Situation

The client was a rapidly growing food chain based in a metro city in South India. They are focused on the premium cafe customers who are looking for a/c, beautiful interiors and a South Indian menu.

The rapid expansion throughout India has caused their revenues to drop in 3 successive quarters. Most of the newly opened locations have not broken even after 3 months of operations.

Business Need

The client has done a thorough study on the viability of their shop at each new location so they are confident that the location has potential. The client needs to know what changes to make so that their overall revenue per location is increased.

Analysis

The initial knee jerk reaction of the client to the current situation was to increase the advertising budget and start localised advertising, such as flyers and local newspaper and TV channels. Our team had to convince the client’s management to pull back on all the advertising spend and evaluate the entire source of revenue before committing to an advertising budget.

From our expertise in the food and retail industries, we selected a range of parameters to collect data. Most of the parameters that we had selected, such as customer age range, frequency, etc. were available with the client. Some of the parameters such as local events, tourism related customers, etc were not available and therefore we had to setup the collection for the same. Most of the analysis pointed to weak product-market fit for the entire range of menu that was presented.

Solution

The client was instructed to cut back on all menu items to just the ones that were not present in the locality of each cafe. The remaining items on the menu formed the base framework to understand the taste palate of the local customer. We were quite surprised to see the difference between the menu items from location to location. This cut back was held for a few weeks before offering customers additional menu range as a free sample. All new items were provided free for a couple of months until there were some customers who specifically asked for the new menu item. We recommended this ‘ask’ as a trigger to place the item on the menu permanently.

Results

The results were significant to the client as they did not expect the variation in menu items from location to location. The assumption was that the local cafe from a particular location could thrust the opinion of taste to another geographic region and maintain the revenue. 

The client was aware of the taste requirements at their original location but refused to accept that their taste would not be accepted in its native form to another location. 

Once we had shown the client the cut back menu item and only when a customer ‘asked’ for a new item, the results were rather evident to the client. The revenues bounced back to healthy numbers and they have now become a well known eatery in nearly all their locations.