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March 06, 2011

The Mast Kalandhar Formula

From the Forbes India profile of VC-backed North Indian restaurant chain.
Today, Mast Kalandar has 22 outlets and a clear plan to reach 100 before the end of next year. And then, 500 more. And all this using the almost bland cuisine positioning: “Authentic, vegetarian, homemade style North Indian food.” Wasn’t eating out all about escaping homemade food? Increasingly, there’s a new category of customers frequenting restaurants: They eat out or order in because they don’t want the hassle of cooking at home. They include working professionals who don’t have the time or knowledge for everyday cooking, or newly married working couples who don’t want to deal with dirty vessels, maids and grocery. That is the primary market Mast Kalandar is targeting.

...Its decision to offer freshly cooked meals is both its biggest differentiator and its biggest execution risk. “Over 30 percent of our customers dine more than six times a month with us,” says Gaurav. The restaurants seat 55-60 people, who spend Rs. 80-100 per person on a meal. This adds up to Rs. 85 lakh to Rs. 90 lakh in revenue at one restaurant annually, delivering cash profits of 25-30 percent in steady state. With 22 outlets, this translates into revenues of Rs. 18.7 crore.

...But can it maintain this while scaling from 22 to 100 outlets? Or 500? Successful restaurants are good sources of profit, but venture capitalists need a few dozen of them in order to justify multi-million dollar valuations that will sway later-stage investors. Caught in the numbers game, new entrepreneurs often end up taking their eyes off the nitty-gritty of daily profitability at a single restaurant level as they rush to put up newer ones elsewhere. Two chains that got caught in this vicious cycle over the past few years were Delhi-based Yo! China and Bangalore-based Kaati Zone.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at