Surviving the tea bubble

When Bryan Loo succeeded with a Taiwanese F&B concept in Malaysia, all the other franchise brands followed, most failing. He has recently been in Australia looking for other brands he can introduce back home.

Who: Bryan Loo

What: Chatime

Where: Malaysia

When: 2010

When Bryan Loo finished his schooling in Malaysia, he applied to study at Monash University in Melbourne. By his own admission, he hadn’t always applied himself as diligently to his studies as perhaps he could have. His grades, as a result, saw him miss out on gaining a place at Monash’s flagship metropolitan campus, but he was offered enrolment at its rural Gippsland site.

This was a blessing in disguise for Loo. “Out in the middle of Gippsland,” he says, “there wasn’t anything else to do but study. This was where I learnt the value of hard work.”

He graduated from Monash in 2008, and back in Malaysia took up a job with a biotech company. He tried to stick at this for a while, but just didn’t enjoy working for someone else. After all, his entrepreneurial streak had shown itself early – at seven years old, he had drawn his own comic strips and sold them to his classmates. He lived in a small town in Malaysia’s smallest state, and headed to the nearest big town with the money he raised from his venture to invest it in bulk-buying Power Rangers erasers. He took those back to his school where he sold them for a profit, making his first 1000 ringgits (a shade over $300).

After nearly three years at the biotech firm Loo told his father he wanted out. When asked what he proposed to do with his life, he replied, “I just want to do business.”

He visited several international trade fairs with his father as he contemplated the type of business to start up, and decided on the F&B route. He had worked out that everybody has to eat and drink “irrespective of the economic climate”.

Saw potential

Looking at the sector in Malaysia, he noticed there were plenty of coffee shops but nobody selling tea. He realised the coffee shop brands such as Starbucks were beyond the affordability of most Malaysians, but there seemed to be great potential in reasonably priced tea along with bakery items.

His research showed that Taiwan had a thriving tea-shop scene, with many of the 198 such outlets there run by franchisees. So Loo visited the island nation to see if he could interest any of its tea chains in opening in Malaysia, but everyone he spoke to had their eyes cast firmly in the opposite direction — it seemed the goal of every Taiwanese franchisor was to break into the Chinese market.

Two weeks after he returned to Malaysia, a Taiwanese friend of his cousin told him about Chatime, a franchise set-up he hadn’t been able to arrange to visit when in Taipei. Loo called Chatime’s chairman to propose a Malaysian arm of his venture, and the franchisor flew to Kuala Lumpur to meet him the very next day.

All the Taiwanese franchise owners who had turned him down learned of his success and opted to open in Malaysia after all.

Three months later, Loo launched the Chatime franchise in Malaysia. The going was tough initially as Malaysian retail is dominated by large shopping malls, and he couldn’t persuade them to give Chatime a go. Through persistence, he managed to gain an outlet into one mall, and within a year had 45 outlets.

Loo and his father invested 300,000 ringgits (about $100,000) in the venture. All his early franchisees were family and friends, and they continue to be the mainstay of the chain in Malaysia.

Chatime’s pioneering success in Malaysia could in fact have been its undoing – all the Taiwanese franchise owners who had turned him down learned of his success and opted to open in Malaysia after all. At one point, 46 Taiwanese franchisors had outlets in Malaysia.

Lack of commitment

These have whittled down to only three Taiwanese-owned tea-shop franchises, of which Chatime is one. Loo believes most of the others failed because they did not set up their franchise model correctly.

“Lack of real commitment to long-term success in Malaysia cost them,” he says, “and that was compounded by not having the operational nous in this country.”

Meanwhile, Chatime thrived in Malaysia, its success inspiring other Malaysian entrepreneurs to open various F&B franchise businesses in neighbouring nations, particularly Indonesia and Thailand.

Five years after its Malaysia debut, Chatime has almost 200 outlets across the country, with leasing proposals under consideration in 120 shopping malls. As well as tea, Chatime kiosks sell yoghurt, croissants and other items – anything that fits the three key criteria that drive the business: it needs to be a fast-moving brand; it has to be something that can be produced through an automated process; and it must be able to be produced, displayed and sold in a small-format store.

With only 156 major shopping malls in Malaysia, Loo’s franchising aspirations are not confined to them. There are thousands of petrol stations across the peninsula, with the only F&E3 outlets exploiting the opportunities these present being KFC and McDonald’s. Chatime is tendering to break this duopoly, and is also keen to take advantage of the growing number of stations servicing Malaysia’s ever-expanding suburban rail network, where kiosks are ideal for commuters to pick up a quick snack while on the move.

Loo will again apply his three criteria to his kiosks, but is keen to explore wider avenues in the F&B space. He says he sees a great opportunity in the “fast gourmet” and “fast casual” dining scenes popular in Australia, which are fundamentally untapped in Southeast Asia.

Almost a decade on from completing his studies in Australia, Loo has been spending time in Melbourne and Sydney looking for Australian brands he can take back to Malaysia … and write another transnational franchise success story.

Tim Ladhams

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