In an interview wth Seth Lui, Tony Young shared his story on the difficulties in running a restaurant business.
He claimed that losses have amounted to a staggering $2.2m!
Is it possible? I'll elaborate more below.
Back in 2009-2011, I operated in F&B business and his story resonated with me.
More on it below but if you want to watch the video, I've the link here.
In the video, he shared how difficult it was to hire Singaporean staff.
It is true. When I operated, most of my front line staff were part-time students.
The hard part is the kitchen.
I produced only ice cream and waffles which admitted is 10x easier to make than good japanese food.
Anyone can be trained. Like Fast food business.
I must imagine that good chefs are hard to recruit.
I've a friend who is a qualified chef but chose to shelf his knifes for a corporate sales job after 10years or so. The hours in F&B are long and not family friendly.
In the video, he also shared that malls did not want an unknown brand.
For this part, I personally think it depends on connections.
Check them out!
How to lose $2.2 MILLION?
I think nobody, that is not a successful F&B businessman, should judge Tony Young or his partners. After all, he's earned the $2.2m to lose.
Firstly, rent losses.
Misato operates in The Centrepoint Mall and if this is accurate, his rent is perhaps $20,000/mth.
Misato has operated there since early 2017. Perhaps $500,000 has been spent on rent.
Secondly, set up cost.
When I set up my ice-cream shop, I spent close to $30,000 on basic renovations.
SMRT (my landlord then) gave me a blank 300+ Sqf area
Pipes needed to be built. Lights needed to be installed. Storage cupboards and service counters needed to be built. Special voltage sockets needed to be installed and connected.
This was in addition to the $20,000 in PPE (Plant property and equipment) that I've spent. I had fridges, freezers, ice-cream makers and display shelves.
From this $20,000 price tag, do you think these PPE were first or second hand?
Tony Young shared that his tableware alone costs a whopping S$400,000.
If he has certain taste and standards, it is likely that the total renovation + PPE cost to be between $800,000 to $1,200,000. These are just my unverified guesses.
From my memory, F&B landlord contracts are often structured at 1+1 year or 2+1year. The +1 just means that the F&B owner can extend the lease contract. After that, rent will be renegotiated or the landlord may want to put it up for open tender.
What this means, to you as an F&B owner or investor, is that you have this lease period to make and recover back capital that was spent.
The clock is ticking. I did not understand the urgency previously until I folded my F&B business.
Thirdly, operating expenses
From the interview, Tony Young seems to be detailed and a hard-believer for authenticity.
To use the best ingredients cost money. To preserve high quality in food requires throwing old ingredients.
To hire good chef requires good wages.
It is quite possible that his operating costs has skyrocketed.
Does this capture the remaining $700,000 to $1,100,000 in losses?
That equates to an operating loss of $30,000 to $45,000 per month.
Whether this can be turned around, I really don't know.
But listed F&B businesses frequently also go into losses into setting up phase. You do need time to tell customers that you are here and time to build reputation.
Example 1: Din Tai Fung London by BreakTalk Group
Example 2: Texas Chicken Malaysia by Envictus International
Don't Go Into F&B Business If You Are Clueless On Retail Marketing
This is what I've posted on MunchyMoo facebook page.
Did you realise that the image I posted is blur? That is terrible marketing.
I cringe looking back at our cake design. It was of course made without the guidance of a dessert chef.
It was bad business decision to not hire adequately.
Now even if you believe the ice cream cake taste good, would you be excited enough to post this on your social feed? How would such a poorly decorated cake go insta-viral?
Next, I was frequently using cheap banners and flyers to create awareness.
Nothing was targeted and nothing seemed like an intriguing offer.
Hence, if you are going into the F&B business or if you are going to invest in one, be sure that these are in place. If not the business will fail.
Support for Misato
I think any business who puts customers first and quality first is unlikely to be terrible.
Check out Misato Facebook Page and see if you'd like to dine there once. I'd be.
Misato team, if you are seeing this, I feel that the songs in the Facebook page is confusing. I'm looking for MORE food pictures and food offers.
F&B business is a hard business. Hours are not family friendly.
I felt the stress from daily losses and it was a period where I argued endlessly with my spouse.
I even had to return back to my shop 2days after my wedding and just before my mini-moon flight to resolve issues.
This post is to share on mistakes.
There are many successful F&B brands out there but there is nothing to learn from the outside.
I did well in the financial advisory business and I assumed that I could replicate success to F&B business.
After all, aren't you also seduced by the idea of multiple streams of income?
My failures in F&B gave me new perspectives and maturity. But that will be a future post...