Get down to the core business to beat the odds in F&B

Mr Vikram Natarajan turned Copper Chimney, which was losing $300,000 a year, into a profitable restaurant in seven months by getting down to the real nitty-gritty.
Mr Vikram Natarajan turned Copper Chimney, which was losing $300,000 a year, into a profitable restaurant in seven months by getting down to the real nitty-gritty.PHOTO: COURTESY OF VIKRAM NATARAJAN

When Mr Vikram Natarajan took over Indian restaurant Copper Chimney in 2012, it was losing $300,000 a year.

Then, the Syed Alwi Road outlet had a bloated menu of more than 200 items, was paying suppliers exorbitant prices and had too many people on its staff.

Mr Natarajan, 35, turned the restaurant into a profit-making business in seven months. It now runs on 10 workers, down from 15, has 100 menu items, new suppliers and makes 70 per cent more revenue. It has also launched six new outlets.

He told The Straits Times at a Singapore Productivity Centre (SPC) seminar for small food and beverage (F&B) businesses on Monday that the secret was getting down to the nitty-gritty of the business core. Such an outlook, a survey revealed on Monday, is what most small businesses must adopt to survive. Commissioned by enterprise agency Spring Singapore, the study of 216 small F&B businesses found that the successful ones had a stronger focus on core business operations, rather than on ancillary areas such as branding and store design. In particular, they focused on three core areas: lean workflow, menu engineering and financial management.

Such advice may be sorely needed. The study also found that only 60 per cent of small F&B firms - those with less than $1 million in annual revenue - survive their first five years of operations. The average small F&B firm operates at an annual loss of 8 per cent.

Smaller F&B businesses make up most of the food services sector here, comprising 85 per cent of around 5,000 food enterprises. However, they capture just 21 per cent of the industry's revenues.

Mr Sim Choon Siong, director of Spring Singapore's food division, said that the low entry barrier means many outlets are set up every day. "The fact that consumers have plenty of food options also means that this sector is highly competitive," he said.

In response to the survey, the SPC on Monday launched three consultancy packages in the three core areas. Companies can tap Spring's Capability Development Grant for funding assistance of up to 70 per cent of project costs.

Mr Natarajan said making his restaurant more efficient "took a lot of effort". He worked out the profit margins of each dish on the menu.

"If something had low sales, low margin, I junked it," he said. "If an item had high margin but low sales, I told managers to push it. If something has low margin but high sales, you may need to consider raising prices. Everybody has the passion, but not everyone knows the details of what they are doing."

A version of this article appeared in the print edition of The Straits Times on July 30, 2015, with the headline 'Get down to the core business to beat the odds in F&B'. Print Edition | Subscribe