TARTING UP A RESTAURANT
Anjan Chatterjee started his first restaurant, Only Fish, 21 years ago. Now the restaurant mogul runs 96 restaurants across 25 cities. Last year, his company Specialty Restaurants went public successfully. Chatterjee’s success has encouraged 24-year old Akshay Chitre who started Zenzi Mumbai, a takeaway kitchen, six months ago to embark on a similar journey.
Chatterjee recounts the legal complexities that he had to go through. Twenty years later, he says, it hasn’t become any simpler! “The basic licenses that you need are Gumasta or Shop and Establishment licence, health licence, an NOC from the fire department, food safety license from Food Safety and Standards Authority of India (FSSAI), a grade certificate, eating house licence from the police department, signage licence from the Municipal Authority, VAT and sales tax registration,” informs Chatterjee.
Mind boggling models
Licences are just one of the many hassles that Chitre would have to deal with. He also has to decide on the model that’s most suitable for his business idea. Chatterjee has a confounding answer for that—COCO, FOCO and FOFO.
“COCO is company-owned and company-operated. So you own the restaurant, you own this store and you operate it. The other one is FOCO, which is, franchise-owned and company-operated. The franchise owns the real estate, pays for the décor, equipment and all the costs go to him and the corporation or the brand—for instance, Chitre’s company is Zenzi—will come in to actually operate that on a management contract, for which they take a royalty. So basically, they run the brand.
The third is FOFO, which is franchise-owned and franchise-operated. In this case, you actually tell the franchise that you give me real estate. I will teach your people, sensitize some of them and they are the ones who will work on our behalf but you pay them directly and run the business.”
Chatterjee suggests that if it’s a simpler operation like the one Akshay is planning, FOFO would be a better option. But if one intends to include fine dining and detailing, FOCO is the way to go.
Chatterjee’s business is spread across several states. He wants aspiring restaurateurs to know of the different State laws. “There are two kinds of structures in Maharashtra—a wine and beer licence and the other, hard liquor licence. The cost depends on each state. In Maharashtra, it is around Rs. 6-Rs. 7 lakh per year but it peaks up to a level of around Rs. 42 lakh in Andhra Pradesh.”
STARTING UP MANUFACTURING FACILITY
After working for 15 years in the corporate sector, the entrepreneurial bug bit Priya Parab in 2008. The desire to give her children a nutritious breakfast led to the creation of Vihaan Natural Healthcare, a private limited company that manufactures Strombs, a breakfast cereal.
For the first two years she outsourced the manufacturing. However, she was unhappy with the quality control process, which is when Parab decided to set up her own manufacturing unit.
The process
At the outset, Parab rented a 900 sq ft plot in the Mumbai suburb of Mulund. At that time, she had to project a future output to make a start on her registration at the Joint Directorate of Industries. Relating the process, Parab says, “The local office for Mumbai is at Chunabhatti. You have to give a project report that mentions the total investment you have done and the project costs. If it’s a manufacturing company, then you have to give details of the machineries. If it’s a proprietorship, then your personal details are required. If it’s a private limited company, then you talk about the Memorandum and Articles of Association, a board resolution and list of directors with their names and addresses.”
The first level for anyone hoping to set up a manufacturing facility is the EM-I—Entrepreneur Memorandum-I. Parab says once that is obtained, the EM-I then has to be taken to the Pollution Control Board.
“You first take consent from them to establish a unit. Then you go to your local ward office to get a factory licence. If it is a business related to food, then you need a certificate of approval from a medical officer. Once you have got your machineries and have set it up, you have to go back to the Pollution Control Board, take consent to operate—that’s the second level. Then you go back to the Joint Directorate of Industries and get an EM-2 to just finish this entire process.”
Fund matters
Parab started the venture with her personal savings of Rs. 4 lakhs and then dipped into her provident fund and finally liquidated all her investments. In the last five years, she has invested close to Rs. 60 lakhs in the business and applied for a bank loan only last year. Of her experience of seeking a bank loan, Parab relates, “I went to different banks. Though at a corporate level, banks advertise about Small and Medium Enterprises [SMEs] funding, women entrepreneurs… all that is only on paper. On the ground, it’s the branch manager who actually takes the decision to give a loan and that tribe is quite risk-averse.” When the State of Bank India gave a positive response, Parab approached the Small Industries Development Bank of India (SIDBI). “SIDBI gives collateral on our behalf to the bank. That was an assurance for the bank to go ahead with the loan processing,” says Parab.
