Introduction

Methodology
The Business
Entrepreneurs Background
Market Landscape
Restaurants
Health Restaurants
JP Nagar Demographics
Vaathsalya
Operations
Economic Assessment
Demand target audience
Production
Competition
City Level Competition
Area Level Competition
Direct Competition
Customer Choices
Customer Behaviour
Economic Model
Recommendations
Annextures
Annex: Questionnaire
Annex: Transcript of conversation with Vaathsalya employees
Annex: Lunch Menu at Vaathsalya on 07-Aug-2015
Annex: Snapshots of complementary products on sale
Annex: Secondary data on Vaathsalya
Annex: Data collected about neighbourhood restaurants
Annex: About demographics of the area

Introduction:
In order to study and understand the various objectives mentioned in our project
guidelines pertaining to customer, strategy, demand and supply, costs and profits etc., we refined
our search to restaurants in JP Nagar, which we considered to be a good field for conducting our
research based on the above mentioned parameters. After analysing the list of restaurants in the
area we were particularly interested in Vaathsalya Millet Caf.
The health-food market has been growing tremendously owing to the escalating demand
for wholesome food at peoples door step as the population has started to realize the importance
of having a healthy lifestyle. The segment of health and wellness food is estimated to rise to a
whopping Rs. 55,000 crore this fiscal year<reference require>. Due to the increased prevalence
of lifestyle diseases in the country, people have now become more aware of the causes of these
diseases. This increased awareness has led to the positive growth in health-food market, and this
also was a driving factor behind our choice of this restaurant, as it focusses on a currently
growing sector and there would be a wide scope for us to explore and study the market.
Methodology
Based on the project guidelines, we refined our search to restaurants in JP Nagar. Within that we
chose to conduct a field trip to Vaathsalya Millet Cafe at 277 15th Cross, J P Nagar Phase 5,
Bengaluru 560078
The aspects that made this particular restaurant interesting were:
1. They are a specialty restaurant dealing extensively with a Millet (Jowar and Bajra) based
menu
2. They operated out of a house, presumably with the intention of creating a home-like
atmosphere
3. We were interested in understanding how the operated vis-a-vis the other restaurants, given
that they are located in an area with several restaurants
We then created a detailed questionnaire (provided in the annextures) to focus our study to
certain aspects of the restaurants business. The primary observations were then analysed vis-a-vis
the formal models of economics learned in Prof. Subhashish Guptas Managerial Economics
class.

The Business
Entrepreneurs Background
Vaathsalya Millet Caf:
The story of the caf started when Jyoti Mahipal, a homemaker with interest in catering
tasty yet healthy food, started the packaged food business about 6 years ago, under the brand
name Vaathsalya. The caf was started around 1.5 years ago, with the same objective of a
healthy millet based menu. The goal of Vaathsalya, as mentioned by the entrepreneur herself, is
to spread the awareness of use of millets to a larger population and also to cultivate more
quantity of millets at her farm in Kanakapura Road. Vaathsalya can be considered as a social
enterprise, where profit maximization is not the main objective. Vaathsalya also focuses on using
eco-friendly packaging for its value added products and providing employment opportunities for
rural women.
According to a report by the Indian Council of Agricultural Research, Jyoti has
participated in various exhibitions organized by the Government of India and technologists meet
both at the national and international venues. To mention one of her accomplishments, she has
received 3rd prize for displaying her products at a stall named Ragi Mane, in Krishi Mela, 2007
at UAS, Bengaluru. The participation in these events has given her lot of marketing potentiality,
new avenues, and confidence to go ahead with new ventures. The Vaathsalya Millet Caf is one
such venture.
Jyotis Viewpoint:
The business was started 1 year back with an intent to serve healthy food to the
customers. The nearby area had 2-3 restaurants, but none was serving healthy food.
The owner, Jyoti, who herself has incorporated healthy diet in her family, thought of starting a
restaurant to promote the healthy eating habit amongst the people in Bangalore. She owns a
millet processing unit at Kanakhpura (started 10 years back) and used to sell ready-to-eat
processed food to customers. She still sells the packaged food to customers in her restaurant. She
mentions she is not selling food, she is selling a concept Eat Healthy, Stay Healthy. She is an
expert in the area of millet processing, infact she herself cooks food for the customers and
supervises her cooking staff.
The business is still in its nascent stage, where she is trying to come up with a good menu
based on recommendations/suggestions from the customers. The restaurant is has posters all
around showing the nutritional value of the Thali that she prepares for the customers everyday.
The menu is changed everyday so that customers dont feel bored. She is strict on her principles,
customers are expected to remove their footwear outside before entering the restaurant. The
place is designed in such a way that it gives the customers a home-like feeling. The restaurant
closes at 8PM, because Jyoti feels to stay healthy people should be having dinner before 8PM. A
lot of customers has criticized the timings, but as mentioned earlier, the restaurant is not for

