I read somewhere that of the top 10 restaurants in the city in 2012, only two survive in 2016. In just four years, eight restaurants of the best quality have shut down.
For a long time, our governments have seemed to see restaurants as at best an indulgence, and too often as a vice. This is evident in the large number of regulations and the multi-layer tax structure the industry must navigate. Just one example: we are perhaps the only industry which pays all three indirect taxes: value-added tax (food in Maharashtra is charged at 5 per cent), service tax, and excise.
After topography, geography and architecture, restaurants are what give a city its personality, its vibrancy. Go to an area with no restaurants, and you don’t feel like living there; in an area full of restaurants and cafes, you feel welcome, and assimilated into that space. Restaurants carry three points out of ten in a city’s livability index, according to a TED talk I saw.
Besides, the business contributes hugely to employment generation, government revenue and taxation. The organised segment (chain restaurants and licensed standalones) contributed an estimated Rs 11,500-11,900 crore towards taxes in 2013, which is projected to more than double to Rs 24,600-25,000 crore by 2018. While taxes are levied across the sector, there is leakage in the unorganised segment due to its fragmented nature. The government has the opportunity to generate Rs 17,000 to Rs 26,000 crore in additional taxes through closer monitoring of collection from the unorganised segment and promoting the organised sector.
We are the third-highest employment generator in the services segment, after retail and finance. The industry generated direct employment for 4.6 million people in 2013, projected to grow to 8 million by 2018. And it employed another 7-8 million indirectly in 2013, projected to grow to 11-13 million by 2018.
For the sector to grow, thrive, and contribute even more to the economy, our administration must see us as a necessity, as infrastructure, and as something that will benefit the country. The need is to deregulate the business and incentivise people to open restaurants.
Every business comes with its own set of challenges. In the restaurant business, you have to understand tastes, trends, expectations. In India, though, the three biggest challenges are red tape, manpower and rentals. The world over, the business runs on a radically different approach.
Lessons from the world
Every global city has restaurant and entertainment hubs. Singapore has Boat Quay and Clarke Quay, Los Angeles has Third Street Promenade and Boardwalk, Hong Kong has Lan Kwai Fong. The laws in these countries encourage the development of these hubs. If I want to set up a restaurant in Turkey, I need four licences; in Singapore, I need six; in Thailand, five. And these are all online, single-window clearances.
The world is waking up to the richness and diversity of our cuisine. An Indian restaurant in Bangkok, Gagan, ranks at #9 on San Pellegrino world’s top 50 restaurants (and #1 on its Asia list). With the exception of China, India’s culinary depth and variety is hard to match. Restaurants draw tourists. Culinary tourism is encouraged everywhere, and chefs and restaurateurs serve as ambassadors of their countries. Denmark has gone on record to say tourists don’t come to the country for the climate but do so for the food. Australia recently ran a $12 billion campaign called Restaurant Australia. What if our government was to promote our own food businesses?
Cut the red tape
Regulation of our business is hyper-local. We report to multiple departments, and no one in particular. No ministry covers restaurants, so we go to several departments for our paperwork: the shops and establishments department in the Brihanmumbai Municipal Corporation for our licences and health permits, the legal metrology department for our weights and measures, the BMC for health, the fire department for fire licences. (Fortunately, the police have been removed from this crazy mix: the Maharashtra government has recently in a notification said that police clearance and license will no longer be required for a restaurant; this is an extremely important step taken by the chief minister, and it brought great cheer to the industry.)
In India, you don’t get a licence despite submitting a bunch of papers over and over again. There is not a single day I don’t go to a government office, be it that of the police, fire brigade or BMC. I have a team of 10 people who only handle licensing. And all this, after you have put in money, paid rent, hired people. A six-month delay in getting a licence doesn’t just mean extra rent; it costs you interest on capital.
