What is Sequoia smoking? That’s what we thought when we walked into a Faaso’s outlet in suburban Mumbai the other day. With barely five small tables, drab interiors and a counter and kitchen which service orders, you won’t spend a lot of time at the eatery. But last October, the Pune-based fast food company, which specializes in wraps (a flatbread rolled around a filling), raised $5 million in Series A funding from Sequoia Capital. And that’s what prompted us to sample their wares for the first time.
We picked up our phones and placed our order. The potato-and-cheese, chicken boti, and paneer tikka wraps were delivered in about ten minutes and were smartly packaged in long, rectangular boxes. The wraps were pretty good. Unlike other wraps we have sampled in an around Mumbai, Faaso’s goes easy on the oil, the paranthas (both whole-wheat and white flour) are crisp, the fillings succulent and it appeared to be just the thing to have when you want to a quick lunch or an evening snack. But would we have put $5 million into the company? After all, the wrap is pretty common fare in most parts of north and east India.
A chat with Jaydeep Barman, co-founder and CEO of Faaso’s, threw some light on why Sequoia may think this company is worth its money:
- Each outlet occupies just 200 square feet and is designed to be exactly what it appears to be – a clearing-house for dispatching orders. There are usually ten delivery motorcycles attached to an outlet – an emulation of a Domino’s Pizza or McDonald’s outlet model. Real estate and overhead costs are therefore kept to the minimum and the motorcycles ensure faster delivery turnaround.
- The menu keeps it simple with a singular focus on wraps. Variety is offered in the form of fillings, the ingredients for which are relatively easy to pull together – kebabs, potatoes, cheese, cottage cheese and eggs.
- The company uses social networks, chiefly Twitter, to take orders. This cuts down on the cost of running a large call center, though it also takes orders on phone.
- As a result, deliveries take place within 10 minutes, maybe 15 minutes tops.
- Prices are competitive. A potato wrap meal, which includes a beverage, wafers and a dip costs Rs 75 – again taking a leaf out of McDonald’s book.
- The packaging is a winner. The attractive yellow boxes in which each wrap arrives offer both hygiene and convenience.
- Each outlet operates at one-fifth the cost of a fine-dining restaurant and takes about three months to break-even.
- The low-cost model makes the business extremely conducive to scaling rapidly.
- There are already 25 Faaso’s outlets between Mumbai and Pune. That compares more than favourably with a much older competitor like Jumbo King Foods, which hawks vada pavs, or a contemporary like KaatiZone, which also started with wraps.
The idea for Faaso’s was born out of Barman’s experiences with the roll in his hometown Kolkata. “I was fascinated by the concept of rolls. It’s a bit like a pizza, except that it’s not flat. And it is so versatile. You can wrap anything under the sun,” he says. (For the uninitiated, the legendary Kolkata ‘roll’ is a greasy and absolutely delicious parantha wrapped around succulent kebabs.)
After completing his management studies at IIM Lucknow in 1999, Barman moved to Pune to work for elearning startup Brainvisa Technologies. That’s where he met his co-founder Kallol Banerjee, also an alumnus of IIM Lucknow. The two decided start Faaso’s as a part-time business in 2003. Angel funding came from another IIM Lucknow alumnus, Anand Lunia, currently executive director at Seedfund, and an old friend of Barman’s. Lunia, who declined to comment for this story, invested around Rs 5 lakh to get them started. The day-to-day operations were entrusted to friends Siddharth Joshi and Biswanath Chakraborty, now shareholders and part of the senior management team.
The first Faaso’s outlet, incidentally, was a large, air-conditioned full-service restaurant. The founders quickly realized that the overheads would be untenable if they were to expand and quickly stripped down to the bare-basic format. Faaso’s in its current form began to gather momentum around 2009, when Barman quit his job as associate partner with McKinsey & Co in London. Banerjee, who was employed with Maximize Learning (now known as Aptara) in the US, followed a year later. By this time, the company was running six outlets, mostly in and around Pune. That’s when Lunia came in with a Rs 50 lakh second round of angel funding. The founders also raised a term loan of Rs 1 crore from SIDBI.
In early 2011, the company decided to raise a larger round of funding and started approaching venture capital firms. “We actually wanted $2.5 million,” says Barman. Out of the $5 million that Sequoia has committed as investment to the company, it has drawn half so far. The money will be used to primarily to expand the number of outlets 250 by 2014.
But, there may be some challenges on the way there:
- The single-item menu, though cost-effective, could see the novelty wear off if the company doesn’t introduce more options, either in fillings or dishes.
- As the company grows bigger, retaining quality, and more importantly keeping the taste buds tingling, will be a challenge. Already, much as we liked Faaso’s, the rolls at Hangla’s down the road though greasy, hit the spot better (but that’s a personal preference).
- Finally, adapting the Western quick service restaurant format to desi fast food is not a novel concept. A good example is Mumbai’s own Tibbs Frankie, which has been successfully flipping its version of wraps for decades and is expanding rapidly. Clearly, this is an easily replicable business model. Execution and innovation will be key.
Image: StartupCentral
