Overall, the store rental-revenue dynamics have improved. Real-estate costs, which were a critical factor for retail has turned favourable, as companies work out deals for existing and prospective properties. “Though sales may have dipped 5-10% for a lot of retailers, rentals have come down 35-40%. As a result, existing stores are now breaking even or becoming more profitable,” associate vice-presidentretail & consumer goods at Technopak, Baqar Naqvi, said. The revenue sharing model, which has positioned malls owners as partners, is also transforming into a key stimulus.

“Earlier, most franchisees would ask for minimum guarantees. These clauses are now out of the system, making expansion through franchising much easier. However, only companies with cash reserves will be able to seize the opportunities in a downturn.

Unfortunately, there are very few of this breed,” added Mr Naqvi. Home decor brand Rosebys, which has announced an expansion to 110 stores this fiscal, is a case in point. For new entrants, there are strong reasons to invest. Take for instance, the Jawad Business Group which franchises Papa John’s and recently launched American south-western casual-dining chain Chili’s. “When there are fewer brands hitting the market, vendors are more willing to indulge in hard negotiations over payment terms, as they are also on the lookout for business,” general manager, restaurant division, Tapan Vaidya, said.

The RPG Group, which operates Spencer’s chain, sees it as an opportune time to test the market for its lifestyle format Mera World. “The downturn not only gives us an opportunity to perfect the model but it is also easier to tie up with the right partners for our shop-inshop formats.

“Many of these brands may have opened standalone stores if the market was better,” Speciality Retail’s president, K Dasaratharaman, said. Mera World has partnered with Baccarose for perfumes, Just in Vogue for watches and Eternity for eyewear. Media costs, which play a key role in brand building have also become much more fluid today.

Economic Times, Sarah Jacob BANGALORE, sarah.jacob@timesgroup,com

The humble vada pav, Maharashtra’s popular snack, is set to compete with major multinational fastfood brands, after a venture firm joined hands with two first-time entrepreneurs to help roll out a national chain of restaurants. VenturEast, a southern venture capital firm, has invested $4.7 million, or Rs.21 crore in Goli Vada Pav, a Mumbai-based ethnic food chain that sells the snack. 

The firm hopes to set up outlets across the country in an attempt to replicate the success enjoyed by Jubilant Foodworks, a franchisee for Domino’s Pizza.
Venkatesh Iyer and Shivadas Menon, founders of Goli Vada Pav, set up this firm in 2004 with an investment of Rs. 1 crore and now seek funds to expand the chain into smaller towns . “At least five investors had approached us, but we selected VenturEast because of their pedigree, approach and ability to understand our business,” said Mr Iyer.

The investment values Goli Vada Pav at about . 100 crore, he added. The funds will be used to improve managerial capabilities and also for brand building.
The company plans to set up training centres for its own staff and also those of franchisees and will also put in place audit and MIS systems, said Iyer who has 20 years of experience in corporate consultancy, franchising chain and retail chain models. His partner Menon’s expertise lies in corporate finance.

With assets of over $300 million under management, VenturEast focuses on highgrowth, small and medium enterprises and has offered financial support to over 50 projects in technology, healthcare and life sciences and other emerging sectors.

The Indian fast food market is growing at an annual rate of 25-30%, industry estimates show. Goli Vada Pav’s turnover is about Rs. 20 crore and Mr Iyer says sales could more than double by the end of 2012-13. “We would also like to make a public issue when market conditions are favourable,” he added.
Goli Vada Pav focuses on smaller towns and cities where the company sees major scope for expansion , given the limited presence of multinational food companies.

The company has grown on a franchisee model with a network of 125 outlets spread across Maharashtra, Karnataka, Andhra Pradesh and Tamil Nadu. It plans to develop a network of around 500 franchisees in the next three years.
Iyer says Goli Vada Pav’s strength lies in the quality of its products that are manufactured in hygienic environments with supply chain and technology support from Vista Foods. Vista provides infrastructure and support services from its plant at Taloja in Maharashtra.