Group 11-Raju Omlet Expanding in the UAE

W15515

RAJU OMLET: EXPANDING IN THE UNITED ARAB EMIRATES

Kirti Khanzode and Sandeep Puri wrote this case solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. This publication may not be transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without the permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) [email protected]; www.iveycases.com. Copyright © 2015, Richard Ivey School of Business Foundation

Version: 2015-11-12

In January 2015, as Rajiv Meherish, a businessman in Dubai, rode the elevator to his office on the 26th floor of a high-rise building, a young woman who stood next to him exclaimed, “Are you the guy from Raju Omlet?” Until then, Rajiv was busy checking his phone, oblivious to others in the elevator, but the sudden attention made him self-conscious. He looked at the woman, smiled and said, “Yes!” As the woman stepped off, she said, “Good job. I love the place!” The compliment left Rajiv flustered for a few moments. He walked towards his office with renewed vigour; the incident in the elevator had made him feel happy and aspirational at the same time. Within a short span, Rajiv’s restaurant, Raju Omlet, had become so famous that people started recognizing him because of it. The lady in the elevator recognized him, as would have any frequent visitor to the restaurant. Rajiv spent a considerable amount of time at the eatery to ensure that his customers’ needs were met and that everything flowed smoothly. He realized his presence at the restaurant during the initial days was as important for him as for his customers and staff. Rajiv and his son Nakul managed the venture jointly. They were very happy with the way the business had shaped up in the last two years and were proud of the AED2.04 million1 turnover for the year 2014 (see Exhibit 1). Raju Omlet specialized in egg preparations, which was their unique selling proposition (USP), and the entire marketing campaign was developed around this offering. Expansion was inevitable, but Rajiv struggled with mapping out a plan for doing so. A brainstorming session of key decision-makers at Raju Omlet sought the answers to two difficult questions: Would it be possible to sustain the expansion with a single product offering? Would diversifying the product range kill the restaurant’s unique competitive advantage? RAJU OMLET The Idea

Rajiv and Nakul launched Raju Omlet in June 2013 at Al Karama, a residential area in an older part of Dubai. The 18-chair eatery became immensely popular within the short span of a year, with 200 1

AED = Emirati Dirham; US$1 = AED3.67.

This document is authorized for use only in Kiran Sharma's PGDM Marketing - 06222017 course at K J Somaiya Institute of Management Studies & Research, from June 2017 to December 2017.

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customers visiting on a daily basis. In the next year, this number grew to about 250 customers daily and 300 on weekends. Rajiv’s entrepreneurial instincts picked up on the unique concept of Raju Omlet during a business trip to Vadodara, India. Rajiv recollected the day he was led to a roadside handcart eatery by his taxi driver after requesting to be taken somewhere for a snack. The driver drove him to Raju Omlet Centre, quite unlike any place Rajiv would have frequented. The driver’s endorsement of owner and chef Rajesh Bhogilal Rana (Rajubhai)’s omelettes and the customer rush at the stall prompted Rajiv to explore the roadside eatery. Rajiv, a vegetarian who had shunned eggs for a couple of decades, had ordered only a cup of tea, but was persuaded by Rajubhai to try the popular Raju’s omelette. Rajiv liked what he tasted, and that experience inspired the idea of replicating the concept in Dubai. The Genesis

Nakul, enterprising like his father, was equally excited about the idea but realized that the handcart setup would have to be scaled up to match the magnificence of the city of Dubai. The misspelled name “Raju Omlet” was retained with the consent of Rajubhai (see Exhibit 2). The ambience of a humble roadside eatery was, however, preserved through the furniture and the cutlery. The interior was decorated in a way to invoke a feeling of déjà vu in anyone who had eaten at a roadside stall in India. The posters, with informative content about eggs, made the interior of the restaurant look trendy (see Exhibit 3). The outcome was a wonderful fusion for expatriate2 Indians who were reminded of the humbler settings of their home country yet found the place stylish. SUCCESS MANTRA The “Eggs Laid Yesterday Made Today” Model

Rajiv was a businessman with a philanthropic inclination. Philanthropy for him, however, did not just mean donating money to charity. Philanthropy to Rajiv also included being fair in business and delivering value to his customers. As passionate as he was about his business, he also treated it as a means to serve society. He primarily sought to deliver value through impeccable food quality and service. Rajiv said, “We offer fresh eggs cooked with high-quality cooking ingredients and provide value for money.” Rajiv admitted that when he was new to the egg business, he could not differentiate between eggs laid the previous day and those laid a month ago. But by constantly searching for the highest quality products for his customers, it took him little time to figure out a taste-defining difference. While seeking suppliers for his business, he came across a local poultry farm called Al Jazzera Poultry. It was this supplier, in an attempt to make his sales pitch to Rajiv, who elaborated upon the difference between fresh eggs and older ones. In Rajiv’s words, he learned that “the difference was as much as buying fresh fruits and vegetables over the frozen ones.” Rajiv realized the effect that freshness would have on the preparation and the taste of the egg dishes. He started sourcing fresh eggs and entered into an agreement with the poultry farm. Even though he had to 2

