Yo! China to open 10 cafes with 20% costlier food; to serve alc

• Posted by Sindhuri G August 29, 2012 - Filed in Business - 2,137 views

  NEW DELHI: Moods Hospitality, the owner of Chinese fast-food restaurant chain Yo! China, will open 10 youth-friendly cafes over the next one year as part of a strategy to increase profitability, its top executive told ET.
  
  To be called Yo! China Cafe, the large-format cafes will serve food at a 20% premium over the entry-level pricing at Moods Hospitality's existing outlets. The first such cafe is expected to open in the next 10 days, managing director and CEO Ashish Kapur said.
  
  "We are moving up the curve. This is our new focus area," Kapur said, adding, "We expect the cafes to be a more profitable business model than our existing outlets."
  
  The cafes, with an average built-up area of 2,000 sq ft, will have display kitchens and serve alcohol and specialty desserts. Some existing Yo! China restaurants could be converted into cafes, Kapur said.
  
  The company plans to hire college students as store managers for the cafes to help connect better with the youth.
  
  Kapur, who worked with GE Capital before launching the Yo! China brand in India nine years ago, said the tagline "Chinese food at Chinese prices" made Yo! China popular, but didn't work later.
  
  "About four years back, we made the mistake of continuing to say that we serve the cheapest Chinese food. Consumers began relating the prices positioning with quality," Kapur said, adding that the firm had to shut down about 10 stores because it had expanded too fast at the cost of profits.
  
  Consultants, however, say the new business model will need to be tested before it can be scaled up. "The cafe business is not easy and is traditionally not associated with Chinese cuisine," said Pinakiranjan Mishra, partner (retail and consumer products) at consulting firm Ernst & Young.
  
  The Rs 50-crore Moods Hospitality operates 50 Yo! China outlets and two fine dining Dim Sum Bros restaurants in the country. About 50% of the outlets are company-owned.
  
  The company is looking to raise over Rs 60 crore in the first quarter of next year to facilitate expansion of Yo! China and Dim Sum Bros. The infusion could be from more than one PE firm, Kapur said.
  
  Kapur said the first overseas Yo! China outlet could debut this fiscal, as part of the company's plan to expand into the Middle East, South Africa, Nepal and Mauritius.
  
  The company had received its first round of funding of Rs 27 crore in 2007 from Matrix Partners India.
  
  The fast-food segment in India has seen a couple of PE deals in the past. In May this year, rival fine-dining Chinese restaurant chain Speciality Restaurants raised over Rs 175 crore through an initial public offering, which was oversubscribed 2.5 times.
  
  Last year, TVS Capital pumped $11 million into Om Pizzas & Eats, the Indian franchisee of international chain of Papa John's Pizza, Chili's Grill & Bar and The Great Kabab Factory. ICICI Ventures, too, had infused $56 million into Devyani International, which owns and runs Pizza Hut, KFC, and Costa Coffee outlets in India.