Vada Pav Franchise Goli Vada Pav Plans 500 Food Franchise Outlets

28th January 2013, By

17th January 2013, Mumbai, Maharashtra, India: Goli Vada Pav, a chain founded in 2004 by Venkatesh Iyer and Shivdas Menon, changed the way this popular snack is prepared - and consumed. It took the snack indoors into a more gentrified ambience and made it a sterilised, upmarket version of its original self, all the while without tinkering one bit with the alluring taste that sustains vada pav's mass appeal.


It all started off with a 200 square foot shop in a Mumbai suburb, marketed as an ethnic fast food joint. It was a gamble that paid off, thanks to rising incomes and fast-changing dietary habits among Indians in a buoyant economy.


"From day one, our business was rocking," Mr Iyer remembers. "We soon expanded to 10 outlets. We had uniformed staff in red and white ties. We had large pictures of our product on the walls, just like McDonald's and Burger King."



But Goli Vada Pav was nowhere close to reaching its present scale of operations, even two years after launch. High footfalls at its outlets translated into high sales, but the operations were fraught with unnecessary wastage of its raw ingredients, which escalated costs, and a lack of standardisation of quality and taste.


To increase the shelf life of its product, the firm tried various technologies used by dairy and other perishable-product manufacturers: ultra-violet rays, nitrogen gas chambers, and even blast-chill refrigeration. But none of these methods produced satisfactory results.


Eventually, Goli Vada Pav went to Vista Processed Foods, a subsidiary of the US company OSI, one of the world's largest food processing corporations, which prepares burgers for McDonald's. Goli Vada Pav outsourced the manufacturing of the potato dumpling to OSI's fully automated plant near Mumbai. The plant is certified for hazard analysis and critical control point, a global standard for food safety, and can prepare 100,000 portions in five hours.


Every step - slicing, peeling, dicing, packing - was automated. The hygienic conditions under which Vista made the potato dumplings increased their shelf life from one to 90 days, while at the same time automation cut down on waste. Each finished dumpling now goes through metal detectors and is X-rayed, ensuring greater standardisation of the product.


The gram flour-coated dumplings are packed, sealed in cartons, with manufacturing and expiry dates clearly stated, and transported in refrigerated trucks to warehouses and thereafter to franchises, where they are unpacked, deep-fried to order, and served scalding hot to customers. Each outlet has a single-touch fryer, designed specially for the company by engineers at the Veermata Jijabai Technological Institute in Mumbai.


These innovations have given Goli Vada Pav a significant leap over street vendors. A survey conducted between December 2009 and February last year by Metropolis Healthcare, a multinational chain of diagnostic centres, found that of 70 random street food samples it collected from Mumbai, nine out of 10 were contaminated with bacteria and unfit for human consumption.


Goli Vada Pav's franchise outlets have grown from 10 in 2004 to nearly 100 this month. Its turnover rose from 3 million rupees in its first year of operation to 150 million rupees last year.


The chain is planning a massive expansion, to 500 franchise outlets, across India in the next five years, with a more than tenfold jump in turnover to 1.8 billion rupees.


Mr Iyer says he is keen to expand the company's footprint in Dubai, the UK and Singapore and is scouting for franchise partners. The growing popularity of vada pav, which is native to Mumbai, across India does not surprise him.


The success of the brand is a reflection of the surging growth of India's agricultural and food business, which is expected to double to US$280bn by the next decade, according to ICICI, the country's largest private bank.


India's food retail business, which accounts for 26 per cent of the country's GDP and is currently worth $70bn, is expected to more than double to $150bn, according to the global audit and advisory firm KPMG.


According to a report - Indian Fast Food Market Analysis - released in September by the market researcher RNCOS, India's fast-food market is growing at an annual rate of 25 per cent to 30 per cent.


But analysts warn that high food-price inflation could impede growth.


Headline inflation was an annual 8.43 per cent last month, up from 7.5 per cent in November. Vegetable prices rose by 22.9 per cent last month compared with November. Onions likewise became more expensive by 34.86 per cent and potatoes by 16.29 per cent. These prices are "unacceptably high", warned the finance minister, Pranab Mukherjee, who acknowledged that high food-price inflation could harm the broader economy.


The government raised key interest rates six times over the previous year, but its monetary policy has so far been ineffective in curbing rising food prices.


Mr Iyer acknowledges that inflation is a very serious issue, but he says Goli Vada Pav's profit margins are largely insulated by the economics of bulk purchasing and mass marketing.


"We buy potatoes for 100 stores, oil for 100 stores, wheat for 100 stores," he says. "Input prices have certainly gone up, but not drastically because we do our operations in bulk."


But with onion prices showing a tendency to "shock every three years", the company decided in its early years that it would avoid using onions, normally a key ingredient in potato dumplings.


"Our franchises have an option to source onions locally and use them as salad dressing," Mr Iyer says. "Our customers are not complaining.