Expatriate is used, as opposed to immigrant, because the United Arab Emirates does not give permanent residency to immigrants. People from other countries who wish to live and work in Dubai are typically given a residence visa of up to three years, which is renewable. The applicant needs a local person or entity to sponsor the visa. In the case of employment, the employer sponsors the visa. Source: Mohammed K. al-Safi, “Dubai Visa, Residency and Sponsorship Questions and Answers,” http://dubaiemploymenttips.com/ visa/comment-page-1/, accessed January 2, 2015.


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pay 30 per cent more than he would at other suppliers, he persisted because this offering fell in line with his core belief of serving high-quality fresh food at reasonable rates. At Raju Omlet, the average cost for a meal for two was AED45 (see Exhibit 4). Rajiv said, “This is one of the many ways in which I stay true to my business in delivering high quality with value for money to my customers.” The Local Location

The choice of location was one of the key factors that contributed to the success of the restaurant. Al Karama was preferred over other areas in Dubai for two reasons: the presence of the Indian diaspora and the presence of other eating outlets offering Indian cuisine, which made the vicinity feel familiar to the expatriate Indians. Al Karama, a residential area in the older part of Dubai, was among the most populated areas in the city. Over the years, Al Karama had earned the reputation of being an “Indian eating lane” due to the large concentration of Indian expatriates living in the area. The Expatriate Consumers

Rajiv and Nakul were clear about their potential customer community from the beginning. Omelettes had a universal appeal, but Rajiv and Nakul preferred to target Indians and Pakistanis because of the similarity in their eating habits. Radio was chosen as the medium of advertisement to target working professionals commuting to work. Dubai was home to many expatriates from India and Pakistan who lived without their families and hence ate out almost daily. This meant that the Raju Omlet clientele was predominately males who were left with little time to cook because of the fast-paced city life. Women came with their families, as did young people and college students. The Fresh Start

Like any new business, Raju Omlet had its own set of start-up troubles. Rajiv wanted a gas cylinder connection, whereas the Dubai municipal authorities insisted that he opt for a pipeline connection. Rajiv knew that gas cylinders could be purchased at a fixed price, which could increase periodically, but he feared the notorious frequent rise in prices of pipeline connections. Yet, he eventually relented. The restaurant was set up with a pipeline connection. Some Indian businessmen had certain religious beliefs, such as inaugurating the cash box on an auspicious day. Thus, Rajiv waited for an appropriate day. However, customers started to come into the new restaurant, and he did not want to ask them to leave without eating. Rajiv ensured that every customer who came into the restaurant was served; however, they could not be charged because the cashbox was yet to be inaugurated. The customers found this idea fascinating because they realized that they could eat as much as they wanted without having to pay. Word soon spread and the traffic to the restaurant increased when doubtful customers came in to see whether it was true. All of them were pleasantly surprised when they were served free food. When some customers insisted on paying, Rajiv asked them to give AED1 as a token. Although the practice continued for 10 days, it did help to create positive word-of-mouth publicity for the new restaurant. The Staff

The staff was composed of eight employees, including two chefs with great service experience who were trained to provide customized dishes. Most of these employees were brought in from India. Rajiv and


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Nakul provided the required training to the employees. They focused on training their employees on soft skills to offer superior customer service. The employees were asked to remember the names of regular customers. They were also empowered to provide the best service possible, even if it required going above and beyond the required service. They were told to change the dish immediately following the smallest of customer complaints. The employees were also trained on hard skills, such as learning how to use the cash register and how to serve food. The staff was provided with competitive salaries, accommodation and food. The restaurant was closed on Mondays as the owners wanted to ensure that all employees got a holiday, and therefore did not go for the “off in rotation” model. The employees were also given incentives, such as movie tickets and gift coupons. THE MARKETING STRATEGY

