Nilgiris Plans Rs 150-cr Expansion In Two Years

New Delhi, Nov 13: | Updated: Nov 14 2003, 05:30am hrs
South-based food retail chain Nilgiris is all set to expand to the northern and western regions of the country through the franchise route. The total investment entailed in about 90 stores and regional distribution hubs over the next two years would be over Rs 150 crore by the company and franchisees combined.

The company currently has 26 stores, all in the south except one in Pune. While six are company-owned, others are franchised out.

Nilgiris managing director C Gopalakrishnan told FE, We are coming out with advertisements soon inviting franchisees for the north and west. We will not be owning any of the stores ourselves in this region. Each store will be 3,500-5,000 square feet each.

He revealed that the total investment for the franchisee works out to about Rs 2,200 per square foot besides land and building. All property is leased by the company directly, this sum being charged to the franchisee. This ensures that if the franchisee opts out, we do not lose the location and find another licencee, said Mr Gopalakrishnan.

The ideal rent should be Rs 40-45 per square foot which I must admit is a problem in the west and north but not so much in the south. But we are going ahead anyway and are confident of finding suitable locations. We are also talking to state governments and builders for better terms, he added.

A sale of Rs 200 per square foot per month is what an outlet needs to achieve to breakeven on operational costs. The net margin works out to 2-5 per cent depending on sales volume. We are looking at 30-40 stores in Delhi and Punja b over the next two years and another 50 in Mumbai, Nagpur and Pune. Other states will be covered only after this, said Mr Gopalakrishnan.

While we will get manufacturers to supply directly for the first 15 stores in a region, we will need to put together a distribution hub after this. One such hub costs about Rs 35-40 crore, he added.