Puttaraj A G, President, Coffee Day Xpress,talks to Priyanka Kapoor about his company’s success story and future growth plans.

Coffee Day Xpress is the off-shoot of Café Coffee Day. It is a unique concept that feeds a world continuously in transit. CCD started in 1996 and Xpress in 2003. When CCD units were being set up, many corporates wanted to have them within their office premises but insisted on competitive pricing, that’s when the idea of Xpress germinated. Now this is a kiosk model and we call it convenience café chain, largely different from CCD which is a leisure chain. CDX is designed in a way where everything fits in 100 sq. ft area. Every product is in a takeaway format. We have the entire range of coffees, a host of beverages including teas, shakes and even hot chocolate. There is also a variety of snacks like sandwiches, submarines, burgers, puffs, samosas, wraps and pastries. Today we have about 870 outlets across the country out of which 55% are franchised and the rest company-owned.

Franchising in our case works on a very simple model. We have two different formats, indoor and outdoor kiosks. The former is in the office space or a place where several other kiosks of different brands are available. The latter is for the retail segment where one takes up a built-up area and establishes a customized kiosk.
For an indoor kiosk we take about Rs. 3 lakhs as deposit and for the outdoor variety, the amount is nearly Rs. 4 lakhs. Out of these sums, 20% is non-refundable and we have a lock-in period of three years for the franchisees. All the capital items, including the kiosk and machinery and the food items, are supplied by the company without any additional cost from the franchisee. So the advantage here is that, with one-time investment, the franchisee gets the entire set-up plus the working capital support from the company. Every morning the food items are delivered to all the franchisees and at the end of the day, whatever is not sold is discarded. The franchisee collects the cash and takes it home. We do a weekly billing to the franchisee and give 25% commission on the net sales. Thanks to this model, a franchisee doesn’t need to spend any money and can also keep his part of the revenue share with him on a daily basis. The only out-of-pocket expenses for him would be the salaries of his staff or bean buddies as we call them. We also help the franchisee in getting the right type of staff since we have tie-ups with various agencies. .

Almost 70% of our 870 kiosks function in cafeterias in corporate establishments. Wherever there are over 1,000 employees, the companies are compelled to offer various product options. These days the trend is that many companies have different formats of kiosks and different forms of food items. We are definitely known for Coffee wending in India and no other brand can match the quality we offer. In terms of food, we always develop new items and change the menu completely every two months. The customers walk in to find new stuff, apart from the basic products. Hence, they never get bored.

We have no competition from any branded product. Local vendors in each city are the only rivals, able to sell cheap because of lack of overheads. But our advantage lies in the unmatchable product list, consistency of the products and the level of quality. We maintain certain standards. The local resistance is actually short-lived.

Franchising is a big challenge today. Getting a franchisee is no problem but getting the right franchisee is a big question mark. With the kind of finance options available in the market now, anyone can just come in and say he wants to be the franchisee. But we are very selective and conduct interviews, besides gathering some background information. We have mostly been successful but have gone through bad experiences as well. In India, the biggest problem is that people compare franchising with, let’s say, stock exchange where they put in money and get returns immediately. Franchise business cannot satisfy such get-rich-quick aspirants. This field demands a lot of patience and a sense of involvement. Vigilance over the operations of franchised units, if not physical presence everyday, is absolutely essential.

Undoubtedly! We have many franchisees who have multiple outlets with us. Once an individual gets into franchising, it is like somebody running his own company. There are lots of challenges involved. Once people get used to the franchise model, they are fully independent. We have seen people growing big from a humble beginning and taking out franchises of other different brands.

Our Café Coffee Day brand now has one outlet in Pakistan and three in Vienna (Austria). Our policy is simple. CCD goes to a country, establishes its base there and then expands. This is what we did here in India. In the coming year, our target is to have 1,000 Xpress stores. We are dominant in Bangalore, Mysore, Chennai, Hyderabad, Mumbai, Pune, Nagpur, Ahmedabad, Surat, Chandigarh, Delhi NCR and Jaipur. We are not going beyond these cities.

Location is the key factor. First we select a particular location and only then look for potential franchisees in that area. Investment from our end would be in the range of Rs. 5 lakhs-Rs.8 Lakhs and another Rs. 3 lakhs-Rs.4 lakhs from the franchisee.

There is going to be a temporary slowdown in Indian retail and this may stay for another 3-4 months. Beginning with the next financial year, things will change with the growth wheel back on the fast track. Nothing can stop this because earlier retail was quite unorganized. With organized retail coming in, I don’t think anyone can go back to unorganized format.

We have been cautious in selecting sites, and not blindly accepting whatever is available. Internally we have been working more effectively towards cost competitiveness of the product range.

Definitely not, the advantage for a brand like Coffee Day Xpress is that, apart from being a convenient chain, ours is the most competitively priced product. So there cannot be any slowing down for something which is already so affordable. The prices cannot be lower than this in the market.
We haven’t curtailed any expansion plans. In fact, we are seeing a big advantage in this period of slowdown. If a retail brand wants to expand in the market, then the real estate costs are a matter of concern owing to high rentals. But with this slowdown there is bound to be a correction in the realty sector and prices will return to a competitive level. This will benefit every retail brand in the market. This correction, I feel, will happen within the next 3-4 months.

When we started Café Coffee Day, we never went for the franchise model because we wanted to do everything on our own. So we learnt quite a few lessons. We adopted the franchise route for Coffee Day Xpress purely for the entrepreneurial skills and experience the franchisee will bring with him. Franchise as a model is good for all brands as the franchisee will put in his best for the business to work well and in return we will also be benefited.

Our immediate aim is to take Coffee Day Xpress to 2000 outlets in the next 2-3 years and then probably establish the brand abroad.