cafe – BBFT

For years, India’s coffee culture was defined by instant mixes and mass-market cappuccinos. But in the last decade, a quiet revolution has reshaped the landscape. A new generation of coffee drinkers, primarily young professionals and urban dwellers, are demanding more than just caffeine—they want quality, craftsmanship, and an experience that goes beyond a quick espresso shot.

This shift in consumer behavior has paved the way for brands like Third Wave Coffee, which launched in 2016 with a mission to bring artisanal, ethically sourced coffee to India. In a market dominated by Café Coffee Day and Starbucks, Third Wave Coffee positioned itself as the go-to brand for specialty coffee lovers. But how did a relatively young company carve out such a strong niche in India’s competitive café industry?

This case study explores the strategy, product differentiation, and disruptive growth of Third Wave Coffee.

The Indian Coffee Boom: An Industry Ripe for Disruption

India’s coffee market is experiencing rapid growth, expected to reach $2.31 billion by 2024, with a compound annual growth rate (CAGR) of 8.9%. While instant coffee remains widely popular, there has been a surge in demand for premium coffee experiences, driven by rising disposable incomes, urbanization, and increased awareness of coffee origins and brewing methods. The Coffee Board of India estimates that the specialty coffee segment alone will grow at a CAGR of 12.6% over the next five years.

This demand for high-quality coffee has given rise to a new café culture, where people are no longer just looking for a place to grab a quick cup of coffee but are seeking “third spaces”—cafés that double as work hubs, social gathering spots, and experiential destinations. With this shift in consumer preferences, Third Wave Coffee saw an opportunity to redefine India’s coffee experience.

The Founding Story: A Vision for Better Coffee

The brand was founded by Sushant Goel, Ayush Bathwal, and Anirudh Sharma, three friends who were introduced to the third wave coffee movement while studying abroad. Unlike the first and second waves of coffee, which focused on mass production and branding, third wave coffee treats coffee as an artisanal product, emphasizing quality, sustainability, and transparency.

Upon returning to India, they realized that while global coffee chains like Starbucks offered a premium café experience, there was a lack of locally sourced, specialty coffee with a strong focus on craftsmanship. They saw an opportunity to bridge this gap by creating a brand that not only served high-quality coffee but also educated consumers on its origins, brewing techniques, and flavors. As Goel puts it, “It wasn’t just about drinking coffee; it was about understanding where it comes from and how it’s made.”

What Sets Third Wave Coffee Apart?

Third Wave Coffee’s strategy is built around creating a holistic coffee experience, focusing on craftsmanship, ethical sourcing, and digital innovation. Unlike mass-market brands that prioritize convenience, Third Wave Coffee has cultivated a culture of appreciation for specialty coffee, making it more than just a beverage.

Their cafés are designed to encourage customers to linger, featuring minimalist, warm interiors that make them ideal spaces for work or socializing. Unlike Starbucks, which emphasizes its global branding, Third Wave Coffee has localized its approach, ensuring that each café retains an inviting, community-driven atmosphere. The baristas are highly trained, not just in brewing techniques but also in customer engagement, adding a personalized touch to every order.

A key differentiator for the brand is its brewing methods. While most coffee chains rely on quick-service espresso machines, Third Wave Coffee introduces Indian consumers to hand-brewed methods like Aeropress and Pour-Over, which bring out the natural complexities of the coffee beans. This approach aligns with their philosophy that coffee is not just a drink but an experience, much like fine wine, where origin, processing, and roasting techniques all influence flavor.

Beyond brewing, their commitment to ethical sourcing has played a crucial role in shaping the brand’s identity. Third Wave Coffee directly sources beans from local farms in Chikmagalur and Coorg, ensuring traceability and fair pricing for farmers. By cutting out middlemen, they provide customers with fresh, high-quality beans while supporting India’s coffee-growing communities.

How Digital Innovation Fueled Growth

While most coffee brands struggled during the COVID-19 pandemic, Third Wave Coffee leveraged a strong digital-first approach to navigate the crisis. Their mobile app became a game-changer, allowing customers to order online, customize drinks, and subscribe to monthly coffee plans. This move significantly boosted their online revenue, with 30% of total sales now coming from digital orders—a remarkable achievement in India’s café industry.

Beyond delivery, their subscription model has created a loyal customer base that values fresh coffee delivered directly to their homes. By integrating technology with their brand experience, Third Wave Coffee has successfully positioned itself as a forward-thinking company that understands the evolving preferences of modern coffee drinkers.

Competing Against Industry Giants

India’s café industry is highly competitive, with established brands like CCD, Starbucks, and Blue Tokai fighting for market share. While CCD dominates with affordability and mass accessibility, and Starbucks thrives on its global appeal, Third Wave Coffee has crafted a niche by targeting discerning coffee lovers willing to pay ₹300-400 per cup for a premium experience.

Their strategy has paid off. As of June 2024, Third Wave Coffee operates 100 outlets across major cities, including Bengaluru, Mumbai, Delhi, Gurgaon, Pune, Hyderabad, Noida, Coonoor, and Chandigarh, with plans to open over 50 new outlets in the coming year. Their financial performance has also been impressive, with revenue soaring from ₹32 crore in FY22 to ₹144 crore in FY23—a staggering 4.5x growth. This success has attracted significant investment, including a $35 million funding round led by private equity firm Creaegis, signaling strong investor confidence in their expansion potential.

