Even for a dull Tuesday afternoon when you’d expect most people to be at work, the Gachibowli store of The Thickshake Factory in Hyderabad is buzzing with customers. It doesn’t sell anything but milkshakes, or rather ‘thickshakes’, which is exactly what every customer there has come to indulge in.
There is a wide range to pick from — classic shakes, chocolate indulgences, the Protein power range, the ‘Koffee indulgences’ range and more. Most orders, however, seem to come in for the ‘Belgian Chocolate’ thickshake. “It’s our most popular item on the menu,” says Yeshwanth Nag, founder of The Thickshake Factory.
Speaking to TNM on the sidelines of his talk at Hyderabad's startup engine T-Hub, Yeshwanth laughs as he says he runs a simple business, at least when compared to a tech startup.
“At least you know you’ll get a shake when you go to the store. It’s a much simpler startup business, unlike your typical tech startups. What we have done is take a small product – a milkshake – and make a business out of it. We didn’t invent it, we just made it better,” he says.
But betting on a business based on a single product was a big gamble Yeshwanth and his brother Ashwin took. And it seems to have paid off.
Aswhin Nag and Yeshwanth Nag
The idea
When Yeshwanth went on a student exchange program to Belgium in 2011, little did he know that having one milkshake at a milkshake parlour would change his life forever.
For someone not particularly fond of milkshakes or anything sweet otherwise, Yeshwanth fell in love with the taste of this milkshake, which was unlike anything he had ever tasted back in India.
“When you go to a typical restaurant in India, you get all kinds of cuisines, and somewhere on the menu, there is a milkshake as well, which is always more like flavoured milk. About 5-6 years ago, I don’t think people in India knew what an actual milkshake was,” he says.
Yeshwanth immediately saw a great business idea in selling authentic, high-quality milkshakes in India. His hypothesis was that if someone like him who doesn’t particularly have a sweet tooth could like this milkshake so much, then a country like India, which loves its sweets, will definitely like the product.
Once back in India, Yeshwanth went on to work with TCS, but the idea was always at the back of his head.
“The 6-7 months that I worked in TCS, I always kept an eye out to see if anyone was doing something like this. No one was. But when TCS offered me to go to the US for a period of at least two-and-a-half years, I thought someone will definitely start this and that’s when I thought that I should really give it a shot and see if it clicks. I was somehow very confident about this idea,” he adds.
He looked at similar businesses across the globe. It was a clear-cut case of a profit-oriented business. If the product clicks, you’re in for profit. It not, it’s a loss.
Rejecting the offer to move to the US, Yeshwanth quit his job and started working on his big idea.
Creating the perfect Thickshake
Retail was a very new concept for both Yeshwanth and Ashwin, as they had a background in engineering. They didn’t have enough knowledge about rentals, procurement or what it took to run a retail QSR (quick service restaurant) business. All Yeshwanth and Ashwin knew was that they wanted to build a milkshake brand.
Thus began months of research of what goes into building a retail business and creating a successful milkshake brand.
“After a lot of research, we understood that the taste of the milkshake comes from the quality of ice cream and raw materials used to make it. In order to make the perfect thickshake, we needed to figure that out first,” he says.
Then, they began the process of tasting every single ice cream found in the country. Ashwin and Yeshwanth experimented with nearly every ice cream brand but weren’t able to make a good thickshake.
Luckily for them, Ashwin at the time worked in the ice cream section at Amul and had a fair idea about how ice creams are manufactured. Using that experience, the brothers spent the next 6-7 months on R&D and after various trials and errors made the perfect ice cream for their thickshake.
And the idea behind calling it a thickshake, Yeshwanth says, is to change the perception people in India have about milkshakes.
With the recipe in place, the next big challenge was zeroing in on the location to open the first store. “I tried finding a place in Jubilee Hills, a prime area in Hyderabad, but the rentals were very expensive. That’s when I realised it wasn’t easy. Many malls also didn’t want to give out a space because they feared we would run away after a few months without paying the rent,” he recalls.
The grand opening
After much scouting, they found a place in a mall that was then upcoming in Kukatpally with the help of a friend and by December 2013, The Thickshake Factory’s first store was launched.
Much to his delight, The Thickshake Factory made sales of nearly Rs 30,000 on its first day. But this didn’t help in settling Yeshwanth’s fears. “I was surprised and glad but thought okay maybe this was because our family and friends came to support us,” he recalls.
But the streak continued. Over the next week, the store was doing sales of anywhere between Rs 25,000-30,000, something which continued for the next two months. And that’s when Yeshwanth knew that his idea was a hit and that he built a business that can be scaled.
Shaking it up
With a steady growth in sales, The Thickshake Factory hit operational breakeven in just the first month. Within 13-14 months, they got back everything they invested.
By the second year, it expanded to 11 stores and to 25 by the third year of its operations. This included stores in Bengaluru, Vijayawada, Vishakhapatnam and Chennai.
At present, The Thickshake Factory has 65 stores in 12 cities across two countries, including one in California, USA. It also has a presence in towns and cities such as Gulbarga, Guntur, Coimbatore, Vellore and Pondicherry.
With a starting price of Rs 120, The Thickshake Factory currently sells 7500 shakes in the 12 hours its stores operate each day. This, Yeshwanth claims, means that over 10 thickshakes are sold every minute at The Thickshake Factory.
It claims to be witnessing 200% growth year-on-year. And all this, with no external funds being raised.
And a testament to the success of the concept of thickshakes is the fact that over the past four years, Hyderabad has seen several new milkshake and thickshake brands come up. In fact, Yeshwanth says that TTF has sent copyright and infringement notices to at least eight such brands for cloning or copying its logo.
However, TTF is in no way threatened by the emergence of the new similar brands. “There was no market initially. We created a market and today people coming into the market has only increased the market size and we still have the largest pie. It doesn’t matter to us because our sales are continuously growing. As a customer, you don’t care how many stores I’m opening, you only care about the taste of the product and that’s what we are ensuring,” Yeshwanth adds.
The secret ingredient
Yeshwanth says that he used to be at the counter himself every single day talking to customers, understanding what they like and what can be made better. This, he says, really helped understand how his customers thought and what mattered to them.
Currently, the target audience for TTF is those aged between 15-28.
TTF also claims to be the only milkshake chain to manage its entire value chain end-to-end. The company has one central point in Hyderabad where it makes its own ice cream and raw materials. And from here, the raw material is distributed to all its stores.
TTF takes its inspiration from the models of McDonalds and Subway to ensure complete control over the quality and that the taste of its shakes is standardised across every store.
Business model
Out of the 65 stores that are currently operational, 60% of them are franchise stores and 40% of them are company-owned.
“We were initially confused about the business model. We would need unlimited capital to keep opening stores. But with the franchising market opening up in India, we also decided to give out franchises,” Yeshwanth says.
It operates on a revenue-sharing model with franchises. Apart from the initial franchise fee, TTF charges franchisees a certain percentage of sales as royalty, which is currently a major revenue stream for the company.
Milking growth
TTF will expand to 75 stores by the end of April and by 2018-end, it is looking to expand 4 times — to about 200 stores.
The next big step for TTF is to enter bigger markets such as Delhi and Mumbai and expand further in markets such as Chennai and Delhi. It sees a market for about 1000 stores in just India and a market in other countries including Middle East, Europe, etc., apart from the US where it already has a successfully running store.
Apart from that, it is also exploring newer variants, a lower entry point product and different sizes.
For Yeshwanth, who drew inspiration from the world’s top QSR chains, the ultimate aim is to build a global QSR chain based out of India, whose recipe for success is one simple product – a high-quality thickshake.