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Understanding the dining business
When food is no longer just food but an experience?
One of the first entrepreneur whom we had helped in our early days of dabbling in starting businesses is Derek, who started as an entrepreneur selling food products before moving into the restaurant/dining business. In a blink of an eye, he had been in the business for 10 years and had become an accomplished businessman starting and running restaurant operation.
While the pandemic had decimated dining, the agile and nimble entrepreneurs had been able to pivot rapidly. His restaurant business pivoted quickly away from dining-in to takeaway, and then pivoting quickly back to dining and drinking when the rules relaxed.
We were dining at Tipsy Bird when he shared his plan that he would be doubling his restaurants count next year. You can check out more about the restaurant under the Tipsy Collective here.
This is ambitious and we have an inkling that he will be doing very well next year. There is a pent up demand to have face to face interaction over a good meal and drinks and we could just see his dining operation serving into this trends.
On a business front, new dining setups by experienced entrepreneurs will be offered new leases and premium shopfront which had been vacated by others. The chance to double your business only comes once in a long long time and it is the prepared who will be able to take advantage of that opportunity.
Our meeting with Derek also got us thinking on the type of restaurant business we want to be in.
Do we want to be in the dining-in or takeaway segment?
If it is dining-in, do we want to be in the premium or casual segment or fast food?
Should the restaurants be self-owned or run as a franchise?
Are we able to ride on the delivery trend and just own a ghost kitchen concept?
Should we run a single brand or multi-brand concept?
We had invested in the catering/dining/restaurant business in the past and we had always been clear that such a business could earn an extraordinary return if run well. But there is a need to launch and rejuvenate new concept making business operations tough. In that sense, we would rather be in a take-away concept in which start-up cost is low and the revenue per sqf is higher. Employee cost is corresponding lower as well.
If we are really have to invest in the dining-in segment, we would rather be in the premium fast-food segment which the business can be replicable through franchise. This reduces capital and help in the creation of entrepreneurs solving a perennial problem of finding capable staffs.
Setting up a ghost kitchen to take advantage of the rise in infrastructure sprouting around the food delivery and services space seems like a logical move that everyone should take to further extend their reach.
The beauty of a single brand expansion than a multiple brand expansion is that economies of scale in marketing and scaling is set into the system but it also expose a single point of error. As for the multi-brand concept, the creation of new brand become set into the company’s DNA allowing the company to thrive for a long time but scaling become corresponding harder with no chance of franchise in sight.
While we admire Derek’s work from a distance, we somehow feel that the ideal catering/dining/restaurant/take-away business we would like to own is vastly different from what Derek is building right now.
But if Derek offers to sell us a stake in his company, we will definitely be buy for we will definitely weigh his acumen as an F&B entrepreneur more than any business model in our head.
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