IN THE last quarter of 2006, Yap Chee Wee took a calculated risk. He and Steven Tan entered into a partnership by buying coffee and kaya toast group Wang Jiao. Taking over the 1953-founded, fourth-generation-run and marginally profitable company may have seemed 'unglamorous' to other young entrepreneurs, but these two saw potential in the business.
Some 18 months later, the company has gone from strength to strength. Rebranded Wang Cafe, it has grown from four outlets in 2006 to 16 now, with three in Malaysia. Locally, the newest outlet opened at Changi Airport Terminal 3 in December. And there are plans to expand into other regional markets.
Staffing at the outlets, at locations such as Harbourfront Centre, Plaza Singapura and Suntec City Mall, is now about 130, up from 40 at the outset. Revenue has grown from $3.8 million in 2006 to more than $5 million in 2007. Profit before tax last year was more than $600,000, up from $500,000 in 2006.
Wang Cafe attributes its encouraging growth to its strategic positioning. 'When positioning a kaya toast brand, some businesses may go for the classic range of items like eggs, the toast itself and coffee or tea. But including too many food items will result in a full-range, zhi-char-type business set-up,' says Mr Yap, 36, who says his experience in venture capital as an investment professional complements co-director Mr Tan, who counts a stint at IE Singapore and consultancy-based work in the F&B and retail industries among his experience.
Mr Yap highlights the company's 'kitchen-light' and simple business model, which emphasises food items that are easy and quick to prepare.
'You're not going to see us brewing herbal and double-boiled soups, which require preparation days in advance,' he says. 'Also, instead of over-relying on skilled chefs, we have a standard operating procedure for skills which can be taught and applied to staff quickly.'
According to Mr Yap, this approach makes for better food quality and consistency - and eventually growth, which is vital because of high rental costs. He points to the growing trend of shopping malls going into the Reit system, where management emphasis on maximising yield by raising rents poses problems for Wang Cafe and similar business.
'Not all landlords will be flexible enough to charge rent as a percentage of sales revenue instead of the usual fixed rate, so we can only work around the high cost to a limited extent,' he says. 'Ideally, sales will be high, making it win-win for both parties.'
Also to be contended with are high labour costs - players have to pay competitive rates due to the tight labour market.
Mr Yap's approach is to open outlets at an 'optimal level' to avoid over- or under-staffing. Besides hourly remuneration, individual staff are hired under a mix of full-time and part-time employment schemes. To get around the labour crunch, the company took advantage of the relaxed quota on foreign workers earlier this year, and keeps an eye on quarterly recruitment sessions for job-seekers organised by NTUC and the CDCs.
Wang Cafe's value proposition - which Mr Yap says helps to set it apart from competitors such as Ya Kun, Killiney and Toast Box - lies in the menu. Local favourites like mee siam, mee rebus, laksa and chicken macaroni are included to pull in customers throughout the day. Besides just the usual breakfast and mid-afternoon hours, during which you'll see people having their soft-boiled eggs and kaya toast, the expanded menu means customers show up throughout the day for snacks. This has improved spending per customer, bumping up revenue and the chain's ability to cope with high rents.
The company has also had a programme with NTUC since last July. Regular shoppers at the supermarket chain can trade their link points for a Wang Cafe loyalty card, which can be used to buy food items at any of the cafe's outlets.
Individual outlets have different promotions in place as well: at the Bukit Panjang Plaza Branch, for example, customers can get a kaya toast set with coffee for two under a 'buddy value meals' offer between 2pm and 10pm on weekdays.
This differentiation is something Wang Cafe will have to persist with to keep up in a market that has good prospects in general.
'The good thing about building the business around this core kaya toast concept is that it involves food items that Singaporeans and South-East Asians have grown up with,' says Mr Yap. 'It is an integral part of indigenous culture and routines and the novelty won't wear off so easily, unlike other food fads such as gourmet coffee, bubble tea, coffee buns and even doughnuts.'
This dovetails with the former venture capital fund manger's view of the lower echelons of the F&B industry as a stable business that is not potentially as volatile as, say, the tech sector.
'We felt F&B would be a better bet, along with other old economy prospects such as food and education,' he says. 'These old businesses are more resilient to the economic cycle. It has been pretty much a golden age in the past two years for the sector.'
The company is now looking at increasing its presence outside Singapore and Malaysia. Mr Yap and Mr Tan are in the process of screening potential franchisees and partners in Thailand, Indonesia and China to get around the high rents that have capped Wang Cafe's local growth prospects. This will be a long and painstaking process as the two directors vet candidates' business plans and conduct a full feasibility study before making their decision.
They also have to manage growth well. The company's emphasis on customer service has to be entrenched in the minds of staff and customers alike. In addition to continual training to drill all staff in standard operating procedures, as well as refresher courses, the management personally does taste tests and sends out mystery guests for an additional source of feedback besides public feedback. It has also made it a company practice to respond directly to every email from customers and modify its menu where possible - for example, the introduction of chicken macaroni and fishball noodles, and the up-and-coming introduction of rice-based items later this year.
NINE finalists have been unveiled for the inaugural Emerging Enterprise Award 2008. They are:
AG Delta Pte Ltd
Aldon Technologies Services Pte Ltd
KinderGolf Pte Ltd
McCoy Components Pte Ltd
OAAG (S) Pte Ltd
San SeSan Global Pte Ltd
Scrawl Studios Pte Ltd
Sparkfury Creative Consultants Pte Ltd
Wang Jiao Group Pte Ltd
Yesterday, BT profiled OAAG (S) in the first of a new daily series on the finalists. Today, the spotlight falls on Wang Jiao Group.
Emerging Enterprise 2008 is jointly presented by The Business Times and OCBC Bank, which is also the sponsor. It is supported by Spring Singapore, HP Singapore, RSM Chio Lim and NUS Enterprise.
The new award caters to small enterprises with an annual turnover of between $1.5 million and $10 million, which have been operating for at least three years but not more than seven years.
But this is not just another award - the three winners will receive not only a trophy but also $380,000 of interest-free loans, grants and business services.
OCBC will contribute a $150,000, five-year interest-free loan to each winner. The bank also has the option to invest in the company. Spring Singapore will give a $150,000 grant to each winner to meet half the expenses of selected business projects.
The other three partners - HP Singapore, RSM Chio Lim and NUS Enterprise - will contribute a total of $80,000 of IT, consultancy and education packages.
This article was first published in The Business Times on May 9, 2008