The Future of Third Wave Coffee

As India’s specialty coffee market continues to grow, Third Wave Coffee is well-positioned to lead the charge. The brand plans to expand into tier-2 cities, introduce bottled cold brews, and strengthen its subscription and retail offerings. With an increasing number of Indian consumers embracing artisanal coffee, the brand’s focus on quality, sustainability, and innovation gives it a competitive edge.

Co-founder Goel sums it up best: “The future of coffee in India isn’t just about selling more cups—it’s about creating experiences that people want to be a part of.”

Introduction: The Million-Dollar Question

If you’ve ever dreamed of owning a restaurant or café, you’ve likely faced this dilemma: Should you build your brand from the ground up or invest in a franchise? The food & beverage (F&B) industry is lucrative but notoriously challenging, with around 60% of new restaurants failing within their first year and 80% shutting down within five years.

One path leads to the tried-and-true world of franchising, where you can leverage an established brand to grow your business. The other path takes you into uncharted territory, where you build your F&B brand from the ground up.

Both routes invite success, but which one is the better investment?

Let’s break it down with real data, industry insights, and expert opinions to help you make an informed choice.

Success Rate: The Cold, Hard Facts

The numbers don’t lie. Independent restaurants have a survival rate of only 20% within five years, while franchises have a survival rate of around 85% over the same period. This staggering difference is due to the proven systems and structured support that franchises provide.

According to a report by the International Franchise Association (IFA), franchised businesses grow at a rate of 1.5x faster than independent businesses, largely due to their access to training, marketing, and operational expertise.

Would you rather reinvent the wheel or drive a car that’s already been fine-tuned for success?

Known vs. Unknown: The Power of an Established Brand

When it comes to F&B, brand recognition is everything. Starting your own brand gives you creative freedom, but it also means building everything from scratch—from the menu and branding to customer acquisition and operational systems. On the other hand, franchising gives you access to a well-established brand name, proven business model, and loyal customer base from day one.

As franchise expert Mark Siebert puts it,

“A strong brand is half the battle won. Franchising allows you to stand on the shoulders of giants. You’re not just buying a business; you’re buying a proven system.”

Let’s take McDonald’s as an example:

When a franchisee opens a McDonald’s, they aren’t just selling burgers; they are leveraging decades of brand equity, global recognition, and trust. In contrast, an independent burger joint would need years and huge investments to build that level of credibility.

Marketing Muscle: Leveraging a Pre- Existing Audience

When starting from scratch, you’ll need to spend heavily on marketing just to get noticed—from digital ads and influencer partnerships to loyalty programs and PR campaigns. Building brand recognition takes several years and a substantial budget.

Franchisees, however, benefit from national and regional marketing efforts funded by the franchisor. Whether it’s a new menu launch, influencer collaborations, or high-budget ad campaigns, franchise brands already have an audience ready to engage.

Example: Starbucks spends over $400 million annually on advertising. A small independent coffee shop could never match that level of exposure. But a Starbucks franchisee? They automatically benefit from it.

Operational Edge: Expert Training and Supply Chain Synergy

One of the biggest advantages of franchising is the comprehensive training and ongoing support provided by the franchisor. Whether it’s standardized recipes, improving customer service, or troubleshooting operational challenges, franchisees benefit from an expert-driven roadmap.

Franchisors offer intensive staff training programs that cover everything from food prep to inventory management. Compare this to an independent owner who has to learn through trial and error—often at the cost of wasted time and money.

Running a restaurant also involves managing suppliers, negotiating deals, and handling logistics—infamously, one of the trickiest parts of the business. Independent owners must navigate these complexities alone, often paying higher prices for ingredients, equipment, and packaging. Franchises, however, leverage their bulk purchasing power to secure better deals.

“The biggest risk in F&B isn’t the idea, but execution,” says Jennifer Patel, a restaurant consultant. “Franchisees get a playbook, while new owners have to figure everything out on their own.”

The Creativity Myth: Franchising Doesn’t Mean Losing Your Spark

One common misconception about franchising is that it stifles creativity. While it’s true that franchisees must follow certain guidelines, there’s still plenty of room for innovation.

Many franchisees add local flavors to their menus or host community events to build customer loyalty.

Franchising gives you a framework, but it’s up to you to bring your personality and passion to the business.

Franchising strikes the perfect balance between structure and creativity, allowing you to thrive without reinventing the wheel.

Funding & Expansion: The Growth Accelerator

Raising capital is one of the toughest hurdles for any entrepreneur. Banks and investors are often hesitant to fund standalone restaurants due to the industry’s high failure rate. However, franchises are seen as lower-risk investments, making it easier to secure financing.

According to a Franchise Business Review survey, franchise owners are 30% more likely to secure bank loans compared to independent businesses. This advantage extends to expansion as well—successful franchisees often reinvest and open multiple locations within a short time.

A franchisee of a popular coffee chain can expand to 3-4 locations within five years, while an independent restaurant owner might still be struggling with the first outlet.

The Verdict: Why Franchising Takes the Crown

So, which is the better investment?

For most F&B brands, franchising is the clear winner. It offers lower risk, faster growth, and a proven system for success. That’s not to say starting from scratch doesn’t have its merits—it’s perfect for those who want complete creative control and are willing to take on the challenge.

But let’s face it: In the fast-paced world of F&B, time is money. Franchising gives you a head start, allowing you to focus on what really matters—delivering delicious food and unforgettable experiences.

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