Though the word-of-mouth publicity did the new venture a great deal of good, Rajiv and Nakul knew that this alone would not suffice. Rajiv selected radio as the medium of advertising, but the content of this initiative was not outsourced. Both father and the son wanted distinctive advertisements that could stand out. Nakul spent considerable time researching the health benefits of eggs. He wanted the radio spots to be woven around these benefits. He also wanted to dispel certain common myths about egg consumption through these advertisements. The strategy was clear: to talk about Raju Omlet implicitly by focusing on the health benefits of eating eggs. These spots always ended with the message, “This was brought to you by Raju Omlet,” followed by details of the location and timings. The radio spots also conveyed that eggs could be ordered for breakfast, lunch and dinner, lest people perceive Raju Omelet as a place for snacks and not meals. Two things worked for Raju Omlet: 1) the clarity of the potential customer base, which made their advertising efforts focused, enabled them to select the right radio channels; and 2) the advertisements themselves, as the content did not talk about the restaurant but rather the health benefits of eating eggs. In communications parlance, the ads used indirect messaging to establish persuasive appeal. The campaigns were carried out on two channels, one after the other. The frequency of the radio spots was considered “prime time” — weekday mornings from 7 a.m. to 10 a.m., as well as from 4 p.m. to 7 p.m., when office workers were in transit. Because of these time slots, the ads were noticed from the first day they aired. The radio spots were different from other restaurant ads in the sense that they educated people on the health benefits of eating eggs and also dispelled myths, all of which intrigued people enough to visit Raju Omlet. The radio ads pulled people into the eatery; high-quality food, good service and a cozy and ethnic ambience did the rest to ensure repeat and happy customers. The Sunny Side App

In the era of smartphones, mobile apps had become critical to the success of the companies in the service sector. Raju Omlet, too, introduced a free mobile app. All of the radio spots mentioned the app and asked customers to download it for more information. The posters inside the restaurant also contained information about the app (see Exhibit 5). The homepage of the app looked vibrant, with a bright yellow and red colour scheme and tabs such as Fan Wall, Menu, Reach Us, Photos, Reviews, Contact Us, Mailing List and About Raju Omlet.


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The “No Home-delivery” Option

Rajiv and Nakul were reluctant to offer home delivery as they foresaw a drop in the quality and taste of the packed food meant for later consumption. Rajiv did not want consumers to eat and pay the same price for diminished-quality food. Also, he wanted his consumers to enjoy the food primarily at his restaurant because it was in the brand-building phase. Although he realized that the home-delivery option was a major source of additional revenue for restaurants in Dubai, he decided to take that hit in the larger interest of the brand-building exercise. Radio Advertising in the United Arab Emirates

It was economical to buy cars in the United Arab Emirates (UAE) because of they were tax-free. Vehicle loans were available at very low rates of interest, and fuel prices were also low. Public transport was still not as well developed as in the Western world. Together, these conditions induced people to buy cars for commuting. People spent two to three hours daily on average in their automobiles while commuting to work, which made radio advertising a good promotion platform in the UAE. THE MARKET: UNITED ARAB EMIRATES

Over the past decades, Dubai, called the “Melting Pot of Cultures” and home to people of over 200 nationalities living together in peace,3 had become a sought-after live-and-work destination for people across the world. Several factors contributed towards making the UAE a lucrative expatriate destination. The country had excellent infrastructure, matched by only a few countries in the world. It was also regarded as one of the safest places to live. Being a tax-free country added to the attraction. Tolerance, security, job opportunities, attractive environment for investment, advanced infrastructure and tax-free income were the main alluring factors.4 The UAE, considered a gateway to the West, had become a trade and business hub. The presence of almost all the world-class companies had added to the influx of expatriates. UAE comprised the seven emirates of Abu Dhabi, Dubai, Sharjah, Ajman, Umm Al Quaiwain, Ras Al Kahimah and Fujairhah. These were very well connected through roads, and people residing in one emirate travelled to other emirates for work. Of the total population of UAE, more than 80 per cent were expatriates. Of this expatriate population, over 50 per cent were South Asians.5 Nearly 1.75 million Indian nationals resided in the UAE, which made it the single largest expatriate community in the country. The other major groups included Pakistani (1.25 million) and Bangladeshis (600,000).6 Another one million were from other parts of Asia, including Iran, Philippines and Sri Lanka. The others were from other Arab states.

3

Mohammad El Sadafy, “Peaceful Co-existence of Diverse Peoples One UAE’s Many Distinguishing Features,” Emirates 24/7 News, www.emirates247.com/news/peaceful-co-existence-of-diverse-peoples-one-uae-s-many-distinguishing-features2013-05-21-1.507329, accessed January 2, 2015. 4 Ibid. 5 Guide2Dubai.com, “Dubai Population and Nationalities,” www.guide2dubai.com/info/uae-population.asp, accessed December 8, 2014. 6 Ibid.


