When Rebel Foods Cracked The Recipe For Unit Economics The transition from being a QSR to an online delivery-only kitchen changed the entire economics of the business
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Rebel Foods did not start as a cloud kitchen company but started with an aim to become a dominant player in the organized retail chain in 2003. Since then it has been on a roller coaster ride and today the foodtech unicorn has today built more than 45 brands across 10 countries including India, Indonesia, United Arab Emirates, United Kingdom, Singapore, Malaysia, Thailand, Hong Kong, Philippines, and Bangladesh.
The Turning Point
In 2003, Rebel Foods started a single shop of rolls called Faasos in Pune with this vision. In five years, Faasos made steady progress. Revenues jumped from INR 4 crore in fiscal 2012 to INR 62 crore in four years and the brand expanded to three cities and opened 40 outlets.
The top-line growth, though, was eclipsed by a bleeding bottom line. Hurting most were the exorbitant rentals on the high street. Around this time, co-founders Jaydeep Barman and Kallol Banerjee attended a Sequoia Capital (its longest backers) conference where Doug Leone said something along the lines of, "the most important job of leaders is to find the stickiest friction for growth and remove it".
Location and hence rent was the biggest friction in their business. "We realized that even with 50 high street locations, around 75 per cent of Faasos orders were for delivery. So, we asked our customers a simple question through a text survey: "Have you ever seen or been to a Faasos outlet?" A whopping 74 per cent responded "no". We then thought, "why exactly do we need to be on the high-street?," said Ankush Grover, co-founder, Rebel Foods, who joined Rebel Foods in 2012 as part of Faasos Entrepreneur in Residence program with his learnings from previous stints.
That's when the founders and the team decided to pilot a kitchen on the second floor of an industrial estate with 80 per cent lower rent than a high street location in the same area, more space, and a better working atmosphere for employees. "It worked beautifully as our revenue kept climbing while our rent nosedived, generating a kitchen level profit within a couple of months," said Grover.
Thus, the biggest turning point for the startup came when the founders found out that their web and phone delivery business was growing independently of the stores and thus decided to shut down the quick service outlets (QSRs) and lease low-rent spaces for kitchens instead, to transition from being a QSR to a kitchen with only online delivery. The shift changed the entire economics of the business. The rent-to-sales ratio dropped from 15 per cent to 4 per cent in the next two years. And more importantly, they no longer had to worry about finding great locations & location fatigue — two problems that had previously hampered the scale-up operation.
"We altered the store economics of a restaurant by reducing capital investments, taking away prime real estate costs and expensive service staff. A combination of this model with lower break-evens and change in the consumer environment enabled us to scale up quickly and build brands. Investors across the globe have paid attention to this development and have believed in our long-term goal," he said.
Further, the founders also realized that they could build multiple brands from the same kitchen. The first brand that was launched after Faasos was Behrouz Biryani, which soon went national, and they were delivering more than 2 lakh biryanis a month, within a year. 18 months into launch, Behrouz had skyrocketed to become a $12 million business. Banking on the success of Behrouz Biryani, they then launched a pizza brand called Oven Story Pizza.
In 2018, SLAY Coffee happened as a part of the Rebel Launcher initiative, where Dropkaffe built the brand, the product offerings etc, and they scaled it on Rebel Operating system. "Now we host and scale multiple brands such as Natural Ice Cream, Marrakesh, Anand Sweets, Mad over Donut on our pan India network of 20+ cities," he said.
Apart from cooking up new brands, the startup offers a wide range of services like Rebel Launcher, mentioned above, where it welcomes great restaurant brands to utilize its cloud kitchen network to scale pan-India and even abroad; Brands-as-a-service, where Rebel Foods ties up with existing restaurants in international markets to offer existing brands the know-how, dish selection and designing of a menu, besides marketing to local restaurants; Rebel Operating System which is a full-stack technology offering inventory and kitchen management to demand management and fulfillment, supply chain capabilities for sourcing, warehousing, and moving input materials safely in any shape and form; and lastly culinary expertise and capabilities to break down menus into small SOP driven steps that don't require any additional skill.
"We were always confident about our Operating System (OS). Rebel's OS is what sets our business apart. This tech and our business model contributed manifolds to our scale and the growth that we witness now," he added.
The Unicorn Status
"We are proud and humble about our achievements. We have a strong and constant vision and turning into a unicorn has made us very happy and is one of the biggest achievements for us, our partners, customers, and other stakeholders," he said when asked about achieving the unicorn status.
The cloud kitchen trend is even more crucial for the industry now saddled with a lasting change in consumer behaviour, with dine-in yet to recover to pre-COVIDlevels. "One must keep evolving and upgrading with the changing trends to sustain for a longer period," he said.
Talking about the team and team culture, he said, "All our approaches are aligned to think about our customers first and delight every customer we come in contact with across all food missions. So much so that our kitchen managers are themselves called - Chief Delight Officers, each of them on a mission to delight every single customer they come across. We have been fortunate to find people who truly believe in our vision and are constantly working towards it," he said.
Milestones and Plans
According to Gover, besides the unicorn status, there are many other milestones for the company which includes pioneering cloud kitchen, building tech-led culinary expertise, Faasos crossing 500+ locations, pioneering the Thrasio of Food model by investing and onboarding SLAY Coffee in 2019, launching digital foodcourt EatSure in 2020 and launching a virtual brand partnership with foodpanda, starting in 6 new countries.
Rebel Foods' future plans/goals include not only geographical expansion but also, acquisitions and evolution in technology. "We aim to be present across 100 Indian cities and 20 countries in 2022-23. Globally, we will continue our expansion whilst associating with various food missions," he said. The Mumbai-based company is planning to add 250-300 locations across Southeast Asia, West Asia and the UK in 2022-23. It is also currently eyeing many popular brands and will soon onboard them in Rebel Kitchens.
Over the years, the foodtech unicorn has built many tech-first products in kitchens which helped in maintaining consistency and enhancing customer experience. And, more innovations like LIVE streaming of customer food preparation and giving LIVE instructions to chef on how fried the garlic should be is in the pipeline.