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Business News›Industry›Services›Hotels / Restaurants›Mid-sized restaurants hungry for funds as investors stay away

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Mid-sized restaurants hungry for funds as investors stay away
Synopsis

Mid-sized organized restaurant chains such as Punjab Grill and Mad Over Donuts face financing challenges. Investors are being more cautious, focusing on sustainable profits and unit economics. As a result, several chains explore capital raises or stake sales. Recent investments favor businesses demonstrating strong financial performance and growth potential. Meanwhile, larger investments continue to thrive, creating a divide in the restaurant industry.

Reuters

Mumbai | New Delhi: Mid-sized organised restaurant chains and quick service restaurants (QSR) are battling a financing hurdle with at least a dozen chains finding it increasingly difficult to attract fresh capital. Executives attributed this to investors turning more cautious on funding businesses that are yet to show sustainable profit metrics and strong store-level economics.



Mid-sized chains including Punjab Grill, Truffles, Mad Over Donuts, Charcoal Eats, YouMee, CX Partners-backed Dindigul Thalappakatti and General Atlantic-backed Absolute Barbecues are among chains seeking either the next round of funding or investor exits, said industry executives.



"Investors today are also much more disciplined," said Rahul Singh, a serial investor in restaurant chains and co-founder of The Beer Cafe. "They are looking for proven unit economics, profitability and capital-efficient growth rather than simply a large top line. That creates a real funding gap for businesses that have demonstrated consumer acceptance but need another meaningful tranche of capital to reach scale."

Tamil Nadu-based biryani chain Dindigul Thalappakatti (DT) is also exploring a majority stake sale, as the initial investors want an exit. DT, also backed by Tree Line Investment and the family office of Havells Group, was valued at ₹450 crore in 2019 when CX Partners took a majority stake. "Biryani in India is as diverse as its languages," said a Mumbai-based private equity investor. "What works in Telangana can be very different from what appeals to consumers in Karnataka, Delhi or Punjab. Anyone looking to build a pan-India biryani brand will therefore face significant challenges in catering to these distinct regional tastes." The challenge, executives say, is more intense for mid-sized chains as large investments are continuing to gain traction.

"We are now planning our next phase of expansion; we are in conversations with partners," said Tarak Bhattacharya, executive director, Mad Over Donuts. He didn't elaborate.

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