In an Outlook Business interview, Impresario CEO Riyaaz Amlani said Indian restaurants were fragile before Covid-19: metro rents match global capitals, restaurants could not claim GST input tax credit and about 36 licences need yearly renewal. His target costs are occupancy 16–17%, cost of goods 35%, labour 18% and other costs 22%, for roughly 18% EBITDA.
Riyaaz Amlani is CEO of Impresario Handmade Restaurants, the group behind Smoke House Deli, Social, Mocha and Salt Water Café. During the Covid-19 lockdown he gave Outlook Business a detailed account of restaurant economics in India, backed with figures. His case was that the lockdown did not create the industry's weakness. It landed on top of structural problems restaurants had been carrying for years.
Metro rents at global prices
Amlani told Outlook Business that rents on Delhi's Khan Market or Mumbai's Linking Road are on a par with Mayfair or Times Square, while Indian purchasing power is only about one-third as high.
That runs against the common belief that Indian restaurants enjoy a cost advantage. Rents match global capitals, but menu prices cannot, because local diners have far less to spend. Indian guests also expect more service: someone to seat them, park the car, top up water and clear away a single cigarette butt. That means more staff per table than a comparable Western restaurant, which piles labour cost onto revenue already capped by what customers can pay.
GST without input tax credit, and 36 licences
Amlani points out that restaurants are among the very few industries in India unable to claim GST input tax credit. Most businesses set the GST they pay against the GST they collect; restaurants historically could not, which he counts as an 18% increase in cost with nothing to offset it. On the operational side, he says keeping a restaurant legal means renewing roughly 36 licences a year, a burden he likens to "opening an arms factory".
What a healthy restaurant cost structure looks like
Amlani sets out the costs, as a share of revenue, that a well-run Indian restaurant should aim for:
- Occupancy and real estate: around 16–17%
- Cost of goods: close to 35%
- Labour: around 18%
- Utilities and other operating costs: roughly 22%
Meet every one of those targets, he says, and store-level EBITDA should come in at about 18%. Restaurants in the next tier, which are still doing well, would see EBITDA in single digits.
The break-even maths for a Mumbai restaurant
His worked example is a Mumbai restaurant of 1,000 sq ft paying ₹4–5 lakh a month in occupancy costs. To break even it needs roughly ₹20 lakh in revenue every month. Anything less and it is losing money, and Amlani says that is true of the majority of Indian restaurants rather than a small group of strugglers.
The size of the sector and the lockdown loss
When he gave the interview, Amlani sized the organised restaurant segment at about ₹1.4 trillion a year in revenue, 35% of the whole sector, which he put at ₹4 trillion. His projection for what the lockdown would cost the organised segment was ₹850–950 billion, a back-of-envelope figure he worked out after the shutdown had run for more than a week. Impresario's own loss he estimated at ₹200–220 million.
He also compared chain footprints: China has around 9,000 McDonald's outlets and India around 700, with a similar gap for Starbucks. As he reads it, the operating environment rather than customer demand is what had held back Western-style chains in India for years before the pandemic.
The relief Amlani asked for
His requests to the government were:
- Waivers on statutory dues
- Deferment of tax payments, or a holiday from them
- Some form of salary support for employees
- A complete stop to coercive demands for rent or utilities, with force majeure applied so that contractual obligations are paused during the crisis
He warned that if the situation dragged on for another month without clear incentives from the government, the industry would "collapse". He also raised a risk he felt was being missed: contract staff and small suppliers. Restaurants typically carry 15–20 days of stock from their fruit, vegetable, meat and fish vendors, so once restaurant cash flow dried up, those suppliers would be hit next.
What this means for your restaurant
- Set your own cost lines against Amlani's targets: occupancy at 16–17% of sales, cost of goods about 35%, labour close to 18%, and utilities plus other running costs about 22%. Any line running well above its target is the first place to look for lost margin.
- Work out your break-even revenue from your rent. In his Mumbai example, ₹4–5 lakh a month in occupancy called for about ₹20 lakh a month in sales just to cover costs.
- Build the GST you pay on inputs into menu pricing as a cost, since restaurants have historically been unable to offset it through input tax credit.
- Keep a calendar of licence renewals; Amlani counts roughly 36 that a restaurant has to renew every year.
Sources
- If the government does not step in with clear incentives, the industry will collapse — Outlook Business
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