Social enterprise

9/19/2014 business.outlookindia.com | In Good Taste

http://www.outlookbusiness.com/printarticle.aspx?291710 1/6

Janta meals startedbecause cookingremains an

Enterprise MAGAZINE | SEP 05, 2014

"Currently, w e sell 2,000 meals a day. Within three years, w e w ant to prepare 100,000 meals a day" Jesse Van De Zand, Co-

founder & CEO

GOOD BUSINESSES

In Good TasteJanta meals supplies nutritious food for migrant workers at economical prices

HIMANSHU KAKKAR

Started 2013Location GurgaonInitial investment Rs 40 lakhSocial impact Providing nutritious, hygienic and affordable food for migrant workers 2013

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When I eat at a roadside hotel, I have to pay Rs 60 for a decent meal. Thats too expensive for me. Here, Iget a decent lunch for just Rs 500 a month, says Akhilesh Pandey as he steps out of a Janta Meals outletin Gurgaon after a quick meal. The 23-year-old migrant from Faizabad, Uttar Pradesh works as a datacollection agent for a finance company. For a third of what Pandey would pay at a restaurant, he gets ahygienic, nutritious meal at Janta

. But most importantly, he gets to eat home-like food as is advertised by theboard at the outlet, which invitingly reads ghar ka swadisht khana.

The man behind the venture (and CEO) is also a migrant 32-year-oldDutchman, Jesse van de Zand. He had been managing start-ups in the



inefficientproposition for amigrant worker

A large part ofJanta meals targetcustomers eat atroadside carts andstalls

Costs of fuels andvegetables make up50% of the selling

Netherlands since 2007 at Enviu Foundation, a platform for social andenvironmental entrepreneurs, but had never handled a food start-up beforecoming to India in 2013. What puts off fellow Europeans is the very reasonfor him to be in India. I love the chaos here, he laughs. The idea of servingmeals for less to migrant workers was first pitched to van de Zand by PrabhatAgarwal when they met early last year in Gurgaon. Agarwal later became the financier of Janta Meals.The IIT and IIM graduate already had successful businesses to his name but decided to enter the socialsector five years ago with a NGO-run school called Aravali Scholars

. Since then, he has financed three social enterprises Janta Meals, abiomass-based refrigeration start-up in Uttar Pradesh, and a rural BPO inUttarakhand.

The duo felt Gurgaon, where Agarwal runs his school in the Sikandarpurarea, was fertile ground to start such an enterprise. There are around50,000 migrant workers in this area alone, but the latest census registeredonly 4,200 here, he says. When migrants are not counted properly, one cansafely conclude that there are no effective policies or programmes to cater to

their needs either.

The motivation to start Janta Meals came from the fact that cooking ones own food remains an inefficientproposition for a migrant worker he doesnt have cooking gas, refrigerator, running water, time or alarge house.

Twists And Turns

Van de Zand started a pilot project in August 2013 in a rented outlet near the Sikandarpur metro station,home to a huge migrant population, with an initial investment of Rs 40 lakh from Agarwal

. The meal, which included four to five rotis, dal, sabzi, chutney and salad,was offered for a measly Rs 20. Jantas first two outlets in Sikandarpurmarket and Sheetla Colony were set up to test the demand for its product.Both outlets could serve about 250 meals in one shift, had 12 women cookseach and a manager to oversee operations: enough to serve their clients,



price andcontrolling them isa challenge

mostly NGO schools.

Once the demand was proven and it decided to scale, Janta established alarger kitchen in Gurgaon. Within a couple of weeks, a couple of hundredcustomers came in, recalls van de Zand. Despite the companys focus onnutritious, hygienic food, he admits that Indian workers dont care much for nutrition. The original businessmodel had franchisees that would cook food and sell at their outlets. The company would finance theinitial set up, provide supplies and guide them. However, this didnt prove effective, so we switched to ahub-and-spoke model early this year, says Apeksha Porwal, co-founder and CFO, Janta Meals. The 22-year-old Porwal was earlier working with UnLtd India, an incubator for social enterprises.

Under the current model, a central kitchen at Sector 18, Sarhaul, works from 5.30 a.m. to 6 p.m. everyday to prepare 2,000 meals, with the potential to go up to 10,000-12,000 meals. The kitchen is a dimly-lithall with large burners, woks, refrigeration cabins, vegetable peelers and cutting boards. The place ismanaged by Yogesh and 12 women cooks, who used to work earlier as maids, cooks and tailors. Food issent out from here twice a day through tempos to outlets located within a 10-20 km radius, for lunch anddinner. The franchisee just needs to heat and serve the food, alleviating the concerns about quality,sufficiency, inefficiencies and timeliness that plagued the original system.

Finding Franchisees

Today, Janta Meals runs six outlets, all in Gurgaon. We select franchisees based on how well they knowthe area where the outlet is, so that we get a well-networked guy, says Porwal. The outlet is typically asmall shop in the vicinity of offices or industrial areas. The initial investment of Rs 1.8 lakh is made by thecompany, to be paid back by the franchisee over five years. Out of this Rs 1 lakh is for equipment, whichincludes a bain-marie to keep food warm and electric heaters used to heat chapattis and make tea. Otherequipment includes plates, cups, spoons, glasses, utensils, food carriers, tables and chairs. Thefranchisee pays an interest-free lease every month for five years for the equipment, the cost of which is



shared by franchisee and company.