making money, there is a social agenda behind it. Jyoti knows she will certainly be losing a lot of
customer base because of this, but she doesnt want to compromise on her agenda
Market Landscape
Customer base
The restaurant has never done any marketing. Most of the customers came to the restaurant
through word-of-mouth publicity. It has done a great job by creating a niche for themselves in
the food industry.
Currently Vaathalya sees ~25 customers on weekday, and ~75 customers on a weekend.
50% of the customer base visit the restaurant atleast once. 10-15% of the customers visit the
restaurant 3-4 times a week. This suggests there is a high loyalty amongst the customers for
Vaathsalya.
Weekly customers mainly include the people who are working in nearby offices. During the
weekend, there are customers coming from all across Bangalore eg. Whitefield, Marathalli, etc.
On weekends, customers generally come with their family, Jyoti mentioned how she interacts
with the customer on a daily basis to constantly get feedback. She wants to target kids to make
them understand the importance of millets.
Competition
We surveyed the restaurants located within a five minute walking distance from Vaathsalya to try
and understand the competitive landscape. We found six other restaurants that fit the criterion.
The following table captures the key similarities and differences between them from a customer
point of view

Nandhini

Nandini has positioned itself as a specialty Andhra Cuisine family restaurant dealing with a
largely non-vegetarian spread. While the prices were amongst the highest of the group
considered, we observed that the occupancy rates were at about 70% during our sample
collection. The restaurant is located on the first floor of a 5 floor building, with the ground floor
hosting a pub and the reception area, and the floors 2 and up serving as a boarding hotel. Nandini
is likely to derive some of its restaurant business from its hotel guests. There is limited two
wheeler parking available in front of the building, but cars need to be parked in nearby streets.
Vasudev Adiga's
Vasudev Adigas is the newest restaurant to come up in the area. Its building and facility are
recognisably new. The facility offers a Mini Hall for hosting occasions, apart from a standard
South Indian menu. The kitchen is visible to diners and customers serve themselves from the
counter. This facility has parking space for four cars, and ample parking space is available in the
nearby street. Vasudev Adigas is priced the lowest (along with Take a Break and Cafe Udupi
Ruchi) among the group
Cafe Udupi Ruchi
Cafe Udupi Ruchi is located on the first floor of the building that has McDonalds (listed below)
on the ground floor. The access to the first floor is somewhat cumbersome as one has to enter it
from the back of the building. However, the glass walls, its position on the first floor of the
corner building of a busy intersection ensures that it is not missable. About 5 cars can be parked
in front of this building (something that is shared with McDonalds). The dining area at Cafe
Udupi Ruchi has several of their packaged food products displayed. These include health drinks,
various forms of ready-to-cook packs and the like. A couple of pictures of the products on
display have been shared in the annexe. The prices are amongst the lowest in the group, but we
presume that several customers may also pickup some of the packaged foods on display there.
Kebab Souk
Kebab Souk is located at the corner of a street with ample parking. We noticed several families
walk in and out of this place. They additionally host a Dilli Chat stall on part of the facility
facing the main road. The prices here were amongst the highest in group, but the demand
observed seemed the highest of all restaurants observed during our field trip.
McDonalds
McDonalds is located at a busy intersection, and with its large red hoardings is very prominent.
Access is easy as the facility opens up to the main road directly. The menu is almost completely
burger based, and the tables are arranged as tables for two, or sometimes with two such tables
clubbed to form tables for 4.
Take a Break
Take a Break operates out a modified house a few buildings from Vaathsalya on the same side of
the street. Their ambience bears some similarity to Vaathsalyas - they both have outdoor dining,
and are restaurants operating out of houses. They are different from Vaathsalya in that their
seating capacity is larger and that they are a fast food unit rather than a normal restaurant. Their
menu consists predominantly of bakery items, with sandwiches and ice creams added.

