Good Businesses 2014

In good taste

Janta meals supplies nutritious food for migrant workers at economical prices

When I eat at a roadside hotel, I have to pay ₹60 for a decent meal. That’s too expensive for me. Here, I get a decent lunch for just ₹500 a month,” says Akhilesh Pandey as he steps out of a Janta Meals outlet in Gurgaon after a quick meal. The 23-year-old migrant from Faizabad, Uttar Pradesh works as a data collection agent for a finance company. For a third of what Pandey would pay at a restaurant, he gets a hygienic, nutritious meal at Janta. But most importantly, he gets to eat “home-like food” as is advertised by the board at the outlet, which invitingly reads “ghar ka swadisht khana”. 

The man behind the venture (and CEO) is also a migrant — 32-year-old Dutchman, Jesse van de Zand.  He had been managing start-ups in the Netherlands since 2007 at Enviu Foundation, a platform for social and environmental entrepreneurs, but had never handled a food start-up before coming to India in 2013. What puts off fellow Europeans is the very reason for him to be in India. “I love the chaos here,” he laughs. The idea of serving meals for less to migrant workers was first pitched to van de Zand by Prabhat Agarwal when they met early last year in Gurgaon. Agarwal later became the financier of Janta Meals. The IIT and IIM graduate already had successful businesses to his name but decided to enter the social sector five years ago with a NGO-run school called Aravali Scholars. Since then, he has financed three social enterprises — Janta Meals, a biomass-based refrigeration start-up in Uttar Pradesh, and a rural BPO in Uttarakhand. 

The duo felt Gurgaon, where Agarwal runs his school in the Sikandarpur area, was fertile ground to start such an enterprise. “There are around 50,000 migrant workers in this area alone, but the latest census registered only 4,200 here,” he says. When migrants are not counted properly, one can safely conclude that there are no effective policies or programmes to cater to their needs either. 

The motivation to start Janta Meals came from the fact that cooking one’s own food remains an inefficient proposition for a migrant worker — he doesn’t have cooking gas, refrigerator, running water, time or a large house.

Twists and turns

Van de Zand started a pilot project in August 2013 in a rented outlet near the Sikandarpur metro station, home to a huge migrant population, with an initial investment of ₹40 lakh from Agarwal. The meal, which included four to five rotis, dal, sabzi, chutney and salad, was offered for a measly ₹20.  Janta’s first two outlets in Sikandarpur market and Sheetla Colony were set up to test the demand for its product. Both outlets could serve about 250 meals in one shift, had 12 women cooks each and a manager to oversee operations: enough to serve their clients, mostly NGO schools.

Once the demand was proven and it decided to scale, Janta established a larger kitchen in Gurgaon. “Within a couple of weeks, a couple of hundred customers came in,” recalls van de Zand. Despite the company’s focus on nutritious, hygienic food, he admits that Indian workers don’t care much for nutrition. The original business model had franchisees that would cook food and sell at their outlets. The company would finance the initial set up, provide supplies and guide them. “However, this didn’t prove effective, so we switched to a hub-and-spoke model early this year,” says Apeksha Porwal, co-founder and CFO, Janta Meals. The 22-year-old Porwal was earlier working with UnLtd India, an incubator for social enterprises. 

Under the current model, a central kitchen at Sector 18, Sarhaul, works from 5.30 a.m. to 6 p.m. every day to prepare 2,000 meals, with the potential to go up to 10,000-12,000 meals. The kitchen is a dimly-lit hall with large burners, woks, refrigeration cabins, vegetable peelers and cutting boards. The place is managed by Yogesh and 12 women cooks, who used to work earlier as maids, cooks and tailors. Food is sent out from here twice a day through tempos to outlets located within a 10-20 km radius, for lunch and dinner. The franchisee just needs to heat and serve the food, alleviating the concerns about quality, sufficiency, inefficiencies and timeliness that plagued the original system. 

Finding franchisees

Today, Janta Meals runs six outlets, all in Gurgaon. “We select franchisees based on how well they know the area where the outlet is, so that we get a well-networked guy,” says Porwal. The outlet is typically a small shop in the vicinity of offices or industrial areas. The initial investment of ₹1.8 lakh is made by the company, to be paid back by the franchisee over five years. Out of this ₹1 lakh is for equipment, which includes a bain-marie to keep food warm and electric heaters used to heat chapattis and make tea. Other equipment includes plates, cups, spoons, glasses, utensils, food carriers, tables and chairs. The franchisee pays an interest-free lease every month for five years for the equipment, the cost of which is shared by franchisee and company. 

Finding and training franchisees is one of the major challenges Janta Meals is facing currently. “We have to do a lot of hand-holding in the first quarter. We have to teach them everything, from how much to order, how to present, how to avoid wastage to managing counters and customers,” says Porwal. 

