[Photo: Dr Sam Yap]

By TEH SHI NING

EXPANSION of the explosive kind was far from Sam Yap's and Gurchan Singh's minds when they founded Cherie Hearts.

But the childcare centre chain did 'explode' - from the very first centre way back in 2001 to 50 today. And that's not counting the outfits beyond Singapore's shores.

Dr Yap, who holds a PhD in entrepreneurship, tells BT that entering the childcare business was a strategic move. 'Childcare was something we foresaw that the government would place a lot of emphasis on, since education is pushed a lot.'

In recalling those early years, Dr Yap also drops a bomb. He got into the industry not because of a love for kids or the nurturing of young minds.

No, it was a 'burning desire' to start a business of his own that did it. Still, the executive chairman of Cherie Hearts Group International says that working with children is 'very interesting and different'.

'Education is something that involves a lot of passion, it's doing something for a social cause. We get a profit but at the same time, we also groom a child.'

Cherie Hearts now operates 50 centres locally, with several more branches in Vietnam, Malaysia and Indonesia, and soon, centres bearing its purple heart-shaped logo will be set up in China too.

'We have a very aggressive growth factor,' says Dr Yap. In 2007, it was 20 local childcare centres. This swelled to over 40 in 2008, and he hopes to have 80 centres in Singapore by the third quarter of this year.

Cherie Hearts' rapid growth was recognised on a regional level at the Asean Business Awards earlier this year, when it was named the Most Admired Enterprise for Growth, in the SME category.

This growth was achieved via both franchising and acquisitions. Within two years of opening its first centre, Dr Yap recalls, he and his partner had begun to receive enquiries from people interested to run childcare centres under the Cherie Hearts name.

Franchising, they felt, would enable them to 'scale fast and at minimal cost', so despite initial uncertainty, they decided to learn how to wield franchising as one of Cherie Hearts' key growth strategies.

Friends or parents of children attending Cherie Hearts centres were their earliest franchisees. The first franchised centre in Kembangan now has an enrolment of 120 children and another in Upper Serangoon has about 100 children enrolled.

Franchisees pay the group a fee of $65,000 upfront, and royalties of 8 per cent of their monthly revenue subsequently. Cherie Hearts is meticulous about preserving, and enhancing, the brand's image, and takes a very hands-on approach with its franchisees.

'We work with them from the beginning, helping them to find a location to set up, recruit staff, train the staff, do the marketing, print brochures and get organised,' says Dr Yap. 'Our policy is to help them until they break-even before we let go.'

But, as with most parents, letting go does not mean giving up their say altogether. The group's management meets with franchisees at least once a month, to run through case studies and update them on new initiatives. All franchisees are also connected to the group's e-mail system.

There are regular audits of franchisees, and tight controls and regulations which the childcare centres must adhere to, to be able to operate under the Cherie Hearts brand. For instance, every circular sent out to parents by any centre must first be vetted and approved by the headquarters.

Other matters audited by Cherie Hearts' 'in-house inspectorate', Dr Yap says, include whether or not food served in the centres' kitchens meet health standards, and whether operational procedures, such as proper records when children need to take medicine, are complied with.

'It's tough to run a group of 50-60 schools, so we invest a lot into maintaining this sort of assurance for customers and parents,' he says.

Franchising may not always be the best way to grow though, says Dr Yap. Half the 50 centres that it has in Singapore at the moment are franchised, the other half are subsidiaries.

Different models may suit different markets and jurisdictions too. The group's two branches in Vietnam are joint ventures, as are five upcoming centres in China.

In Malaysia, it has one joint venture and one franchise; while in Indonesia, franchising has seemed suitable with one franchise already in operation, and two more in the pipeline.

Despite the downturn, Dr Yap says that Cherie Hearts' franchise rights are still in demand. In recent months, the franchising seminars that the group conducts on a regular basis have been oversubscribed.

But the company remains careful about who they extend franchising rights to. Dr Yap adds: 'Of course, we won't over expand. We have a certain target, and will try to close deals on that certain target.'

While childcare and education are often seen as relatively recession-proof businesses, Dr Yap says that they 'still need to be vigilant, and don't want to grow complacent'.

Hence, the group has looked into ways to trim costs and stay lean - for instance, looking into areas where job-sharing is possible, so that they 'don't recruit more than required'.

There are challenges unrelated to the recessionary environment which the childcare industry needs to face up to as well, Dr Yap said.

Hiring good and qualified teachers has been a long-standing challenge, as the average pay for childcare teachers is not commensurate with the training they must undergo to attain those qualifications.

'Those who go into childcare are solid people, they really put their soul into their work, we just need to match the monetary part of it,' says Dr Yap.

The Association of Private Childcare Organisations, of which Dr Yap is the chairman, is trying to help raise childcare teachers' salaries, but he says that the process will take some time yet.

To attract and retain good teachers, Cherie Hearts tries to pay slightly above the industry average and provides teachers with non-monetary benefits such as flexible working hours and free childcare for their children, says Dr Yap.

Another perennial concern of childcare centre owners is the rise and fall of rentals, which make up a substantial portion of their costs.

At the peak of the property market, Dr Yap says, it was difficult to find new locations for new centres, while others struggled to maintain their current properties.

Even as Cherie Hearts ventures abroad, Dr Yap thinks that the local childcare industry is far from saturation point and that opportunities are still plentiful.

In terms of adding to its chain of childcare centres, Dr Yap sees possibilities for new franchisees as well as acquiring from owners of childcare centres who may wish to retire.

There is also room for growth in other child related businesses, Dr Yap says. The group now runs child enrichment programmes too, including one which incorporates drama, music, dance and visual arts, and is conducted in Chinese.

'This year, we'll concentrate very much on local operations. The fruits are hanging low and it's easier for us to expand. We won't be as aggressive overseas,' says Dr Yap.

This article was first published in The Business Times .