Transforming a heritage business: The journey of Paradise Biryani

On Friday, Sep 10, we had a very interesting webinar by Mr. Gautam Gupta, CEO of Paradise Biryani. Mr. Gupta is an alumnus of IIT Delhi and IIM Lucknow. Before joining Paradise, he worked with reputed companies like Reckitt Benckiser and ITC. Mr. Gupta has rich experience in the FMCG and Retail Pharma businesses. With Paradise since 2015, Mr. Gupta is trying to scale up and take global, a famous Indian brand.

Mr. Gupta began by stating that managing a heritage brand is a challenge as well as an opportunity. The core product of the group, Biryani is today a celebrity brand and well known across the country. Indeed, Paradise has come a long way since it began as a small restaurant next to Paradise café in 1953. That small café has grown into a 1200-seater restaurant and Paradise offerings are now available in different cities across the country.

History

Founder G Hussain set up Paradise café in 1953 to sell Irani Chai, coffee, and snacks. In the 1960s, it became a 100-seater restaurant. Biryani was added to the menu. In 1978, Ali Hemmati took charge and the company moved to a new growth trajectory.

In 1983, Paradise Persis was set up as an air-cooled family restaurant. In the same year, the Paradise Takeaway was launched. In 1987, the famous Paradise theater was closed, but the Paradise brand continued to flourish thanks to the growing popularity of the cuisine. In 1991, the group embarked on a phase of infrastructure expansion. In 1996, new verticals and horizontals were set up and modern technology was introduced in the kitchen and the restaurants. In 2009, the group set up its first venture outside Secunderabad in Masab Tank. In 2015, the first outlet outside Hyderabad was set up in Bangalore.

Today, Paradise has 42 branches spread over 8 cities. The group aspires to be in 20+ cities over the next 5 years with 500+ outlets. Today, Paradise offers four kinds of cuisine: Biryani, Hyderabad, Indian and Chinese. There are three formats: Full Service, Takeaway and Home Delivery. Riding on various innovations like Kabab Festival, Haleem during Eid and Chef’s special menu, the group continues to gain in popularity.

Indian food is popular but there are few national chains. Many well- known food brands despite a strong heritage, have not scaled up. Paradise is leveraging its strong heritage and modern management principles to scale up. The group has been ahead of the curve in modernizing processes and improving customer experience. Its loyalty program, Paradise Circle, has enrolled lakhs of customers.

The food services market in India is valued at $ 50 billion. Biryani is the largest segment making up 10%. Paradise has about 1 % of the total biryani market. About 90% of the market is unorganized. Mr. Gupta is not worried about competition. He feels that the entry of more organized players will expand the market. He compares the market with the retail industry about 25 years back.

Global expansion is still a couple of years way. But it is there at the back of the mind for Paradise.

Transformation

Change management

Mr. Gupta compared change management with driving a borrowed car on a long road full of potholes. If we drive the car too fast, the car may get damaged. If we drive too slowly, we may never reach the destination. It is also important to develop a feel for the car. As a driver, we should also be determined in the face of jerks, bumps and deviations. We must keep a strong face in front of the fellow passengers. We may run short of gas, but we should never be short of energy. In short, successful change management involves moving at the right speed, developing empathy for the owners and having high levels of energy to keep going despite challenges.

Key ingredients for success

Successful transformation rests on four pillars:

• Passion for product
• Customer centricity
• Business model
• Culture

The product should be outstanding. Mr. Gupta’s effort is to keep Paradise biryani outstanding with the right proportion of different spices, right flavors and the right cooking with standardized processes backed by training.

Customer centricity is the second pillar. Delivering a great customer experience looks simple but is extremely difficult in practice. It is important to listen to the voice of the customer and respond effectively. Paradise has 3 million members in its loyalty program. The customer data is collated and analyzed using modern IT tools to fine tune the offerings as well as improve execution.

Business model is the third pillar. Paradise has expanded across India and tried different formats. Based on experience, the current thinking is that omnichannel is the way to go. Customers should be allowed to choose any of the channels; restaurants, take away, home delivery. Depending on one channel alone is risky.

In recent years, Paradise has also moved away from large restaurant formats. The optimal size of the restaurant today is about 1200 square feet. Mr. Gupta believes that the unit economics must be sound. If stores are making losses and the business expands rapidly, the losses will only get multiplied.

Paradise has developed its own app which is integrated with the loyalty program. Thanks to the app, customer profiles can be developed effectively, and targeted messaging and offering is possible. Culture is the key to success. Execution of strategy is strongly correlated with culture. The Paradise culture can be described as BEGOOD:

• Being passionate to serve
• Equal respect for all
• Generosity
• Ownership (important to deal with challenges)
• Openness to learning (needed for continuous evolution)
• Doing it together. (teamwork)

Employees who uphold the Paradise values are given a dum card (virtual during the pandemic). Thus, by constant reiteration and appreciation, the culture is being strengthened and fostered.