A word of caution
After five years of navigating the system, Parab has enough experience to offer advice to others who want to startup. “It is very important to keep all your bills and your finances in order. Also, maintain separate personal and business accounts,” she advises.
STARTING UP A GAMING BIZ
Almost eight out of 10 startups today are in the technology space—gaming, apps, etc. However, you may have the next big idea, but it may not be worth much without Intellectual Property protection.
Sahil Khan, an IIT Bombay graduate, started Lazy 8 Games last year with friends Sunil and Nishanth. In India, there is but one guru of gaming—Vishal Gondal, Founder, Indiagames. Having started it 14 years ago, Gondal sold his company to Disney three years ago for $100m. There is a big possibility, says Gondal, that once your game is successful, people may copy it in various ways—be it concept, graphics, music or sound.
Gondal spells out his strategy that others in the genre can follow. “Once you launch a game and it starts becoming popular, you should immediately apply for a trademark and copyright the characters as well as the music. However, copyrighting the game is expensive and also difficult, because somebody can just change the game a little here or there and make up a new one. I would strongly recommend looking at the trademarking options.” The trademark is the brand name itself and the name of the product, logo and the style can all be easily trademarked, says Gondal. Copyright is slightly tricky because it is more about the characters, sound, music, style, colour schemes etc. “Patents are a lot more complex. They can be algorithms or some kind of new process or technique. This has to be quite well-defined.”
Gondal warns aspiring gaming startups against lifting elements from the internet. “A number of people just go to Google and search for music, download it and use it in their game, which is a wrong way of doing things. The best thing to do is to have a music composer create music for you from scratch. There are also a number of open source resources or open licence resources which are free. You can use those sounds or you can even buy them by paying $20-$30 for the game itself.”
Most American states boast of a ‘One Stop Capital Shop.’ UK has the Direct Access Government Online Resource and there’s EnterpriseOne in Singapore—all these are online resources that give entrepreneurs comprehensive information on the different legal processes involved. In India, to ensure you get the paperwork right, it’s a scramble from department to department! In the next installment, it is back to school for a class on the do’s and don’ts of contracts.
Mind boggling models
Licences are just one of the many hassles that Chitre would have to deal with. He also has to decide on the model that’s most suitable for his business idea. Chatterjee has a confounding answer for that—COCO, FOCO and FOFO.
“COCO is company-owned and company-operated. So you own the restaurant, you own this store and you operate it. The other one is FOCO, which is, franchise-owned and company-operated. The franchise owns the real estate, pays for the décor, equipment and all the costs go to him and the corporation or the brand—for instance, Chitre’s company is Zenzi—will come in to actually operate that on a management contract, for which they take a royalty. So basically, they run the brand.
The third is FOFO, which is franchise-owned and franchise-operated. In this case, you actually tell the franchise that you give me real estate. I will teach your people, sensitize some of them and they are the ones who will work on our behalf but you pay them directly and run the business.”
Chatterjee suggests that if it’s a simpler operation like the one Akshay is planning, FOFO would be a better option. But if one intends to include fine dining and detailing, FOCO is the way to go.
Chatterjee’s business is spread across several states. He wants aspiring restaurateurs to know of the different State laws. “There are two kinds of structures in Maharashtra—a wine and beer licence and the other, hard liquor licence. The cost depends on each state. In Maharashtra, it is around Rs. 6-Rs. 7 lakh per year but it peaks up to a level of around Rs. 42 lakh in Andhra Pradesh.”
STARTING UP MANUFACTURING FACILITY
After working for 15 years in the corporate sector, the entrepreneurial bug bit Priya Parab in 2008. The desire to give her children a nutritious breakfast led to the creation of Vihaan Natural Healthcare, a private limited company that manufactures Strombs, a breakfast cereal.