The Sheetla Mata Mandir outlet in Gurgaon is a small, indistinct shop where eight to ten people are busy having lunch. Behind the counter, Prem Kumar is struggling to keep up with the crowd. “I came to Gurgaon eight months ago from Bihar. Initially, I wanted to work and save ₹20,000 to join a mobile repair course,” says Kumar, as he pours dal into another impatient customer’s thali.

Initially, Kumar worked at one of the carts that Janta ran in the area. Three months ago, however, he was asked to consider becoming a franchisee. Kumar says that on his first day, he only sold meals worth ₹250 but now sells around 125 meals a day and rakes in ₹3,600. After three months’ experience, he has become confident about the demand and is able to earn ₹15,000 each month. Van de Zand believes that potentially, franchisees can make ₹25,000. What about the rent? “I have to pay around ₹3,000 each month,” Kumar says; the total rent is ₹9,000. Kumar says that if he is asked to pay more, being a franchisee won’t work for him.

To address this issue, Janta is looking at stationary carts at a cost of ₹45,000 each, to play a major role in targeting customers eating at roadside stalls. Moreover, these carts can manoeuvre narrow lanes in slum areas and reach construction sites. “We initially used the carts to test our food but realised that we could have higher sales if the cart was equipped with a heating facility, had a stronger body and looked appealing,” says van de Zand. Based on this, Janta has ordered a cycle-driven cart from Bhogal Cycles, which looks quite appealing and has an in-built bain-marie, as a pilot. But for now, the company is focusing on selling meals from its brick-and-mortar outlets.

Economies of scale

Around ₹40 lakh has already been invested in the enterprise, mostly in equipment and salaries. Janta has also received an additional ₹2.2 crore investment from Agarwal. The company aims to have at least 30 outlets in Gurgaon by early 2015. At the outlet level, franchisees make profits, but at the company level (or kitchen level), van de Zand will have to wait. “Currently, we sell 2,000 meals a day. Once we hit 3,000, we will fully cover our costs,” he says. Janta started with 800 meals per day and by April 2014, the company’s turnover touched ₹5 lakh. It has now risen to ₹12 lakh in June 2014.

As on date, Janta’s franchisees contribute 50% to its turnover, the rest comes from sales to institutions such as factories and schools. This is a de-risking strategy as revenues from franchisees can fluctuate depending on the orders placed. “Selling to institutions is an easier revenue source but we don’t want to make it institution-heavy as the impact is higher in case of franchising. We would like to maintain 50:50 ratio between the two,” says van de Zand. The company offers institutional catering for fixed clients that fit the profile of its target customer base. Some of these clients include NGO-run schools, Aravali Scholars and LEU School. It has also set up a canteen in an apparel company in Gurgaon with 1,200 workers.  

Hurdles ahead

Dealing with high expectations of customers is a challenge for franchisees. Van de Zand was surprised that even at ₹20, customers were very picky and expected free refills. To deal with this, the company started charging an extra ₹5 for a dal or sabzi refill. Currently, of the ₹20, 50% is the cost of raw materials and fuel, 30% is kept by the franchisee and the remaining 20% is the company’s profit. Of late, vegetable prices have been volatile. Can the company handle a price rise in the near future? Van de Zand believes it can. “Our research shows that a hike of ₹2 to ₹5 should not be a problem,” he explains.   

Still, keeping raw material costs under control is the biggest challenge. Janta’s vegetable supplies come in every day from Azadpur mandi in Delhi. Pulses come in about five times a month from a wholesale supplier while spices and rice are bought in bulk from a local shop.

The kitchen is equipped with cold storage for vegetables and dairy products and a storeroom for dry raw ingredients. The price of these ingredients does not fluctuate much, unlike vegetable prices. But costs fluctuate based on the price of certain raw materials that remain constant: potatoes, tomatoes, onions and coriander leaves (for chutney). For instance, tomato prices shot up from ₹12 in July to ₹60 a kg in August. 

Janta has been using signage and flyers to promote itself but most customers are drawn by word of mouth. Mohit Bhardwaj, an automobile service center employee, says he was referred here. However, he’s not sure if he will continue to visit the shop if prices rise by ₹5. On the face of it, Janta competes with almost every restaurant and stall on the street. But Agarwal disagrees, “Prices of a proper meal are at least twice or thrice that of street food. Chhole bhathure, samosa or chowmein are not substitutes for good food. We are not facing price pressure but, yes, we want to make it affordable.”

Despite the challenges, both believe they have created the business model and need funding to build capacity. “We want to attract institutional investment,” says van de Zand. “Within three years, I want to prepare 100,000 meals a day,” he says. Agarwal doesn’t think van de Zand is overly optimistic. “We have 1 million migrant workers in NCR. If we capture 10% of them in the coming years, we will get there.” Janta’s customers certainly want it to expand. “They must open in Udyog Vihar,” says Bhardwaj. Looks like Janta Meals has got customers eating out of its hand.