Shutting down Cocoguru Adigemane restaurant for now

I started a Mangalorean-style vegetarian restaurant at Nehru Nagara, Puttur, on 15th January 2023. More than 2 years later, it will be shut down on the closing hours of 27th January 2025. It is agony to close a business after putting heart and soul (capital, physical and mental energy, time) into it. I am announcing it officially so as not to let rumours give you the information. As I announced the opening of it, I have to inform the closing of it as well. Success and failure take an equal position in me as an entrepreneur. I have no shame in accepting defeat in pursuit of a lofty goal, surrendering to failure after trying out my everything. Tears are rolling out of my eyes as I write about it. I feel low and helpless. I feel devastated by this, as it means a lot to me. The heart wants to continue, but the head has decided to close.

Why closing it now, what are the reasons for failure?
I am responsible for all the failures. I am not trying to blame anyone else, as everything else is because of my choices. So, my wrong choices, which have compounded the failure are -

Financial Loss
Business has been making financial losses. We have tolerated such losses for 2 years now. The business was looking good last season and made profits during April and May. Coconut oil business also had similar accumulated losses in the first 5 years. But the big difference is, I didn't give it up despite the losses while I am giving on the restaurant now.

Sewage Water discharge issues
With great difficulty, after 1 year of effort, we got the sewage treatment system working. It has been working smoothly for the last 1 year. We had a lot of pressure and complaints from the neighbours while it was not working smoothly. Now, the only safe drainage was blocked by a neighbour. There is no official drainage facility in the layout. Building owners have also neglected the issue, and we have nowhere to go.

Inventory Management
The food ingredients and gas usage now is almost same as that during May when the sales were almost double. Ingredients cost is ideally a variable cost and should vary in line with sales. We are unable to trace the wastage of ingredients and cooked food. The supervisors and cooks were not comfortable with us measuring it either, as they had not done a similar exercise in their previous work experience. Putting up an inventory management system in place against the non-cooperation of employees is the next challenge we had to take up. The menu items are too many (300+) with varieties of north Indian, South Indian, Juice, Ice Cream, Chaats etc.

Employees Cost
The building was not done considering to accommodate a restaurant. Because it couldn't be rented out, the owner decided to run a restaurant. So, the layout is not convenient. When the layout is not convenient, more man power is required to make up for it. Also, we don't know how to allocate work and responsibility to people as they come with their own constraints. So, we ended up employing a lot of people and costing us a lot. Once the employees are comfortable working with their own narrowly defined responsibilities, they would rather stand idle instead of doing something that is outside their perceived role. So, we could reduce the manpower to 28 people at the cost of 4.5 lakhs per month.

The ambience does not match the premium Positioning
We have given a lot of importance to hygiene and cleanliness in the restaurant. The use of high quality ingredients and preparing food freshly increases the food cost drastically. The pricing is a little premium to other popular local restaurants. Attracting customers who can pay a premium, requires a complete premium package, including the ambience. This ambience and setup is not built by us, it was just taken over from a previous restaurant that was built for the masses. So, the ambience was not resonating with the customers in getting a complete premium experience.

Trying to give everything to everybody
While starting out, we were clear about the offering of traditional Mangalorean dishes only. But many well-wishers advised us to offer what people want that is North Indian, Chinese, Chaats etc. This meant, we had to do away from our core and do everything that customers wanted. It increased our overheads, complexity and costs. The customer dine-ins were not good enough to cover the increased costs.

A mismatch between what customers want and what we offer
The factors on which restaurants position themselves and work on are many. We were working on, high quality, healthy, freshly prepared, hygiene standards etc kind of parameters. Most customers want more taste and low price. This mismatch meant, we had a much smaller group of customers to target. We had to live with people spreading the word around that the restaurant was too expensive and not worthy of dining. We tried to offer people healthy stuffs like Tambuli and Kosambari. We observed that they mostly go to waste. Many local delicacies like Pathrode, Pundi Gassi, Uppittu, Chattambade, Avalakki, Kadle, Charumuri etc didn't get the demand necessary to continue providing them.

Swimming against the current with compliance
It took a lot of effort to get the coconut oil business fully compliant with the laws. So, with the restaurant, compliance should be taken seriously from the beginning itself. With no other restaurant or local business bothering about compliance. It becomes almost impossible for the lone swimmer to swim against the current. As examples,

  • Every business pays its employees in cash. When we pay 25% PF and ESI, the in-hand component looks low to an employee. So it is very difficult to get an employee to work with our terms.
  • Restaurant industry pays 5% output tax with no input tax credit on purchase. So, if average tax is 5% input, then total tax is 10%. So, only we pay 10% tax, while others don't.
  • Use of single-use plastic is banned. However, other restaurant continues to use plastic straws, customers don't mind. When we offer steel straw, even though it is thoroughly sterilised and cleaned, customers doubt and question the hygiene.
  • We give parcels using food-grade reusable containers which costs more than just packing in thin polythene covers and newspapers as done by other restaurants. When we impose parcel charges, customers feel we are charging more.

