HM Foods

Jagan and Veena were a young couple who studied together and graduated in the same
college. Jagan graduated in hotel management while Veena was a graduate in nutrition. After
their marriage, both decided to start their own venture. Jagan and Veena shared a common
interest in healthy, organic food. They cooked for their friends and families during small
occasions. Encouraged by positive feedback, they decided to start their own venture.

Initially with a small budget, they rented out a place near the college as they felt that there
was a growing interest in healthy and nutritious food. Besides college students would also
appreciate their unique recipes and also affordable pricing. They named their small dine-in as
HM Foods. It had a seating capacity of fifteen and there was always a crowd waiting to be
seated. So the couple decided to offer takeaway to cater to those who wanted healthy food
but not interested to dine-in. In few months, the sales from takeaways was eight times more
than the sales from dine-in.

Jagan and Veena were not prepared for this surge in sales in takeaways. One night after
dinner they were deeply engrossed in discussion on the future of HM Foods. Jagan started to
list out all possible options they had (See Exhibit 1).

Exhibit 1

Future of HM Foods
1. Expand the dine-in to accommodate more guests
2. Close dine-in and focus only on takeaways
3. Keep both
4. Innovate and supply packed semi-cooked meal to supermarkets and focus on this
business
5. Keep the dine-in and open at new locations

Jagan mentioned to Veena that they cannot hire more. Currently they were a team of five
including the couple. While two were in the kitchen, the couple and one more person handled
all the other work. They were also exploring the possibility of buying used machinery (INR 10
lakhs) that could be used to produce a maximum of 500 units of semi cooked meals of five
recipes. The couple calculated that they had cash of INR 35 lakhs. Cost of operating a dine-in
every month was INR 8 lakhs for a 15-seater. On the other hand, operating a takeaway cost
only INR 5 lakhs.

The healthy food market was nascent but growing at an increasing rate. There were few
players in the packaged healthy meal market nationally but none locally. Local market had
about 500 supermarkets and grocery stores. Since it was a niche product margins could be
charged higher.

It was past midnight. The couple decided to continue the discussion next morning.