Hospitality chain Oyo Hotels & Homes is in talks to acquire cloud kitchen startup FreshMenu for $50-60 million, three people aware of the developments told ET. The round closure is subject to due diligence, these sources said on the condition of anonymity.
“The move will help Oyo standardise its food experience across hotels, an initiative that has internally been in the works for more than a year,” said one of the sources cited above. “It will also significantly help improve margins,” a second person aware of the discussions said.
While F&B operations have always been a critical function for hospitality chains, over the last few years, hotels are increasingly focusing on food and beverages operations to boost revenue and drive profits. For instance, for Marriott, F&B contributes 40-45% to its overall revenue.
Lightspeed Venture Partners is the common investor between the two companies. It owns about 11% in Oyo and 30% in FreshMenu.
Over the last couple of months, Foodvista India, which owns FreshMenu has explored acquisition talks with a bunch of startups including Swiggy, Ola, Eat.fit, Zomato and Faasos, according to multiple people that ET spoke to. “Pricing expectation mismatch is the main reason why none of these materialised for Freshmenu,” said another person, adding that the company expected to be valued at up to $60 million.
ET did not receive a response to its email seeking comments from FreshMenu CEO Rashmi Daga as of press time Thursday.
“We do not comment on industry speculations and therefore cannot comment on this. As the largest hotel chain in India, operating franchised and lease assets, we do have an active play in the F&B business with over 25 % of our revenue coming through the kitchens we operate in our hotels and hence culinary design and good food experience are valuable to us. We have nothing further to announce at the moment,” an Oyo spokesperson said.
FreshMenu is an internet-first cloud kitchen startup which prepares meals and delivers from its own kitchens controlling the entire process from sourcing ingredients to delivering food. Last year, the company partnered with Zomato’s cloud-kitchen initiative, Loyal Hospitality and Swiggy’s Access programme to scale its business without an upfront investment in opening its own kitchens.
In August last year, FreshMenu’s Daga said the startup was due to close a Series-C fund-raise of $50-55 million in the next few weeks from new investors, according to a media report. However, regulatory filings show that in January this year, it had raised a bridge round of 21 crore from existing investors. Analysts and investors say that the company’s inability to scale up operations has been one of the top reasons for a sale.
Oyo, having closed a $1-billion funding round from a consortium of investors, which include SoftBank and ride-hailing majors Didi Chuxing and Grab earlier this month, has been on the prowl for buyouts over the last six months.
In December, Agarwal, group CEO OYO Hotels & Homes, in an internal email said that the company was looking to invest $200 million – a fifth of what it has raised in its latest funding round – in India, its core market alongside China.
Last month, ET reported that the Gurgaon-headquartered company, which is valued at $5 billion post its last round of funding, was in talks to acquire co-working startup Innov8 for an estimated Rs 200 crore. Separately, the company was also reported to be in talks to acquire Keys Hotels, a development that the company has denied.
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