Competitive Pressures
Our field work revealed two clear patterns. The first was that the restaurants had been careful
enough to showcase themselves as unique, and the second was that despite the portrayed
uniqueness, their prices tended to cluster into three groups. This is not surprising given our
understanding of Managerial Economics, as restaurants are typically best modelled as actors in a
monopolist competition - they have a little pricing power, but not too much. But they have to
differentiate themselves to allow for that little pricing power.
Product Differentiation
Each of the 7 restaurants had a different salient cuisine. The only two that came somewhat close
were Vasudev Adigas and Cafe Udupi Ruchi, but then they offered a different overall
experience. Each restaurant, while fulfilling essentially the same need of food, had positioned
itself such that it were not directly comparable to any of the alternative restaurants in the area. If
it was health food with Vaathsalya, it was kababs with Kabab Souk, and pastries with Take a
Break.
Pricing
We found it very interesting that the prices of the restaurants tended to cluster into 3 groups - the
first one at Rs. 250, the second one at Rs. 500 and the third at Rs. 700. Given our understanding
of how monopolist competition works, the restaurants may have inelastic demand at their stated
prices, but the demand may grow much more elastic if the prices were to be raised substantially.
JP Nagar Demographics
Write in reference to the calculations in annexure
Vaathsalya
Overview of Vaathsalya - their product, its positioning (health (substance), home like
environment (soul))
Economic Assessment
Pricing
During weekdays, the price of the Thali is 180, while on weekends is 220. Jyoti didnt follow
any scientific method to arrive at the price. She mentions its difficult to price the healthy food
segment as the consumer behavior is totally different. She researched in the nearby localities, and
realized the prices varied a lot. She used Rajdhani Thali to benchmark her prices. She realizes
that she doesnt want to serve unlimited food to the customers unlike Rajdhani as it is not a
healthy eating habit, and she priced her Thaali at ~Rs. 200 (Rajdhaani Unlimited Thaali is Rs.
350). She feels the pricing is not a problem, the customers are willing to pay more for healthy
and homely food.
Production and Cost structure

The restaurant currently has a lot of fixed cost associated with it.
Rent
Salaries (8 employees)
Electricity
Overheads

Rs. 1,00,000
Rs. 60,000
Rs. 8,000
Rs. 10,000

The variable cost will be just Rs. 20 per customer.

Monthly Costs
Fixed cost = Rs. 1,78,000
Variable cost = 20x (x is the number of customers)
The restaurant sees ~1000 customers per month
Hence Variable cost = 20,000
Total Cost = 1,98,000
Average total cost = 198 per customer
The restaurant incurs a lot of loss due to food wastage. They are not able to predict the sales
pattern. The cooking time of millets is more, hence they prepare always prepare extra. Since its
still in the learning phase, this wastage will decrease when customer growth and sales pattern
becomes predictable.
Customer Choices

Customer Behaviour

1.

2.

3.

4.