Slowed down advertising to cut costs
We used to advertise in a medium way but consistently on hoardings, social media and local papers. Because we were getting into losses, out of short-sightedness, I decided to slow down on advertising. Restaurant food is eaten out of impulse many times and a new brand should continue to advertise to stay relevant. So, this impacted our sales in a big way.

Big Competitor (Shree Mahesh Prasad)
Opening of a big restaurant 500 metres from us during mid-September has brought the sales down by 20% or 3 lakhs per month. In the face of this, losing just 20% of the business is an achievement, showing preference of other 80% of the customers towards us. They have been Puttur town's 2nd or 3rd most favourite restaurant brand after Hari Prasad. Theirs is a family of hoteliers for the last 40+ years. We should be ready to face competition in business at any stage anywhere.

Catering
Catering is an important arm to keep the restaurant floating. We were not getting any catering orders naturally. The big caterings done to Vivekananda college didn't go well with them. Since, we are not getting catering naturally, we have to take up a lot of effort in marketing it and making it happen.

Local customers vs Tourist customers
I had a clear idea of targeting the local customers. But the Location of the restaurant was along the highway and 3 kms from Puttur town. So, it was not convenient for locals and convenient for tourists. Tourists customers don't mind paying a premium price, but local customers are highly price-conscious as they dine out more frequently. Local foods are attractive to tourists as it is special for them. Locals anyway get it at their homes and functions. So our location, targeting and position didn't exactly match.

Coconut Oil business restructuring
Coconut oil business was not growing well in the last few years even though the operations have been stable. I ran out of ideas and had to get into the restaurant business. Now, I have realised our weaknesses in Sales and Marketing. So, those departments are going through a big restructuring exercise, and I need to lead the effort from the front. There are no good second-level leaders here. That means I have stepped on two different boats that have started to move apart, and obviously, I am sinking.

Massive Requirement of Capital
The costs of copra and coconut oil have increased by 70% from 90 per kg of copra to 155, coconut oil from 180 to 300 levels. So, the inventory value and working capital requirements have risen. We were almost debt free 2 years back, but now have piled up a huge amount of debt. Investment in restaurant, losses from its operations, rising raw material costs of coconut oil are the major reasons.

Image problems with employees to work at a restaurant
There are a good number of employees working at our coconut oil mill. They are not fully busy there, using their skills and time for the restaurant business would have been good for the business. Many of them indeed worked for the restaurant and had no issues being there. However, a few of them have expressed their unwillingness to work there. Working in an industry/office is considered good, but working at a restaurant or in sales is considered cheap. So, I didn't get support from a few employees.

Personal challenges
Wife supported me a lot in starting and establishing the restaurant. With rising stress, our mental health was not at its best. Children are growing, in their 1st and 2nd standards. They need a lot of attention. So, personal challenges and challenges from 2 businesses while being 15 years older than that while starting the first venture make it that much more difficult.

Will I do a restaurant in future?
Restaurant is a great business. It is a low capital, high value addition business where we can work closing with the customers. One respected doctor customer says, that if a restaurant has good sales, and where there is low wastage, it is always a profitable business. I have not developed any hatred towards this business, I haven't found it tough. I didn't understand it well enough, the preparation was not good enough, I made wrong choices, and I don't have the resources to turn it around now. With the learnings and preparation, I will certainly open a restaurant in a couple of years.

What about the present employees?
Half of the employees have worked with us for all these 2 years and have been faithful to us. We will do our best to get them placed in other restaurants nearby. We have given them 15 days notice of shutting down. We will help them claim their PF money. We may call many of them if and when we open a restaurant at Puttur again.

Learnings and benefits from the adventure

  • Individual and business fortunes can change in a short span of 2 years. From being debt-free, I have piled on a mountain of debt. So, work on building wealth other than business.
  • We focus on physical health, weight loss, muscle building etc. But mental health, sleep, concentration, positive attitude is also important and should be actively worked on.
  • Got the idea of making packed fried snacks only while running the restaurant. This has developed into an independent business now and can be scaled like an FMCG product like coconut oil.
  • Social media posts on food gain a lot more attention than those on coconut oil. So, through food posts on social media, the brand reached a much bigger audience online. Many tourists have experienced the brand at the restaurant and are repeatedly ordering coconut oil now.
  • While I am not a subject matter expert in something, it is worthwhile engaging with good consultants in a domain to guide me through the right decision-making. They may be expensive, but can be valuable.
  • The importance of focus and execution has been learned the hard way after placing my legs on 2 boats.
  • Have a vision and stick to it even if the market tries taking you in different directions.
  • Hire good people for management and supervision before hiring blue-collar workers.
  • Start small, I started with small investment but the expenses required were high. So pressure to sell got high, and took the wrong decisions.

What now?
I will focus on sales and marketing for coconut oil. I will take up a challenge to be on market for 100 days in a year. I will focus on my fitness, discipline, personal learning and family. Sporadically, I will work on the next restaurant concept.

Thanks to everyone for bearing with me and being there for me at my most difficult times. Cheers.