Finding and training franchisees is one of the major challenges Janta Meals is facing currently. We haveto do a lot of hand-holding in the first quarter. We have to teach them everything, from how much toorder, how to present, how to avoid wastage to managing counters and customers, says Porwal.

The Sheetla Mata Mandir outlet in Gurgaon is a small, indistinct shop where eight to ten people are busyhaving lunch. Behind the counter, Prem Kumar is struggling to keep up with the crowd. I came toGurgaon eight months ago from Bihar. Initially, I wanted to work and save Rs 20,000 to join a mobilerepair course, says Kumar, as he pours dal into another impatient customers thali.

Initially, Kumar worked at one of the carts that Janta ran in the area. Three months ago, however, he wasasked to consider becoming a franchisee. Kumar says that on his first day, he only sold meals worth Rs250 but now sells around 125 meals a day and rakes in Rs 3,600. After three months experience, he hasbecome confident about the demand and is able to earn Rs 15,000 each month. Van de Zand believesthat potentially, franchisees can make Rs 25,000. What about the rent? I have to pay around Rs 3,000each month, Kumar says; the total rent is Rs 9,000. Kumar says that if he is asked to pay more, being afranchisee wont work for him.

To address this issue, Janta is looking at stationary carts at a cost of Rs 45,000 each, to play a major rolein targeting customers eating at roadside stalls. Moreover, these carts can manoeuvre narrow lanes inslum areas and reach construction sites. We initially used the carts to test our food but realised that wecould have higher sales if the cart was equipped with a heating facility, had a stronger body and lookedappealing, says van de Zand. Based on this, Janta has ordered a cycle-driven cart from Bhogal Cycles,which looks quite appealing and has an in-built bain-marie, as a pilot. But for now, the company isfocusing on selling meals from its brick-and-mortar outlets.

Economies Of Scale

Around Rs 40 lakh has already been invested in the enterprise, mostly in equipment and salaries. Jantahas also received an additional Rs 2.2 crore investment from Agarwal. The company aims to have at least30 outlets in Gurgaon by early 2015. At the outlet level, franchisees make profits, but at the companylevel (or kitchen level), van de Zand will have to wait. Currently, we sell 2,000 meals a day. Once we hit3,000, we will fully cover our costs, he says. Janta started with 800 meals per day and by April 2014, the



companys turnover touched Rs 5 lakh. It has now risen to Rs 12 lakh in June 2014.

As on date, Jantas franchisees contribute 50% to its turnover, the rest comes from sales to institutionssuch as factories and schools. This is a de-risking strategy as revenues from franchisees can fluctuatedepending on the orders placed. Selling to institutions is an easier revenue source but we dont want tomake it institution-heavy as the impact is higher in case of franchising. We would like to maintain 50:50ratio between the two, says van de Zand. The company offers institutional catering for fixed clients that fitthe profile of its target customer base. Some of these clients include NGO-run schools, Aravali Scholarsand LEU School. It has also set up a canteen in an apparel company in Gurgaon with 1,200 workers.

Hurdles Ahead

Dealing with high expectations of customers is a challenge for franchisees. Van de Zand was surprisedthat even at Rs 20, customers were very picky and expected free refills. To deal with this, the companystarted charging an extra Rs 5 for a dal or sabzi refill. Currently, of the Rs 20, 50% is the cost of rawmaterials and fuel, 30% is kept by the franchisee and the remaining 20% is the companys profit. Of late,vegetable prices have been volatile. Can the company handle a price rise in the near future? Van deZand believes it can. Our research shows that a hike of Rs 2 to Rs 5 should not be a problem, heexplains.

Still, keeping raw material costs under control is the biggest challenge. Jantas vegetable supplies come inevery day from Azadpur mandi in Delhi. Pulses come in about five times a month from a wholesalesupplier while spices and rice are bought in bulk from a local shop.

The kitchen is equipped with cold storage for vegetables and dairy products and a storeroom for dry rawingredients. The price of these ingredients does not fluctuate much, unlike vegetable prices. But costsfluctuate based on the price of certain raw materials that remain constant: potatoes, tomatoes, onions andcoriander leaves (for chutney). For instance, tomato prices shot up from Rs 12 in July to Rs 60 a kg inAugust.

Janta has been using signage and flyers to promote itself but most customers are drawn by word ofmouth. Mohit Bhardwaj, an automobile service center employee, says he was referred here. However,hes not sure if he will continue to visit the shop if prices rise by Rs 5. On the face of it, Janta competeswith almost every restaurant and stall on the street. But Agarwal disagrees, Prices of a proper meal are



at least twice or thrice that of street food. Chhole bhathure, samosa or chowmein are not substitutes forgood food. We are not facing price pressure but, yes, we want to make it affordable.

Despite the challenges, both believe they have created the business model and need funding to buildcapacity. We want to attract institutional investment, says van de Zand. Within three years, I want toprepare 100,000 meals a day, he says. Agarwal doesnt think van de Zand is overly optimistic. We have1 million migrant workers in NCR. If we capture 10% of them in the coming years, we will get there. Jantascustomers certainly want it to expand. They must open in Udyog Vihar, says Bhardwaj. Looks like JantaMeals has got customers eating out of its hand.

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