By JOANNE TANG

IN trying to plug a market gap, Andrew Chan - managing director of Soup Spoon - turned his idea of serving gourmet food at mass-market prices into an expanding chain of nine restaurants employing 120 staff.

Recalling the earlier days, Mr Chan says that the idea to set up a business stemmed from a desire to try something new, different yet 'close to my own heart'.

He finally hit upon the idea of selling soup after spotting a market gap between gourmet soups served in high-end restaurants and canned food offered in supermarkets.

Aside from the usual financing problems that most entrepreneurs face, there were also technical issues - such as how to scale up production without compromising quality.

To simulate the large-scale production required for the mass market, Mr Chan and his wife volunteered to sell soup at their church's funfair to better understand the operational aspects.

There were also sacrifices to be made - Mr Chan, an IT consultant, and his wife, an embryologist, faced the dilemma of having to give up their day jobs for the business.

The decision to fully commit to it only came after about 18 months, when the idea proved profitable.

For a chain founded in 2002, adding one outlet a year may seem overly cautious. But Mr Chan disagrees, saying: 'One good site can take you one step forward but one bad site will take you two steps back.'

As a mid-price restaurant committed to serving quality food, the company needed to maintain tight quality control. This meant growing organically, without the use of the faster franchise system.

The emphasis on quality also had cost consequences. Using only the best ingredients meant higher unit cost - something that Mr Chan describes in hindsight as the 'right thing to do'.

However, the lower gross margin meant selling more soup to cover fixed overheads such as rent. The company has therefore focused on being a 'volume player' to whom location was critical in breaking even. This explains the careful evaluation before spending money on costly equipment and leases.

The company's nine outlets are mainly in office or retail areas with heavy consumer traffic.

As for financing expansion, Mr Chan advocates using a blend of internal and external finance for a healthy cash flow. For Soup Spoon, the ratio of internal to external financing is about one to one.

He also noted that the government's bridging loan scheme has greatly benefited SMEs, helping drive the firm's cost of debt down from 11-12 per cent to about 5 per cent.

So far, overall business remains little affected by the economic crisis. While business at the airport outlet has fallen about 50 per cent, business at the Raffles City and Paragon outlets - helped by longer operating hours - has remained resilient.

The economic downturn is not slowing Mr Chan's business plans. He will open a new restaurant - which will carry on Soup Spoon's tradition of serving gourmet food at affordable prices - in August. It will be located next to the existing Soup Spoon outlet in Raffles City, and patrons can expect full-service there - a notch above the limited-service concept at Soup Spoon.

As for Soup Spoon, Mr Chan plans to take the restaurant regional. He is unfazed by previous failed attempts to expand into Malaysia, which were upset by high costs due to import duty. Currently, the company is exploring franchising opportunities in the region but Mr Chan remains tight-lipped about details.

What is clear is that he wants to continue bringing quality food to the mass market.

Looking ahead, he says: 'We will continue to do what we do best - creating good soup and developing new creations from passion.'

This article was first published in The Business Times.