Wednesday, May 04, 2005

Dhaba Economics...

On the old Bombay Pune highway, there are dhabas, roadside restaurants, almost one per half a kilometer. Restaurants appear every half a kilometer on almost the entire stretch of the road (this is until the new expressway came up). I wondered about the economics of such an operation and how so many eateries could sustain themselves. I have atleast a partial answer to it.

Highway dhabas have segmented their market into roughly 3 categories. One is the bus travel segment, the other is the truckers and the third is the traveller driving down on his own (or with family)

The ones that travellers using their own vehicles prefer are the ones which have, over time, built a reputation for themselves. Like Kamats Lokaruchi en route to Mysore or MTR on the same route or the vadapav at Khopoli on the old Bombay Pune route.

How about the truckers? I think they go by the number of trucks already stopped at a place to decide if they want to eat at a dhaba on a new route. Word of mouth is a big seller for regulars. A large number of truck drivers however cook their own food.

Thus, these fly by night highway Dhabas do not depend on the passing one time traveller, they depend on their business on the regular travellers. They have hooked the bus drivers of certain companies ( be it government owned RTCs or private transporters) to halt their bus at these dhabas. The bus drivers get a free meal (sometimes they carry stuff for the use of the dhabas), while the passengers have no choice but to eat at the place where the bus is stopped since the nearest dhaba is half a kilometer away which is not a distance one can walk and come back by the time the bus leaves. Typically these places offer lousy quality of food, but with each bus they get some business and are able to sustain themselves.

It is one of the only marketing example I can think of where bad service can still get customers because of the unique position they are in. Many travellers now opt only for branded or packaged items only and that too if they dont pick it from their boarding point. Yes, they can never become a great place to eat this way, but they will probably continue to make some money.

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