MBA CHAIWALA: Scam or What?

MBA Chaiwala is not only making tea but also fooling people, He is making fake promises, selling franchises for his own profit, etc. These comments are not my personal opinion but statements of many who bought MBA Chaiwala franchises. So, what has happened to this iconic Chaiwala all of a sudden, why is there so much hate, anger, and blame? Let's begin the story.

How did MBA Chaiwala start?

Mr. Billore Ahemdabad Chailwala (MBA Chailwala) company was founded by Mr. Prafull Billore in June 2017. It is a food and beverage startup company in India with more than 100 outlets and 150+ brand partners. This company has been featured in LinkedIn's Top Startups 2022 India.

As a middle-class person, Prafulla Billore had a lot of struggles, and his dream of pursuing an MBA never came true. So, he started his tea stall, and now that tea stall is known as the most famous and iconic chaiwala in India. From here, he was not only a successful businessman but also becomes a motivational speaker, social celebrity, and action-taker. He started selling his franchise to fulfill the entrepreneurial spirit of many emerging businessmen. Now whenever people hear the name MBA Chaiwala, the first thing that comes to mind is not chai (tea) but the name of Praful Billlore himself.

Story Begins...

On 4th April 2023, Ashish Tiwari from Indore lodged an FIR on Prafull Billore at Lasudia Police Station. According to Ashish:-

Praful took a franchise amount of Rs 10 lakh from him and promised him that he would make a sale of Rs 10,000 per day, but in reality, Ashish could not even make a sale of Rs 600.

His outlet has very less customers and is running at a loss. It is not only about Ashish but there are 28 complaints registered against Prafull in Indore only. Like Ashish, there is Tanmay Chokse, and Vineet Rai who have spent more than Rs 20 Lakhs on franchises but their outlets are now closed.

Franchise Model:

According to the MBA Chaiwala, they are charging money on franchise fees, raw material cost, and equipment cost, which runs up to lakhs for an individual. All these lakhs of investments are not giving any positive returns either the outlets are in a break-even position or are only in losses.

The MBA Chaiwala model has been distributed into three different models:

1. KIOSK Model(150 Sq. Ft)
2. DINE-IN Model(300-400 Sq Ft)
3. LOUNGE MODEL(500-800 Sq Ft)

For a Lounge Model Franchise fee is around INR 10-12 Lakhs, Equipment & interior cost is around 15-20 Lakhs, and Raw material cost is around 7-8 Lakhs. So, the grand total for a Lounge model is around Rs 40 lakh.

Break-Even Analysis

If a person has invested INR 40 Lakhs for a lounge model that means he/she has to make around INR 3 Lakhs 40 thousand per month after cutting rent, electricity, employee salary, and other expenses around INR 2Lakhs, it may become around INR 1 Lakh 40 thousand per year that means the monthly sales would be of around INR 12 thousand, but this monthly sale of 12 thousand has not been achieved in any one of the outlets.

Why MBA Chaiwala Franchise Model is Failing?

Customer Segmentation has not been done properly, most of the customers are from Tier 2 and Tier 3 cities. They can't afford the most common beverage in India for Rs 75-90.

The common tea stalls are selling the same tea for Rs 8-10 then the question is why MBA Chailwala's tea?

Successful Franchise Business Model

Every successful franchise business model has these 2 things: Margin and Competitive Advantage.

Tea has neither margin of profit nor a competitive advantage, without proper customer segmentation, the tea business can't flourish in India. The top competitor of MBA Chaiwala is Chai Sutta Bar (CSB) founded by Anubhav Dubey. They targeted Premium and Sub Premium customers only and their cost price for a tea is around Rs 10-12. Apart from tea, they are selling ancillary items like bread, burger, Maggi, Pizza, Momos, etc. They are not limited only to India but have outlets in Nepal, Dubai, Port Blair, and Muscat.

Currently, they are trying to expand their outlets to UK, USA, and Canada.

Is Praful going behind bars?

The answer is NO. Prafull is not doing anything against the statements that are written in his Franchise document. There it is clearly written that:-

All the advances paid to the Company by the proposed Franchisee will be non-refundable and undisputable whereas the Company shall also assure the proposed Franchisee that it will not do any malpractice or fault against the proposed franchise.

--Disclaimer from MBA Chaiwala.

Lessons to Learn

• Never buy products without doing any research on them. Buying a Tea franchise to sell tea is not a wise decision to make. If a franchise is selling a tea at Rs 75-90 then it would be non-affordable to the majoritarian society.

• Don't fall into the trap of an Emotion-buying system. Nowadays, companies are becoming very eager to attract customers with their various marketing campaigns, and if we are not doing any proper research or are always in a hurry, we may end up buying unnecessary products that we are never going to use and that can be a disastrous investment made by us.

Customers were attracted by MBA Chaiwala after listening to his middle-class struggles, they were fascinated by how the middle class is turning his life from rags to riches. They found a connection with Prafull. So, they were having only two choices in front of them: either struggle like Prafull and make everything from scratch or just buy one MBA Chaiwala Franchise and let miracles happen.

Audience was in FOMO (Fear of Missing Out) mode. In either case, they choose the easy step which was buying a Franchise that really costs them.

• Don't believe in everything you see, they are just flashy things. Always trust on paper, paper is always hidden. Everything/Anything documented on paper is true and all word of mouth is lies.