Mr. Gupta’s attempt has been to modernize the brand while retaining the core. A key aspect of his strategy has been to standardize the cooking and the customer experience. Standardization has been achieved through data, measurement and corrective action. Across locations, a people centric approach has given way to a process centric approach. Mr. Gupta believes the food industry can learn a lot from manufacturing. He is a great believer in kaizen and continuous improvement and poka- yoke (elimination of product defects).

On motivating people

People are important in the food services business. At the same time, working in a restaurant is not easy. People have to work till late in the night and over the weekends. Only people with the passion to serve customers can do well. A positive culture is needed, and employees must have high energy levels. Training, culture and motivation are all important to get the best out of people.

Mr. Gupta is also a great believer in metrics. The ultimate purpose of any business is to generate adequate returns to the stakeholders. Data and measurement are needed to take the right decisions and corrective action.

On suppliers and their role

Paradise has believed in maintaining good long-term relations with key suppliers like Coca Cola and Dabur. Over time, the company has developed a strong supplier base. Today, objective criteria are used to measure the performance of suppliers. A daily quality report monitors deviations from standards and brings rigor to the quality management process. Paradise also attaches a lot of importance to traceability and food safety.

On local considerations

Local considerations are important as a brand expands. In Calcutta, people were used to having potato in their biryani. So, Paradise thought seriously abut tweaking its menu. But market research revealed that the Calcuttans wanted Hyderabadi biryani to be as it is. Later, Paradise collected feedback from the local foodies and posted YouTube videos. Today, the brand is very popular in Calcutta.

On health concerns

Unlike fast foods, there are no major concerns with biryani. No oil is used. Only healthy fats, rice and protein are used. But Mr. Gupta admitted that Indian food services providers cannot be complacent. They must be aware of movements such as vegetarianism and veganism.

On transition from one generation to another

Mr. Gupta believes that transition does not create any problems as along as management and ownership are separate. At Paradise, that is indeed the case. An institutional structure has been put in place. The owners have oversight, but the management is left free to operate within the broadly defined contours of governance. Mr. Gupta also felt that institutionalized culture also provides continuity and predictability in how the business is run.

On home delivery

Biryani travels well. Yet, care is needed to maintain the temperature. Biryani comes in layers and during delivery, these can get mixed up, changing the taste somewhat. To provide the same home dining experience as in the restaurants, Paradise is experimenting with containers instead of pouches. However, containers are more expensive and consumer sentiments have to be taken into account.

On how the pandemic has affected the business

The pandemic has indeed posed various challenges. The strategy of Paradise can be summed up in three words: Care, Connect and Costs. Paradise has tried to care for employees and connect with them. The company has provided transportation to employees who wanted to move to their hometowns during the pandemic and again to bring them back after the lockdown was lifted. More recently, employees have been vaccinated with all having received at least one dose. At the same time, the company has tried to keep costs under control in an industry where 30% of the costs are fixed in nature. Paradise has worked with suppliers to defer payments and with landlords to defer rentals.

Mr. Gupta believes over communication is important during a crisis. Paradise has surveyed lakhs of customers to understand what they expected after the lockdown was lifted and the stores reopened. Based on their suggestions, various measures have been put in place and this has been clearly communicated to customers.

Mr Gupta believes that authentic communication is important. Empty promises do not carry weight. It is important is to act as per the customer feedback and then declare that the action items have been completed. One such suggestion Paradise has acted upon is contactless delivery. Customers do not have to touch the menu card. They can scan it with QSR and place the order.

Business is now almost back to pre-covid levels, but the difference is that if restaurants generated 75% of the business before the pandemic, then, they only generate 50% today. The employees of IT services companies are working from home. So, home delivery will be important for some more time.

In the post pandemic period, Mr. Gupta feels that the fundamentals will continue to be important: outstanding product, culture and customer centricity.

On cloud kitchens

There has been a lot of hype around cloud kitchens primarily because they are asset light models. Paradise has tried out this format but without much success. Mr. Gupta believes that omni channel is the way to go. He added that the most global food brands have not embraced cloud kitchens.

On the new age customer

The new age customer has a short attention span. So, any advertising message must get to the point quickly. These customers are also variety seeking and do not show long term loyalty to any brand. They tend to get bored quickly. So continuous innovation is needed. These customers are also more concerned about social responsibility.

On developing empathy

Mr. Gupta mentioned that the senior management at Paradise spends considerable time working in the kitchen and the front area. That is how they understand the challenges employees face and develop empathy for them. It has been a challenge to maintain such ground level contacts during the pandemic as well.

On managing self

Mr. Gupta’s philosophy is: respect your own time and the time of others. We should be sticklers for time both in the office and at home. Mr. Gupta has learnt this lesson working with managers in his earlier stints at MNCs.

We thank Dr. Vedpuriswar for bringing out the highlights in the form of this note