For the first two years she outsourced the manufacturing. However, she was unhappy with the quality control process, which is when Parab decided to set up her own manufacturing unit.
The process
At the outset, Parab rented a 900 sq ft plot in the Mumbai suburb of Mulund. At that time, she had to project a future output to make a start on her registration at the Joint Directorate of Industries. Relating the process, Parab says, “The local office for Mumbai is at Chunabhatti. You have to give a project report that mentions the total investment you have done and the project costs. If it’s a manufacturing company, then you have to give details of the machineries. If it’s a proprietorship, then your personal details are required. If it’s a private limited company, then you talk about the Memorandum and Articles of Association, a board resolution and list of directors with their names and addresses.”
The first level for anyone hoping to set up a manufacturing facility is the EM-I—Entrepreneur Memorandum-I. Parab says once that is obtained, the EM-I then has to be taken to the Pollution Control Board.
“You first take consent from them to establish a unit. Then you go to your local ward office to get a factory licence. If it is a business related to food, then you need a certificate of approval from a medical officer. Once you have got your machineries and have set it up, you have to go back to the Pollution Control Board, take consent to operate—that’s the second level. Then you go back to the Joint Directorate of Industries and get an EM-2 to just finish this entire process.”
Fund matters
Parab started the venture with her personal savings of Rs. 4 lakhs and then dipped into her provident fund and finally liquidated all her investments. In the last five years, she has invested close to Rs. 60 lakhs in the business and applied for a bank loan only last year. Of her experience of seeking a bank loan, Parab relates, “I went to different banks. Though at a corporate level, banks advertise about Small and Medium Enterprises [SMEs] funding, women entrepreneurs… all that is only on paper. On the ground, it’s the branch manager who actually takes the decision to give a loan and that tribe is quite risk-averse.” When the State of Bank India gave a positive response, Parab approached the Small Industries Development Bank of India (SIDBI). “SIDBI gives collateral on our behalf to the bank. That was an assurance for the bank to go ahead with the loan processing,” says Parab.
A word of caution
After five years of navigating the system, Parab has enough experience to offer advice to others who want to startup. “It is very important to keep all your bills and your finances in order. Also, maintain separate personal and business accounts,” she advises.
STARTING UP A GAMING BIZ
Almost eight out of 10 startups today are in the technology space—gaming, apps, etc. However, you may have the next big idea, but it may not be worth much without Intellectual Property protection.
Sahil Khan, an IIT Bombay graduate, started Lazy 8 Games last year with friends Sunil and Nishanth. In India, there is but one guru of gaming—Vishal Gondal, Founder, Indiagames. Having started it 14 years ago, Gondal sold his company to Disney three years ago for $100m. There is a big possibility, says Gondal, that once your game is successful, people may copy it in various ways—be it concept, graphics, music or sound.
Gondal spells out his strategy that others in the genre can follow. “Once you launch a game and it starts becoming popular, you should immediately apply for a trademark and copyright the characters as well as the music. However, copyrighting the game is expensive and also difficult, because somebody can just change the game a little here or there and make up a new one. I would strongly recommend looking at the trademarking options.” The trademark is the brand name itself and the name of the product, logo and the style can all be easily trademarked, says Gondal. Copyright is slightly tricky because it is more about the characters, sound, music, style, colour schemes etc. “Patents are a lot more complex. They can be algorithms or some kind of new process or technique. This has to be quite well-defined.”
Gondal warns aspiring gaming startups against lifting elements from the internet. “A number of people just go to Google and search for music, download it and use it in their game, which is a wrong way of doing things. The best thing to do is to have a music composer create music for you from scratch. There are also a number of open source resources or open licence resources which are free. You can use those sounds or you can even buy them by paying $20-$30 for the game itself.”
Most American states boast of a ‘One Stop Capital Shop.’ UK has the Direct Access Government Online Resource and there’s EnterpriseOne in Singapore—all these are online resources that give entrepreneurs comprehensive information on the different legal processes involved. In India, to ensure you get the paperwork right, it’s a scramble from department to department! In the next installment, it is back to school for a class on the do’s and don’ts of contracts.
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