There is also the Indian consumer’s growing appetite for grab-and-go foods (salads, momos, box meals, and snacks) which is a healthy sign for kiosk- and delivery-only kitchen formats, say industry experts. Plus, over the last five years,food-delivery players such as Swiggy, Zomato, and Uber Eats (now part of Zomato) have added to the sustainability of QSR chains whose business model eliminates the need for large sit-down outlets, bringing down real estate costs considerably.
“Growing profitably with one product is not easy to do. But Wow! Momo has addressed the latent market potential in a comprehensive manner. It has been imaginative in identifying a niche and becoming a specialist and scaling viably,” says Sandipan Mitra, CEO and co-founder, HungerBox, a Bengaluru-based B2B food-tech startup. Of the 318 stores currently, 302 are Wow! Momo outlets (across 16cities) and 16 (across five cities) are branded Wow! China, a fast-food Chinese cuisine format launched in December 2018. “We have defined the menu in such a way that, from a 60-sq. ft.kiosk, we started doing revenue of about ₹14 lakh a month for Wow! China,” says Homagai, referring to crowd-pleasers such as chicken wrapped prawn, chilli cheese stuffed mushroom, Chinese bhel, and Burmese Khao Suey, all priced between ₹99 and ₹300. Needless to say, there is no in-house cannibalisation: Wow! China doesn’t serve momos.
Though the business got wings earlier, Daryani raised his first institutional funding—from IAN—only in 2015, by which time it had grown to 43 outlets across five cities with an annual revenue of about ₹20 crore. The around 96 angel investors from the IAN platform included the likes of Infosys co-founder Kris Gopalakrishnan, the Hero group’s Sunil Kant Munjal, and Arvind Singhal, chairman and managing director, Technopak.
This gave the chain muscle to enter New Delhi (in 2015, in the tony Hauz Khas Village) and Mumbai (in 2017). By 2017, it grew to 108 outlets with an annual revenue of ₹49 crore, a position from which it raised ₹40 crore from LighthouseFunds, a private equity firm focussed on the consumer space. This infusion allowed the founders to offer profitable exits to about 20 investors from the IAN platform (they got approximately55% internal rate of return in two years).
The Tiger Global investment in September 2019 paved the way for 20 more exits from IAN investors, with more than 8x returns. Sachin Bhartiya, partner at LighthouseFunds, says the focus on delivering quality with an eye on economics will shape the business in the next five years. “Their ability to visualise the opportunity and execute it well gave us a lot of confidence [at the time of investment],” he says.
Wow! Momo is looking to close the current financial year with ₹180 crore- ₹190 crore revenue and a total of 350 stores/kiosks. It claims to have an Ebitda margin of 10%.
Product quality and service are critical in the food business; for this, expansion and operations have to work in tandem. Aware of that, the company works with hatcheries (Shalimar Hatcheries in Kolkata, Godrej Tyson Foods in Bengaluru, for instance) to maintain the quality and hygiene of the poultry it uses—there is an auditor appointed or every seven-eight outlets. Streamlining is also a business necessity and Wow! Momo has a centralised kitchen for every city. It plans to make the back-end process more efficient: The kitchen will only do the fresh folding of the momos while the fillings will be pre-cooked at a centralised plant in Kolkata. This plant will be high-tech and fully automated, set up in the city’s Kasba Industrial Estate. It is expected to be operational in two years. Countrywide, Wow! Momo churns out about 500,000 momos a day, a largely manual effort. “Our plan is to make it automated in the future. The size, shape, hygiene, and quantity of the filling should be uniformised,” says Daryani. To underscore his seriousness, almost a third of the amount raised (about ₹50 crore) in the last funding round went into setting up the back end.
But given the largely buoyant scenario, the founders can’t afford to ignore the hurdles inherent in a QSR business combined with the threat of competition: Wow! Momo competes with global majors such as Domino’s, KFC, Pizza Hut, and Burger King. “QSR is an execution game. Very few Indian companies have brought consistency like Domino’s and McDonald’s to QSR, and that remains a differentiator. I hope they continue to innovate on their menu,” says Anand Lunia, founding partner at India Quotient, an early stage investment firm.
The Wow! Momo team’s business instincts haven’t let them down yet. For instance, as they built scale, the founders realised the importance of putting together a team of professionals. In 2015, they offered Shah Miftaur Rahman, 32, their college batchmate,10% equity and a co-founder designation. Rahman, a chartered accountant, was working with PwC India as vice president prior to joining the startup. Currently he looks after the finances of the business.
Of course, the relatively hiccup-free growth of the business is aided, in no small measure, by the understanding between the two founders.“Nature-wise we are completely opposite,” says Daryani. “I am aggressive, optimistic, and restless while Binod is more grounded, realistic, and calm. So as a team we make a good combination.” The longevity of their connection helps too. “Binod was the only friend who stood by me after college,” he adds. “Even though many others had plans to start a business together.” Needless to say, their group studies included a serving of Homagai-made momos. Let’s call it their wow factor.
(This story was originally published in the March 2020 issue of the magazine.)