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THE COMPETITORS

Of Al Karama’s several restaurants in the vicinity of Raju Omlet, most were Indian. In the sense of its product offering, Raju Omlet had no competitors; however, in the sense of serving to the Indian and Pakistani expatriate community in the UAE, the following could be considered as some of its major competitors. Bombay Chowpatty was an Indian restaurant serving vegetarian and non-vegetarian combo dishes, south Indian food, snacks, sweets, juices and milkshakes,7 as well as Chinese food items and pizzas. It had 15 outlets in the UAE, and of these, 13 were in Dubai in prime locations (including one in Al Karama), one in Abu Dhabi and one in Sharjah. The owner had plans to take the brand to other Middle Eastern countries such as Bahrain, Qatar and Kuwait. It had dine-in, take-away and home-delivery facilities. The average price for a meal for two persons was between AED50 and 70.8 Chappan Bhog was another famous Indian restaurant in the vicinity. A pure vegetarian restaurant, it was chiefly known for its extensive variety of Indian sweets. It also served North and South Indian dishes, snacks and milkshakes. It started as a small Indian sweets and savouries shop in Abu Dhabi in 1996 and had 12 outlets across the UAE by 2014.9 It had dine-in, take-away and home-delivery options. The average cost of a meal for two came to around AED75.10 Bikanervala was another prominent Indian restaurant, just opposite Raju Omlet. Its specialty was sweets and savoury food. It served snacks, Indian curries, mini meals, South Indian dishes, pizzas, sandwiches, sweets and shakes.11 There were four outlets in Dubai and Sharjah.12 It offered dine-in, take-away and home-delivery facilities. The average cost of a meal for two was around AED80.13 Kulcha King specialized in a variety of Indian breads. Among the other items on the menu were vegetarian and non-vegetarian Indian dishes, combos, snacks, rolls and drinks. It had four outlets in the UAE and offered dine-in, take-away and home-delivery options.14 The average cost of a meal for two came to around AED100.15 Mumbai Restaurant specialized in popular Mumbai cuisine and offered an extensive range of food items, including North and South Indian dishes, sweets and drinks. It had two outlets, one in Dubai and the other in Abu Dhabi.16 It specialized in outdoor catering and had dine-in, take-away and home-delivery options. There were several other non-Indian restaurants, such as The Monk (Chinese), Betawi (Indonesian) and Zamzam (Arabic) in Al Karama.

7

Menu.au, www.menu.ae/Content.aspx?loc=10&rid=1353§ion=Details, accessed December 11, 2014. Zomato, https://www.zomato.com/dubai/bombay-chowpatty-al-karama, accessed December 11, 2014. 9 Royal Orchid Group, www.theroyalorchidgroup.com/restaurants/chhappan-bhog.html, accessed November 17, 2014. 10 Zomato, https://www.zomato.com/dubai/chhappan-bhog-al-karama, accessed December 2, 2014. 11 Bikanervala, www.bikanervala.ae/contact-us.html, accessed December 2, 2014. 12 Roundmenu.com, www.roundmenu.com/restaurant/bikanervala-karama-dubai/2317, accessed December 8, 2014. 13 Zomato, https://www.zomato.com/dubai/bikanervala-al-karama, accessed December 9, 2014. 14 Kulcha King, www.kulchaking.com/, accessed December 6, 2014. 15 Zomato, https://www.zomato.com/dubai/kulcha-king-al-karama, accessed December 8, 2014. 16 Mumbai Express Restaurant & Café, http://mumbaiexpress.org/, accessed December 8, 2014. 8


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THE WAY FORWARD

Raju Omelet carved its niche by growing in terms of footfall, scale and financials. The business was profitable from the first year. The concept was unique, the people behind it were passionate, the marketing communication was apt and promises to customers were delivered. As a next step, Rajiv considered different expansion and diversification options. He also planned to cater to a larger customer base, including those of other cultures such as Arabs, Europeans and Americans. He wondered whether to accentuate the sales by increasing the product range with the addition of chicken, meat and vegetable preparations, increasing the number of outlets by maintaining its USP of egg preparations, or using a combination of these two strategies. He also wondered whether the non-Indian customer segment would enjoy the current preparations. Rajiv was facing a dilemma. The questions on his mind were: Would this product-range diversification lead to the dilution of the Raju Omlet brand proposition? How could he retain his value proposition and still diversify? What should the next steps be for Raju Omlet?


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9B15A052 EXHIBIT 1: SELECTED FINANCIALS FOR RAJU OMLET, 2013–2014 (IN MILLIONS OF AED)

Net Revenue Cost of Sales Operating Expenses Net Income

2013 680,000 210,800 272,000 197,200

2014 2,040,000 591,600 754,800 493,600

Note: Figures have been changed to maintain confidentiality. Source: Provided by the company.

EXHIBIT 2: EXTERIOR OF RAJU OMLET

Source: Provided by the company.

EXHIBIT 3: INTERIOR OF RAJU OMLET



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9B15A052 EXHIBIT 4: RAJU OMLET MENU (IN AED)


EXHIBIT 5: RAJU OMLET MOBILE APP



Group 11-Raju Omlet Expanding in the UAE

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