Answering a query on closure of their popular restaurant chain Machaan in Malad, Mohta says, it was a strategic decision because the company believes in optimum utilisation and evaluation. "We are converting the existing restaurant into another power brand called Sigree Global Grill in the next few weeks," he told CNBC-TV18.
In Q2FY14, the company has added two new restaurants and will open more by end of this financial year, says Mohta
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Below is the verbatim transcript of his intervie on CNBC-TV18
Q: Could you walk us through the rationale for closing this chain in Malad and is it because it was not making money? Do you have to write down any of the investments that you have made into this?
A: Basically our decision to shut restaurant was based on continuous optimum utilisation, evaluation strategy primarily because what happens is that this has been there for five years and we have been trying to build our power brand Sigree Global Grill around the main flagship brand of our, which is Mainland China. So this is a continuous strategy which is already in place.
We have opened four Sigree Global Grill, and we are converting the existing Machaan which is there in Malad, Mumbai into a Sigree Global Grill in few weeks time.
Q: Is it indicating a bit of a consumption slowdown, is that something that you have witnessed over the last three-six months?
A: Yes, there are headwinds in the economy and on the macro front. There are constraints and there are challenges, which we are also facing. However, based on that we have been able to increase some prices of our product in the end of August - primarily to offset that and we find that the footfalls are stable. I would not say they have been getting into a very negative trend.
Q: You were looking to open four more restaurants in Q2, given the slowdown did you open it?
A: Yes, we have already opened two restaurants yesterday, and we continue to strive on our expansion strategy. We are opening restaurants in time to come till March 2014.
Q: We recently had Yum! brands reporting zero percent same store sales growth, are you seeing big slowdown signs and do you think it is a possibility that in this financial year maybe for you as well, the same store sales growth would be on the lower end?
A: Let me tell you one thing. As far as fine dining is concerned, though same store sales growth for an already matured restaurant is not a very important metrics for us but we have been finding same store sales have been stagnant in certain cities for us, which is a negative but in other parts of the country, it is positive but it gets neutralised.
Q: Last quarter your margins fell very sharply, it went down 700 bps to go to that 12-13 percent mark. In Q2 as well in this quarter, have you faced similar margin headwinds?
A: It is an operating leverage play for us primarily because what happens is there have been pressure on cost, the moment we get into a revenue curve, which is getting into Q3 happens to be the best quarter for us and we are entering into the season. So H2 is any which way is better than H1. So on an overall average basis, we look forward for improvement.
Q: In general have you faced any additional margin pressure without getting into numbers?
A: Not really because it is more like an upfront cost of new restaurants which gets opened during particular quarter.
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