A Journey through Chai

By Meenakshi Shivram & Ramesh Jayaraman

In the bustling world of entrepreneurship, where innovation and passion converge, few figures shine as brightly as Jahabar Sadique. As the CEO of Chai Kings, Jahabar has carved a distinctive path, blending his astute business acumen with a relentless drive for excellence. Beyond his role as a serial entrepreneur, Jahabar embodies the essence of a dynamic leader, wielding his charisma and vision to inspire those around him. With a career marked by remarkable achievements and an indomitable spirit, Jahabar Sadique stands as a beacon of inspiration for aspiring entrepreneurs and seasoned professionals alike. In this exclusive Spotlight interview, we delve into the mind of this impressive personality, uncovering the insights and experiences that have shaped his journey to success.

Meenakshi: Can you tell us a little bit more about your journey to where you are today…your personal journey, the journey of Chai Kings…It’s quite a story from everything I’ve read. 

Jahabar: Yeah, it’s going to take some time! (laughs) See, me and Balaji started this together. Balaji is my partner for about almost last 12-13 years now. From our first business together until now, he’s been with me throughout the journey.

Prior to that, if you look at our personal background, both our backgrounds are very very similar…Both our fathers are bankers. We come  from a middle class family. We both did engineering, electronics and communication engineering. I did it in Chennai, Balaji studied in Bangalore and then we started working for a company called Sutherland Global Services in Chennai. This was way back in 2000.

That’s where we met…we worked there for almost about 8-9 years together in different roles and Balaji was in my team working directly. So for 7-8 years while we started off as a professional relationship, soon we became close friends and things moved on from there. Around 2008-2009, once we were close, Balaji suggested we go out and do something of our own. But coming from a completely non-business family background, I was very hesitant. I didn’t want to leave this very high-paying job and get into this business mode at all. But Balaji was very persistent because all his friends were from the business community. So he had seen the other side of the world. He’d also seen how his family was, how his father’s daily routine was and what was possible. So he kept at it!

See, we both were in good positions in the companies that we were working in. We quit Sutherland around 2008-2009. I moved on to a company called Symantec, then Balaji moved to another company. We were in senior positions. We were very high paying jobs. 

By around 2012, I finally gave in and agreed. Since we didn’t have any knowledge about how a business worked, we thought we’d take franchise units of well-established brands that were already there. So we took a franchisee of a salon named Green Trends in Chennai. That was our first business!

We both took the franchisee, 50-50 partnership, 50-50 investment. Soon we figured out that this had a lot of potential for improvement and growth. We decided that we would take multiple units.

Between 2012 and 2016, we were running about 4-5 salons, one Subway QSR, a Pizza QSR, a Kulfi QSR, a medical transcription company, a digital marketing company, a labor manpower company…multiple things across geographies. We also had this manpower company in Dubai. 

It was running very smoothly, but somewhere down the line, the idea of having our own brand struck us. We wanted to try our hand at it. Having run Subway for about a couple of years, it gave us the confidence required to launch our own brand. We were looking at multiple options. We even looked at a kebab model similar to Subway but it didn’t click.

So we moved on to coffee. We wanted to do something between ‘Madras Coffee House’ and ‘Cafe Coffee Day’ in terms of offering, in terms of ambience, pricing, product quality, and all of that. So we formed a small team, and started working on what people would like in terms of menu, the pricing, all of that. 

On a daily basis, our own team would start assembling and then we’d go down, have a tea, and come back and work. And then we’d go down, have another tea by around 3-4 pm in the evening and come back to work. Somewhere we realised that there are a lot more tea drinkers within our team than the product that we are working on! 

So we thought, why not try tea? We soon realized that there were a lot of brands up North, like Chai House in Delhi, Chai Point in Bangalore, Chai Thela in Mumbai, Philly in Dubai. We figured out that tea as a model, as a product, would definitely work, but it had to be made to suit the Chennai crowd and the Chennai market. I mean, the product, the pricing, the variety, the ambience, all of that had to match what is required in Chennai. So we kind of did that work.

It almost took us about a year to finalize the SOPs, the branding, the printing of the branding cups and all of that. We formed the company in July 2016. By October, we had our first outlet in KL Park. 

Soon we figured out people liked the product, but the business was not as big or as strong as we expected. It was very slow, but the word of mouth was starting to spread. The feedback was very positive, which gave us the confidence to run it for a longer time. Between 2016 and 2018, we launched six outlets across major areas like Anna Nagar, KL Park, T Nagar and Mount Road! The business was slowly picking up. 

Our pivotal point was around mid/end of 2017, with the advent of Swiggy, Zomato & Uber Eats in Chennai! I think that’s where our business really took off.

About half our revenue came from walk-ins, and the other half from the online portal. It suddenly made the entire business more viable to operate. We soon figured out that we have to establish more outlets and become a brand. 