Challenges with the business

Currently Vaatsalya is facing some challenges:
Customers always have the perception that healthy food is not tasty, initially customers were
apprehensive. But when they tried at Vaathsalya, they started coming more often. The
appearance of healthy food generally discourages customers.
Finding cooks was a major challenge. Jyoti had to spend a lot of time with the cooks giving them
confidence that appearance of the dishes didnt matter. The cooks came from restaurants
where in additives were added to make the food look good and taste good.
Jyoti is still managing the day-to-day operations of Vaathsalya, she is not finding time to expand
the venture by aggressively marketing it. She even told us, that many times she cleaned the
Kitchen herself as the maid was on leave.
Most of the employees of Vaathsalya are fairly new, Jyoti spends a lot of time training them. The
retention rate of the employees is very low.

Economic Model

Recommendations

Annextures
Annex: Questionnaire
1. Customer
Who is their target customer?
What proportion of customers are repeat customers? How do they decide on how much effort
and capital to allocate so that customers come back to them
2. Strategy
What determines the choice of Millet based menu that the restaurant provide? What was behind
the decision to run the restaurant from a house?
3. Demand and Supply
How do they Estimate of Demand and Supply (Elasticity)
How much labour and how much raw material do they procure?
How do they decide how much of each item to produce?
4. Competition
Does the presence of several other restaurants in the area influence their decisions? What aspects
do? What aspects of competitors decisions do they track
Do they consider substitutes while making economic decisions
They also seem to be selling packaged millet and other products at this site. Would that business
qualify as a complementary product offering. Have they a sense for how correlated the
consumption of the two are?
5. Costs
Who are the suppliers? Do they put pressure on costs?
What proportion of costs are fixed? What proportion are labour costs, raw material, ambience
upkeep? What are the sunk costs?
How many people do they employ? Do they pay them market price? What is the supply for the
labour like? Does the restaurant have the capacity to set the prices of labour?
Cost of Capital

Cost of Raw Materials

Cost of Wastage
6. Profits
Are the profits enough to cover operating costs? total costs?
What is the most productive part for the business to operate in?
7. Challenges and Prospects
What are the hardest challenges they are facing? What are they doing to resolve the challenges?
What does the business owner fear will bring his business down? How does he mitigate it?
What are the owners aspirations for the business over the next months and years?
8. Promotion
Do they allocate capital toward promotions?
Do sites as Zomato drive traffic to their restaurant? How do they decide how much money and
effort to allocate toward promotions?

Annex: Transcript of conversation with Vaathsalya employees

Annex: Lunch Menu at Vaathsalya on 07-Aug-2015

Annex: Snapshots of complementary products on sale

Annex: Secondary data on Vaathsalya

http://agridr.in/farm_innovations/pdf/agritech_kvk_pdf/09.%20Entrepreneurship
%20Development.pdf
http://www.deccanherald.com/content/471137/people-bowled-overrestaurant-organic.html
http://thinditheerta.blogspot.in/2014/12/vaathsalya-millet-cafe-jp-nagar.html
https://dakshinpete.wordpress.com/2013/09/29/vaatsalya/

Annex: Data collected about neighbourhood restaurants

Annex: About demographics of the area

JP Nagar Population: 28508
Area: 1.79 Sq Km
Estimated Household (size = 3) = ~9500
% population not visiting the restaurant = 30%
% population visiting the restaurant once a week = 30%
% population visiting the restaurant twice a week = 15%
% population visiting the restaurant Thrice a week = 15%
% population visiting the restaurant four times a week = 10%
Estimate household visits to restaurant = (0*30+1*30+2*15+3*15+4*10) * 9500
= ~14,000 (rounded off to nearest 1000)
Given the current industry trends, ~5% of the population is health conscious
Estimated health conscious customers visiting a restaurant = 5% of 14000 = 700
Also in a health restaurant, 70% are health conscious and 30% are general customers
Hence 70% of x = 700; x= 1000

Potential Market of Health restaurants in JP nagar = 1,000 household visits/week

Estimated household visits per week of Vaathsalya = ~200 household visits/week
Vaathsalya has targeted 20% of potential customers in JP Nagar