Tuesday, December 30, 2014

Running cafes no piece of cake

Dec 28, 2014

Nearly half of all cafes registered in 2011 have shut; owners cite lack of experience, poor planning, manpower as challenges

By Joanna Seow

Having your own cafe may seem like a dream job, and the start-up scene here is brimming with at least 350 new names each year since 2011.

But sustaining the business is no piece of cake.

Almost half of the 369 cafes, coffee houses and snack bars that registered in 2011 have since closed down.

And of the 391 which registered last year, around a quarter have also put up the shutters, according to data from the Accounting and Corporate Regulatory Authority.

Cafe owners past and present say lack of experience and poor planning, along with manpower issues because of the tight labour market, have been the biggest challenges in keeping their businesses running.

De'Pop Culture owner Adeline Wang left her corporate communications job to set up the 30-seat cafe in Bugis in July.

She wanted to open a cafe after spending a lot of time studying in them during her university days.

Now, the 23-year-old is thinking of closing it.

"One of my mistakes was that I didn't have any experience in the cafe business," she admitted.

She has encountered unexpected expenses and thinks she may have under-estimated her costs.

"You hope people will come but you don't know if they will. I think I counted my chickens before they hatched," she said, adding that she is struggling to meet the daily running cost.

Location is another key consideration.

Other than trendy cafe enclaves such as Tiong Bahru, Duxton and Haji Lane, cafes have been sprouting in heartland areas such as Bedok and Toa Payoh where rent and competition are lower.

But there are still risks.

Mr Mike Tan, owner of lifestyle retailer Egg3, opened Egg3 Cafe in Mountbatten in June 2010.

Mr Tan, who is in his late 40s, thought the area was comfortably quiet and "off the beaten track". But the cafe did not attract enough customers and closed after three years.

"You may get a reasonable rent but it may not be sustainable, because you still need to rely on walk-in crowds," he said.

The most common problem seems to be a lack of manpower, due to the quota on foreign workers and the industry's long hours, which can be a turn-off for locals.

Most cafe owners start out doing everything themselves, from preparing the food to manning the counter.

Part-time staff provide some respite, but they come and go according to the school terms.

Passion can go only so far.

"You get tired. And when you want to further develop the business, you don't have time to," said Mr Yugavardhan.

The 27-year-old ran Jiv Jago Vegetarian Cafe in Bali Lane with his wife for eight months before calling it quits in July.

The constant flux of cafes opening and closing "could hurt the industry's image, and discourage people from working for independent establishments as they are unsure of job security", said Food and Beverage Management Association president Cheong Hai Poh.

He urged aspiring cafe owners to get industry experience first, by working for existing establishments.

They should also realise that it may take a while before the business becomes profitable.

"Entrepreneurship is about saying, 'I can afford to lose before I start making money, even if it takes two years.' You need to plan for that," he said.

To retain staff, Ms Chara Lum, 24, who owns Ciel Patisserie in Hougang, tries to have conversations with them and be a part of their lives, "so it's not just 'come in, clock in, clock out'", she says.

She is helped by factors such as the small size of the shop - it has just 25 seats - and the fact that hot food is kept off the menu. This means she can rely on fewer staff.

At ice cream cafe Creamier in Toa Payoh, supervisors are sent for training courses, showing staff that the company is willing to invest in them.

Also recognising the value of staff is Ms June Tan, 25, who co-manages Lola's Cafe in Kovan and nine-month-old On The Table in Pasir Panjang. She says she and her business partner want to create a brand that presents opportunities to their employees.

She has this piece of advice for others hoping to succeed: Work in the industry first.

"It's an extremely tiring business, and experience helps as a reality check," she said.

Said Mr Yugavardhan: "Don't do it because it's cool, do it because you know exactly what it is about."

Doing well: 'Chill' cafe in Toa Payoh
Their three-year-old ice cream cafe in the heartland of Toa Payoh has been doing so well that Ms Khoh Wan Chin and her two partners behind Creamier have opened a new cafe.

Sunday Folks, in trendy Chip Bee Gardens, is the next part of their plan to grow the company sustainably.

"We want to be a serious player in the F&B market so we have to invest and make the business attractive to good talent," said Ms Khoh, 38.

Her two partners are also in their late 30s.

In 2011, they poured more than $250,000 of their savings into a Housing Board shop unit, after deciding the neighbourhood might take to a "chill" cafe.

They started off working eight to 10 hours straight in the kitchen to prepare homemade ice cream and waffle mixes.

"We take a lot of pride in our product and pay attention to details," said Ms Khoh.

For instance, they display their sorbet in smaller pans so the turnover is faster and it is always fresh.

After one of their flavours was highlighted in the media, word spread.

The trio were able to recoup their capital and open the second cafe in July, for around $750,000.

To manage the manpower crunch, they invested in an electronic tracking system for Creamier to tell servers where customers are seated, and a queue system at Sunday Folks which alerts customers when their table is ready.

Ms Khoh noted that running a design agency for 12 years has helped hone her business acumen and people skills.

And one of her partners, Ms Audrey Wang, is a trained patisserie chef with realistic expectations about working in the food and beverage line.

Said Ms Khoh: "It's not just about being passionate, you have to know how to respect and trust each other as partners."

Calling it quits: Patisserie in Siglap

Mr Rayner Tan jumped at the chance to run his dream cafe, even taking leave of absence from his undergraduate studies in 2011 to set up patisserie De La Creme in Siglap Drive with his cousin and parents.

Together, they put in $150,000 of start-up capital, most of which went into renovation, furniture, fittings and electrical items.

But after two years of shouldering cashflow problems and exhaustion from the 16-hour workdays, Mr Tan decided it was time to move on.

"Being in F&B is like a dream (come true), but having a passion for pastries doesn't translate into being a good cafe owner," said the 25-year-old, who has returned to student life while working at another cafe.

"I wasn't serious enough as a businessman.

"I knew what I wanted in terms of the look, feel, taste of the food and price, but I didn't take all these into consideration as a whole."

In retrospect, he said, having a more realistic understanding of the location, pricing and manpower issues would have helped him make more objective choices.

For example, he chose the location because he is familiar with the area and the rental was reasonable.

"But we didn't think about customers having to travel far, where they would park and the type of crowd it would draw," he said.

More market research into the menu and pricing his customers wanted would probably have helped, he added.

Although the family's project did not take off, Mr Tan is thankful for their support.

His extended family helped out around the cafe as manpower was in short supply.

"There were definitely disagreements but the good thing is we managed to not have any falling-outs."

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