We looked at multiple options. We looked at debt as an option to add more outlets, but without collateral, the opportunity to take debt is very less. So we did not move forward. We looked at the franchisee option, but we were not very confident on how this brand could be grown within a franchisee model. So we dropped that as well. Finally, we started looking out for equity investment. And that’s how Chennai  Angels happened, and invested in us. Chennai Angels invested about INR 2 Cr in the company in 2018 and followed up with another round of 1 million by 2019, end of September 2019 to March 2020. So this happened in a few tranches.

So with that, we have about 56 outlets right now, 50 of them in Chennai, four in Coimbatore and two in Hyderabad.

We are profitable! All of the outlets are profitable, barring a couple of them which are there in a seasonal place like a college (which only works 200 days out of the 365 days), or a mall (which is only booming for about 10 months and not so for the other two months). So barring that, as a company, we are profitable.

We are big on compliance. There are no backdoor dealings. Everything has to be accounted.

Every expense has to be accounted. With all of that in place and with investor audits on a frequent basis, we have turned profitable for the last two years. 

And we are the only company in the entire space, which is where the revenue generated to the invested amount ratio is much higher. We have taken a total investment of about 9.75 crores and in total, we have done about 140 crores, close to 140 crores. So nowhere, nobody else in the sector has done it.

I think at this point, our work in terms of setting up the company, stabilizing the process, stabilizing the revenue and the profitability, we are at the right junction where we can look for a good investment partner and take this brand forward. That is where we are at this point. 

Meenakshi: I mean, first of all, that’s an incredible story and it’s wonderful to see such a successful transition from employment to business. One thing that I wanted to ask you, being in this sector, inventory as such is a crucial control topic, right? Being able to predict your demand accurately, especially considering the perishability. How do you approach this for each of your outlets? 

Jahabar: For Inventory, we have developed our own POS system for the front end usage at the outlets with SAP at the backend. So in terms of the IT infrastructure to manage the inventory…it’s a foolproof system that we have.

It has been made better over the last eight years. So that way, in terms of the backend support it’s there. What we have to manage is make sure the outlets are following the process that you have set in terms of how to order, when to order, when to keep checking the stock, closing stock and outlets…all of that.

It’s a very automatic process. We order the outlets, manage their own inventory which is visible from the system that we have and which can also be centrally accessed to see if anybody is having a lower or higher stock against the requirements. All the materials come into the warehouse. The warehouse is being tracked & managed, including metrics like the turnover and ratio in terms of material required to material purchase. 

Meenakshi: Within the sector, what do you think are the core challenges faced by outlets like yours? 

Jahabar: Outlets are the core challenges at this point.See, everything is a challenge. I mean, staff management is a challenge. Identification of staff is a challenge. Managing stocks, because you cannot have excess stock in the outlet where stock is equivalent to money. 

Meenakshi: Do you see any growth trajectory for the F&B sector? Are you seeing a lot of similar companies coming up in the space? 

Jahabar: See, I think it is much better up north and here it is certainly catching up. There were no chai brands in Chennai before we started. There is a huge surge here. We have 50 outlets and if you add up all the other similar brands, it would be almost 50 or even slightly higher than 50 outlets. But if you compare that to the number of tea shops that we have in Chennai, which was about 15,000 eight years back and around 25,000 now, the branded chai cafes like us are a very miniscule percent of the market demand.

So I’m sure it is only going to get better from here. Recently we came across a Swiggy survey. For example, there were 5,000 votes cost in the chai and cafe category in Chennai. Compare that to around 15,000 in Bangalore. So the market is yet very nascent here in Chennai, but it will only pick up from here. The growth trajectory is only going to go up from here. We have 50 outlets and there is potential for another 50 outlets. Plus the capital opportunity is huge! I mean, the number of IT parks, number of hospitals, colleges, schools, canteens…the opportunity is much, much, more.

Meenakshi: Finally, any words of advice for budding entrepreneurs out there, anyone who’s wishing to start a business, any words of wisdom before they start on where to focus on and how to structure their business?

Jahabar:  It’s very difficult. I mean, everything is very personal to each of the founders, but we always say that there are two or three things that you always have to look at. Before you start a business, you look at things like, why are you doing it? Are you making it? I mean, there has to be a reason for that business. That has to be sound.

That is what I always tell my friends or anybody who’s looking for any guidance from me. I mean, there are a lot of people who do business because they like it, right? If they don’t even check if there is a market for it or if it is viable, that’s dangerous. So, you just have to make sure you ask the right questions yourself, whether this business is going to make things easier for people or make it more accessible for people and at the same time, is it viable as a business model. 

Second, you’ll have to have your right team size. I mean, you cannot build the team and then build the business or build that business first and then build your team. It has to be hand in hand.

It has to be simultaneous. 

Third, I would say your financial integrity or your financial ethics, right? It is easy to cut corners. It is easy to make a quick buck or an extra buck here and there, but then everything comes back to bite you at a later time. So, keep that in mind. Always keep everything clean. See, I’ve been in multiple businesses. I’ve done multiple businesses before. I have done proprietorship businesses. I’ve done partnership businesses with other friends and all. It is very easy to take a shortcut. That temptation will always be there. So, you have to avoid that. Take the right route. Keep a long-term vision to the business and make sure everything is in line in terms of the guidelines and in terms of the rules the state has put.