How Café Deli chain founder navigated failed partnerships
By Peter Theuri | May 13th 2020
This year marks 30 years since he set foot into the hotel industry. Back then, in 1990, Obado Obadoh was a student at Norfolk, where he became an apprentice chef. 20 years later, he founded Cafe’ Deli. Now, Café Deli has three branches in Nairobi CBD, and in 3 to 4 years, Obado plans to have 15 branches.
How did that journey begin?
Café Deli is born of a dream, risk and commitment. I worked in five-star hotels for 15 years. I worked at Safari Park, Block Hotels (now Nyali Beach) and Sarova Hotels. While at Sarova, I made a friend that would turn out to be a godsend.
She progressed under my tutelage at the hotel and then left for the United Kingdom at a time when many Kenyans flew to the European country. Upon her return in 2004, the lady, her boyfriend and I decided to open a pastry shop in Westlands. They named it Metropolitan Limited.
How did the three of you divvy up the roles?
I was the pastry chef, her boyfriend was the pastry artist. She on the other hand contributed about 10,000 pounds while the guy and I contributed about Sh 100,000 each. The shares were equally divided among us. But two years later, we would have a fallout.
We lacked a plan that was aligned for the three of us. The distribution of profits led to a serious disagreement. While she wanted her share of the profit to go back into repaying the loan she had taken for her contribution to the business, the rest of us were ploughing back our profits into the business. While she was not actively involved in the running of the business, the two of us were totally reliant on the profits from the business.
Our manager also seemed to be sending inaccurate information to her, which may have made her afraid that we were trying to shortchange her. But ultimately, what led to our break up was my ambition. While I wanted them to expand and open new branches of the pastry shop, they maintained that sticking on the one we already had made management easy.
So you had a go at it alone?
Yes. In 2007, I took my share; Sh700,000 and walked away to start anew, alone.
Shortly after, I almost ran broke after buying a car (for Sh400,000) and using nearly Sh300,000 on house rent for four months and on kitchen equipment. But I got things in order.
Did you sink or swim?
For three straight years, I would bake and supply to many restaurants in town. One of them was Coffee World, which was along Moi Avenue. In 2010, the founders of Coffee World informed me of their decision to quit the market, citing poor business. When they said that, I felt that I knew what was ailing them.
What was ailing them?
They had made it a vegetarian restaurant. In the middle of the city, people need meat! The place was also overstaffed. I saw a business opportunity too. I made a bid to acquire the hotel even though I had only Sh40,000 in my bank account. The asking price for the hotel was sh18 million.
That was quite a leap…
Yes it was. But I set out looking for financiers and haggling to reduce the price of the hotel began in earnest. The price was reduced to Sh14 million.
Through a friend I learnt about a growth finance company called GroFin. I presented my case and I won them over. They would finance me. They said that they believed in me because I believed in my idea. I had a clear goal of what I wanted. I was resilient, and my journey convinced them that given the resources, I would gun for everything within reach. And thus, Café Deli was born.
How long did it take to pay back your financiers?
Although I was to pay money owed to GroFin in six years, it took me only four years to do so. I then opened up two other branches in town.
Are you content with how far you have gone?
Not quite. I am collaborating with a financier because I want to expand Café Deli to 15 branches in three years.
Are you actively involved in the running of the restaurants now?
Well, I delegate a lot. I hire experts instead of acting as a know-it-all. I know something about accounting but I have to listen to my accounts manager; he is fully-trained professional in that field. I have about 105 employees. I am still working with many that I started with. They are part of my success story.
There is a vegetable supplier who I used to pay Sh4,000 a month when my business started. Now that I expanded, I need more supplies from him. I find myself paying him Sh750,000 a month. We’ve grown together. But demands are higher and in spite of our friendship, if he gives me lower quality produce, I send him away.
What is the ultimate lesson you have learnt about entrepreneurship?
When you enter into a partnership, understand one another’s goals. Those determine where you direct your energies. Also, the motives of some partners may not be pure. And basing business partnerships purely on trust is akin to signing a death wish. Record-keeping is of immense importance, every detail should be inked down for easy reference.
What advice would you give when getting into a business partnership with an investor?
You have skills and the investors have capital. The relationship should be symbiotic and both parties should hold their end of the deal. Draw a step-by-step growth and development plan complete with timelines and projections. Transparency, honesty and discipline are crucial components of successful partnerships. Communicate promptly and honestly always. Make decisions that do not conflict with company interests and most importantly, keep records of everything.
And if one wants to get out?
Be flexible enough to jump out of situations that are unfavourable. A shareholder agreement we had signed took care of my interests at the time I broke free of my partnership at Metropolitan. The agreement saves the day in case of a disagreement. Also, partners must agree that one of them is in charge and is more powerful, and that he/she makes the decisions. The rest have to stand by that.
Would you recommend employment or entrepreneurship to your son?
I think that innovative minds should quit the comfort of employment and follow their dreams. I used to earn around Sh50,000 by the time I left employment. Now, I can own a few cars.
Economists say that way of doing business will change post-Covid-19. How do you think your industry will be affected?
I believe robotics will be the way to go for hotels as less people will be required. Already, restaurants are grappling with offering takeaway services to customers, the Kenyan culture, being anything but a takeaway culture. People are used to eating while seated at eateries.
But here’s a new norm, and we will have to adapt. Buy food, carry it along, eat on the way. We have managed to inculcate a coffee-drinking culture in Kenya, why not a take-away one?
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