order sauce in glass bottles or use stapler pins to fasten takeaway items. Food contamination is further avoided by buying vegetables from select vendors. Adiga says, “Though we take all precautions, nobody can prevent an accident completely. But we do our best. In the case of highly bacteria-prone vegetables like cauliflower for example, we avoid using them as far as possible.”
Build and They will come: Recipe standardisation will vault Adiga’s into the big league
Apart from procurement quality, Adiga also has to grapple with labour issues. He says, “The problem is that most of my staff come from villages and have their own problems. So they keep going back to their native place creating a shortage of trained labour. When they eventually return, we simply warn them and take them back.” In order to address labour issues, the company has appointed an HR manager who will be constantly headhunting. Adiga also plans to go in for referral programs to pull in staff for his new outlets. “We are going to ask the present staff to bring in new people. This will enable us to move the experienced hands to new outlets where customer expectations will naturally be very high.”
To address management bandwidth, Adiga has created a CEO as well as a COO position and hired professionals with a retail and restaurant background, respectively, to fill them. Since efficient procurement is key to profitability, the CEO’s retail background is expected to result in even better price and quality. Inventory management, though, will continue to be the domain of the respective unit managers, given their on-site presence. To prove that things are indeed changing, Adiga says, “Earlier, we used to make cash payments on a daily basis to vendors. Now we route all payments through cheques. Also, I used to visit all the outlets to get a report. Now I get a MIS report on a daily basis from the corporate office.”
Even if everything works like clockwork on the people and procurement side, Adiga still has to deal with exorbitant real estate prices. A high rental and not enough business to cover it is a sure recipe for disaster. Adiga plans to counter this by sticking to a basic minimum serving area in commercially lucrative areas and then servicing those outlets from the nearest full service kitchen.
Now that private equity has come in and the company is being professionalised, does it mean it will no longer have Adiga’s personal touch? Certainly not, says Adiga. “Whether I own a 10% or a 90% stake, it doesn’t matter. I will still be out there performing customer pooja. That is what I keep telling my staff. ‘Customer is your god. Treat him well and he will bless you with boons.’”
KN Vasudev Adiga has been there, done that. He has served office-boys to chief ministers and still does. But there is one thing that he still yearns for. He wants to buy the place in Basavanagudi where his first restaurant was located. “Since money was a constraint, I sold it to focus on the second outlet in Jayanagar. Now I want it back. Sentimental reasons, nothing else.”