In our recent meeting with BMC chief Ajoy Mehta, we had listed 30 issues, of which four or five have been approved. I don’t think this is enough. Applying for renewing a licence was earlier a seven-step process, involving as many departments; that has now been reduced to four. Our contention remains: if food is covered under the Food Safety and Security Act, why do we need a health licence from the BMC? That Act overrules all other state acts, but the BMC is taking no cognisance of that.
In any European city, restaurants and bars are open 24/7. You take a licence, pay the extra fees and keep it open. In Mumbai, only five stars are allowed to operate 24/7. Admittedly, a 24-hour licence is not feasible for us; a restaurant gets just 10-15 per cent of its clientele at that late hour, even though it pays for the electricity and staff. What is needed is extending the licences to 3 am on weekends. This has worked in Bengaluru, where the government even admitted that there was no spurt in crime or drunken driving. The extension will give the city a certain vibrancy. Over 50 per cent of our population comprises 26-year-olds who want to go out at night and socialise.
Free up the spaces
Open up restaurants and licences, bring down the rents. A lot of properties cannot become restaurants right now, with the change of user clause being what it is.
If you have a commercial establishment, you could open a shop or an electronics store there, but not a restaurant. According to BMC rules, you cannot change the use of a commercial space unless you pay a huge fee, something like Rs 30 lakh for a 4,000 sq ft space. The more you deregulate, the more spaces become available. Rents will get better as supply increases. I believe there are 500 spaces in Mumbai which can easily become restaurants today. Even if 2,000 spaces are made available, rents will become cheaper.
We also pay very high rentals in relation to what we sell. For example, rents in Berkeley Square in London and Bandra in Mumbai would be comparable. However, in Berkeley Square, people are willing to pay £70–80 for a meal, whereas in Mumbai, patrons typically won’t pay more than Rs 700–800. That’s not something that can be controlled. What can be controlled is reducing the red tape that increases our costs even further.
One more. In most countries except India, terraces are used as restaurants. Here, it is stuck in a floor space index-related regulation.
One country, many laws
This is not strictly about Mumbai, but it does affect us.
Laws are not uniform across the country. Rules vary in Mumbai, Navi Mumbai, Pune, Bangalore, Chennai, as do licence fees. In some states, the fee is at Rs 5 lakh, while in others, it is as high as Rs 36 lakh. In Noida, the drinking age is 18, whereas in Delhi, it is 25. How does that make sense? We need to keep in mind that many restaurants companies are growing, and are becoming national.
Uniformity in laws will make a huge difference, but unfortunately, this is a state subject. Only a radical shift will help in this case.
What we need: A new paradigm
Topping the list of changes would be a new framework, similar to Make in India, which changed the way we look at start-ups. The tourism ministry needs to take this up as it directly affects India’s personality.
Restaurants bring in development. There is a story about a man who would buy properties around a Starbucks café before it came up. People would want to live near a Starbucks café, and the property prices would go up. Because human beings are social creatures, and no one wants to live in a place with no restaurants.
The business is bigger than the hotel industry. We are twice the size of telecom, seven times the size of the hotel industry, and 24 times the size of Bollywood. Yet you don’t see any restaurateur living in a Mannat (Bollywood superstar Shah Rukh Khan’s home).
In a country with so many problems, restaurants are not a priority for the government. Our laws date back to the 1950s, even though socio economic conditions have changed dramatically since. Taxes need to be reduced to about 4 per cent; the high rates are encouraging a parallel economy.
The government needs to understand how important restaurants are to livability. With the rise of the
nuclear family, food is no longer a luxury. It is convenience, a necessity. At the end of the day, it’s important to be able to get a good meal somewhere.
About the author
Riyaaz Amlani is the CEO and managing director of Impresario Entertainment & Hospitality Pvt Ltd, which runs 39 restaurants and cafés across 12 cities. His restaurants have won various awards in India, and been acknowledged internationally. Amlani has also found mention in Time Out Mumbai’s list of top 10 restaurateurs in India. Recently, he was appointed president of the National Restaurant Association of India, wherein he identifies key issues that are holding up the progress of the restaurant industry in India.