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Inside Faasos’ Rise to The Cloud

Last week, food technology company Rebel Foods (previously Faasos) kicked off its $75MM fundraise with a $16MM first tranche. 

Beginning to Roll

The Faasos’ journey poetically started with a beverage (read alcohol).

In 2003, Jaydeep Barman and his co-founder friend Kallol found themselves deep in a drunken conversation. While looking to name their company, they came up with “Fanatic Activism Against Sub Standard Occidental Shit”, inspired by the obscure country Burkina Faso.

Faasos, the roll company, was thus born in Pune. 

That, though, would not be the true “beginning” of the company. Both founders would leave abroad to pursue an MBA while letting two friends run the operations. In a clever move, Mr. Burman ensured that the founders owned the franchise. After a stint at a consulting firm, Barman would return to Faasos in 2010, when the company had grown to 5 stores.

Something’s Cooking

With the founders back to the team, in 2011, the company had scaled from 5 stores to 18. It also managed to raise its first round, with the investment likely backing the strong team and potentially large market. 

Faasos was positioning itself as a quick service restaurant (QSR), looking to take on the likes of McDonald’s and Dominos. While it may seem like the company has “pivoted” multiple times since the start, its focus has always remained the QSR market. 

A market that was worth $1.3Bn, growing at a rapid 22% in 2017. 

The QSR market is fundamentally pushed by increasing urbanization and growing incomes in India. Consumers who are becoming cash rich and time poor, would prefer to eat a quick meal out of their house, versus cooking at home. 

Faasos growing stable of outlets would coincide with the coming of the internet and the smartphone to India.

Wraps and More on the Internet 

I remember my second year in college when we ordered from Faasos regularly. My favourite Chicken Mayo Wrap (even today) would be free with another that my friend would order, via the app.

Little did I know that this “discounting” was a classic high lifetime value customer acquisition strategy, that Faasos could only afford because of the money it had raised.

From 2012 to 2015, Faasos would double down on its roll and wraps strategy, expanding slowly across cities. By the end of 2015, the company had scaled to annual revenue of $5MM, while processing 150K orders a month. Its outlets had grown from 18 in 2012, to 90 in 2015. 

The company raised one round over three years, indicating that its $8MM investment was sufficient for its growth. It was a classic example of product market fit getting established while reducing losses.

But the company had bigger plans.

Faasos began offering biryanis with its wraps, under the same brand, but would have likely noticed something peculiar. People would order only biryanis, and not the wraps.

Could you sell biryanis and wraps from the same kitchen, but under different brands?

That’s likely exactly what the Faasos team thought, and it is this vision that resulted in a substantial $30MM raise in early 2016, a year after a $20MM fundraise. Soon enough, Faasos would launch Behrouz Biryani under a separate brand. 

A Kitchen on Cloud

What Faasos created by reading consumer demand was essentially what is the now mainstream “cloud kitchen”.

The concept is simple. A kitchen would have no storefront but have the ability to cook multiple cuisines. This kitchen would create food of various cuisines under one roof. It would service all demand through delivery.

The concept made ample economic sense.

Stores would no longer need to depend on footfall for consumption, removing the need to rent expensive real estate. Store unprofitability, due to classic stagnating revenue and increasing costs, would be eliminated by continuing to add brands. Stores could kill brands that are not working, and double down on the ones that worked. 

Kitchen payback (i.e. the time to recover investment) would take less than a year, versus 3+ years normally

The kitchen would just focus on high quality, delicious food brands. The strategy would prove to be a game changer for Faasos.

Consumers in the Clouds

The kitchen would just focus on high quality, delicious food brands. The strategy would prove to be a game changer for Faasos.

The company grew from a revenue run rate of $12MM in mid-2016, to a $24MM run rate in mid-2017. The biryani brand, Behrouz, grew substantially to account for 25% of company sales

A full 100% growth at this scale is quite difficult, and repeating the same would be even more tough. Growing 100% again to $50MM would amount to accounting for 5% of the hyper-competitive $1Bn QSR market. Dominos, in 20 years of existence and 15x the number of stores that Faasos had, had garnered 25% of the overall market. 

Faasos growth would end up being propelled by another voracious food startup.

Delivering the Missing Piece

Faasos (now Rebel) had built significant competency in culinary development. Whether it would be improving food for a present brand (better biryani) or creating a new brand (pizzas through OvenStory), Rebel had created the playbook.

What it lacked was strength in logistics, because it had focused resources on solving the food problem. Creating a delivery network would require significant investment, and somebody else was already solving that. 

That would be Swiggy, of course.

Faasos would soon find itself free from the need to build its own delivery network. As the eloquent and entertaining Mr. Barman puts it, food would see different companies become strong brand owners (like Unilever) and strong retailers (like Amazon). 

McDonalds, which was both the food brand and the retailer, would give way to Faasos (brand) and Swiggy (retailer). Faasos doubled its revenue in 2018 (again) hitting a $45MM revenue, and is on track to keep the same growth in 2019. The company’s valuation of $400MM is a 6x multiple of its (likely) $60MM run rate today. 

“Downloading Food from the Internet”

Just like in 2011, when Faasos set out to disrupt Dominos, Rebel Foods has Dominos firmly in its sights. This time around, the model is entirely different.

While the “1,100 restaurants” may feel like a tall claim, when it appears to be 175 cloud kitchens multiplied by 6, it is commendable. The fact that Rebel has created the infrastructure where you can literally “switch on” a brand, there is substance in the multiplication. 

The “world’s largest internet restaurant company” now has 10 restaurant brands, after its initial success with Behrouz. 

Each brand caters to a different cuisine and style. While I believe the number of cuisines/brands will plateau, each of these could scale significantly. Given the shared infrastructure, success with one brand would help the other. 

As the company scales across multiple cities, stores and cuisines, there is huge potential to grow. The growing QSR space is also likely to fuel its growth further. 

Rebel Foods could change the way we eat quickly, quickly.

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[…] like in Edition 70, where Faasos was cooking up different cuisines in the same kitchen infrastructure, TVF would cook […]

4 years ago

u guys should also name who wrote the article too..

4 years ago

By becoming a cloud kitchen company, Rebel has made it self as platform. Today, they have multiple brands catering to different cuisine as the society evolves and the company collects more data. It will enable more entrepreneur(Intrapreneurs) to create local brands . For Eg: Imagine Rebel Starting a Salad/Keto Kitchen in Bangalore or a office snacks/Chaat platform in Gurgoan or starting a kids school meals platform somewhere else. This is will help them rapidly experiment the new brand and products and if it succeeds then scale it across users across multiple city. Imagine your roof-top kitchen counters changing too, Rebel… Read more »

Bhavnesh Diwan
Bhavnesh Diwan
3 years ago

I just wonder how on earth you guys come up with such amazing stories. Have always been a fan. Will always be a fan !!