Can someone create their own local pizza chain while Domino’s and Pizza Hut exist? Yes, indeed! One person did it, and that too without any prior experience in the food industry or seeking investors’ funds. What’s remarkable is that they achieved the status of India’s fastest-growing pizza chain with a turnover of 1,000 crores, boasting over 600 stores, and secured the third position after Domino’s and Pizza Hut, all within just 12 years. We’re talking about Lapinoz Pizza.
The Beginnings of Lapinoz Pizza
The story begins in 2011, starring Sanam Kapoor. He was working in an IT company, everything was going well, but the entrepreneurial bug often bites many amidst corporate life. They plan every Friday night to leave their job, start their own company, but come Sunday night, that enthusiasm fizzles, and they return to their jobs on Monday. But Sanam Kapoor, the entrepreneur at heart, persisted and decided to start his own venture.
The Spark of Passion
He opted for something he was somewhat experienced in. So, although he decided to venture out on his own, he wasn’t sure what to do. That’s when he thought, when you’re unsure, focus on something you’re good at or interested in. Although not an expert, Sanam had a keen interest in food. Hence, in 2011, he opened his first pizza store in a small 120-square-foot space in Chandigarh, naming it ‘Pinokio Pizza.’
The Journey as a Solo Entrepreneur
He started as a self-employed individual, doing everything himself. From creating pizza recipes to handling customer bills and marketing, he managed it all single-handedly.
The Challenge of Starting Small
Remember, back in 2011, pizza wasn’t as readily available everywhere. It was considered a high-class commodity found only in five-star hotels and that too at prices unaffordable for the common man.
Pioneering in Pizza Culture
Apart from those available, the market was dominated by international chains like Domino’s and Pizza Hut. These three players held a lion’s share—54% for Domino’s and around 80-90% for Pizza Hut and Domino’s combined.
Challenges Amid Dominance
During that time, people didn’t have high incomes or spend extravagantly. They refrained from expensive items. Sanam Kapoor, the founder, had no experience or investors to seek support from. With no one to ask and no external funding, he began his business with his own money.
If anyone wants to start a business and succeed in competition, the product needs three things:
- Firstly, it must be the best.
- Secondly, it must be different.
- Lastly, if someone else is offering it, make it better or create something entirely new.
Sanam Kapoor decided to work on a concept that wasn’t prevalent in Western countries: serving pizza in slices, as generally, whole pizzas were served. He aimed to offer large slices, a concept unheard of in India. So, he changed the name from Pinokio Pizza to Lapinoz Pizza, which translates to ‘giant pizza’ in Italian. This was his first difference.
His second differentiating factor was offering Indian flavors, which were absent in other pizza chains. Lapinoz had pizzas like Paneer Makhani Pizza, Paneer Korma Pizza, and Paneer Butter Masala Pizza. This was an attempt to bring in Indian tastes, which other chains lacked.
Gradually, with time, he introduced further innovations, offering large and extra-large pizzas with different toppings for each slice. These innovations helped create a unique brand and despite the initial struggle, the first store eventually became profitable.
Opening New Stores
They said, ‘It’s profitable, but there are fewer people in Chandigarh. If I need more space, I’ll go to Mohali.’ They opened a second branch there, using the same concept, and it became quite popular.
Turning Point – Started Selling Franchises
Then came their turning point when a customer came and said, ‘You make fantastic pizza; will you sell franchises?’ They said, ‘Why not?’
You’ve created an excellent product, established a great brand, and your process is all set. But if you want to expand rapidly, the best and most effective way is to franchise. The franchise model allows others to use your product and brand, and the franchisee earns money based on their sales, while you receive royalties. It’s the best way to accelerate business growth.
Although this is seen a lot in the food space, it can be applied to any area, just as Manya did, just as Jadiyo did. Now let’s see the benefits of offering franchises.
When you open a store, you have to invest in everything from the capacity, setting up the entire shop, liking it, fitting machines, setting up the interior, and adding products. It’s a massive investment in terms of equipment, salaries for the team, and rent. But when you start offering franchises, you can distribute 10 franchises in a month. You could even distribute 100 franchises in a year. Expansion happens very quickly.
Local Market Knowledge
If you’re from Ahmedabad and considering opening a store in Delhi, you might not know Delhi’s market, its audience, or their tastes. But if you tell a local person in Delhi to open a franchise, they have the knowledge, connections, and understanding of the market. So, they might run a Delhi store better than you could.
Consider this: if you’re making goods for one shop, it costs a certain amount. But if you have to make goods for 10 franchises, the more you produce, the cheaper it gets. Plus, when I market, the budget remains the same, but the benefit spreads across 10 places.
Increase in Brand Loyalty
When your brand boards start appearing in every street, every corner in every city, the world starts connecting with you, and you benefit even more.
After having two stores, they started offering franchises, but they put a slight twist in the way they offered franchises, just like they twisted their pizza. Normally, when international companies offer franchises, they hire a professional company.
Innovative Franchise Strategies
Many times, when big companies offer franchises, everything is strictly defined – what to do, when to do, how to do, all written down. They gave a little freedom, like for example, if they launch in Gujarat, their menu includes both veg and non-veg items because it’s the same product. But Lapinoz said, ‘If there are restaurants in Gujarat that say they won’t serve non-veg, we’ll serve pure veg only.’
They introduced a new type of pizza – Jain Pizza. Without onions, garlic, or mushrooms. The benefit? They noticed that since they launched Jain Pizza, even older individuals started coming to try something new, not just the youth or children.
Smart Franchise Scaling
In offering franchises, Lapinoz made a smart move. Normally, if you’re sitting in Jaipur and need to offer a franchise across India, you end up handling the entire country, which costs a lot in terms of operations and logistics. They decided to focus on one area first, gave 10-15 franchises there, and once it stabilized, moved to the next area. This significantly reduced their operational and logistic costs, and they had better management control.
The Journey to a 1000 Crore Company
Their franchise trajectory goes like this: they offered their first franchise in 2013, reached 50 in just two years by 2015, then took another four years to reach 100 franchises by 2017. But after that, they added the next 100 franchises in just two years by 2019, reaching 200 franchises. In 2021, they had 300 franchises, and by 2023, they crossed 600 franchises, achieving a turnover of 1000 crores.
How does Lapinoz earn money?
If Lapinoz is a pizza company, revenue should come from selling pizzas, right? When the company offers franchises, this revenue model flips slightly. Initially, they used to offer franchises and say they’d take an 8% royalty on total sales, but the rest of the products could be purchased at the franchisee’s discretion, like tomatoes, potatoes, etc.
But Lapinoz did something different. Instead of 8% royalty, they reduced it to 4% and sold all the raw materials to their franchises. So, out of the total revenue of 1000 crores, 83% comes from the sale of raw materials. So, if you look closely, it’s a B2B grocery business.
They only get 15% of their revenue from franchise fees and royalties, and the other 2% comes from other sources. But as you’ll see, the actual earnings come from the royalty, which is a direct income. So, the profit margin becomes a game. Out of the profit, 65% comes from franchises and royalties, and the remaining 35% comes from other sources.
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