Awfully successful at franchising
'Sell what you love and the money will follow' may sound like what one reads in a business management book, but this advice has guided the success of young Hong Kong entrepreneur Regina Sam.
The 32-year-old franchisee of Awfully Chocolate, a Singaporean cake business, brought the brand to Hong Kong in 2008. Sam became hooked after tasting its signature chocolate sponge cake at an Awfully Chocolate store in Shanghai. She later became the exclusive franchisee in the city after fending off two other rivals who applied for it.
'At first, I didn't think about setting up my own business,' said Sam, who was an account manager at the Royal Bank of Canada in Vancouver for four years before returning in 2004 to Hong Kong, where she earned a Master of Business Administration (MBA) degree at the University of Hong Kong.
'My sister was working in Shanghai in 2006 where there is an Awfully Chocolate store. Whenever I visited her, I would buy a cake. We became friends with the franchisee in Shanghai, who suggested we bring the brand to Hong Kong,' she said. 'I think I was chosen by the franchisor because I love the cake so much.'
To start her cake business, she initially invested about HK$2.6 million to pay expenses such as royalties, rent, and renovations. She managed to break even in six months, and has now expanded the business to four stores selling a total of 200 large chocolate cakes a day.
Besides being the sub-franchisee of another brand, New York Fries, in Hong Kong and Macau, Sam decided to launch her own brand Cheesess last year. It sells different types of cheesecakes at three locations in Hong Kong. Despite being open for less than a year, Sam has already received enquiries from potential franchisees for her cheesecake brand.
She is considering opening three more Awfully Chocolate stores, in Kowloon Tong, Sha Tin and Kwun Tong, and plans to renew the brand's franchise agreement when it expires next year.
Sam also works as managing director and vice-president at her father's firm, Great Time, one of the largest wine and food distributors in Macau.
Here are her thoughts on franchising and how it pays to have a mentor in your corner.
Your family runs a food and beverage distribution firm in Macau. How did this help you set up your own business?
The most direct help [from my family] is when I discuss the credit terms with the suppliers for milk, cream and cheese.
If you are a new firm, they will require you to pay cash. But since many suppliers know our food distribution company, and me, it is easier to get our orders and negotiate better terms.
Why did you establish your own brand Cheesess?
I love cheesecakes and there is a cheesecake shop I like near my university in Canada. Once I made a cheesecake served with strawberry sauce and my friends from Canada said it tasted similar to those from that cheesecake shop. They encouraged me to sell this cheesecake as well.
Have you been affected by your father's management style?
My father taught me his way of managing staff, which I appreciate very much. He treats his staff well. He thinks if the company makes money, it is not because of his own ability but a group of capable staff. A warehouse worker knows how to organise the products better than you do, despite you having a higher education level than he does.
You may be at the top position in the organisational chart, but everyone plays an important role. This is what my father has been teaching us since we were young.
Why did you set up your business through franchising at the start?
I haven't done any retail or cake businesses before, so it is much better when there is someone who can guide you and teach you. The chance that you will get into trouble is lower.
I think it is worth paying a royalty for a teacher to help you out, which is much better than investing a few million dollars to start up a company on your own and end up losing all the money.
Also, the 'brand noise' can help too. If you set up a new company or a new brand, it may take a few years to get it known. But when I opened the franchise shop, many people may have tried [Awfully Chocolate] in Singapore and Shanghai. Hence, it shortened the time needed for me to accumulate some customers, and thus the time to break even -which was six months.
What are the drawbacks of the franchising model?
After I met with the founders of Awfully Chocolate, I thought we shared similar business philosophies and that was why we signed the deal. This is really important when choosing a franchisee or franchisor. Otherwise, there will be a lot of disputes and it will be difficult to convince the franchisor to change something and apply it to the rest of the stores.
For example, Awfully Chocolate used to sell large cakes sized 6 inches or 8 inches in diameter. But there are times when only one person wants to eat our cake. And unlike in Singapore, it is less common for people to invite others to their homes [in Hong Kong] to eat a cake, as homes here can be small and our fridges are small, too. The franchisor listened to our views. Last year, we launched some smaller items such as cupcakes.
How do you make your products attractive enough to keep fickle Hong Kong customers returning?
At the beginning, my father and some media also questioned how we could sustain our business by selling only three types of cakes at Awfully Chocolate. But I think our chocolate cake is like an old brand: for instance, a famous beef noodle or wonton noodle shop that customers will keep visiting if the food quality remains high.
If you have a focused item, people will remember what you sell.
What are the challenges of running a food-related business?
It takes a long time to get licences from the Food and Environmental Hygiene Department, which is required if you have food production at your store and offer tables and seats for customers to eat. It took us six months to get a licence, and rents in Hong Kong are so high. It costs a lot if you leave the premises vacant for half a year. To solve the problem, we did not offer coffee and seats at the shop at the beginning but just transported our cakes from our licensed bakery to our retail store for sale.
What is the secret of your success?
It is important that you cannot be too stressed and waste your energy on worrying instead of keeping the business growing.
The teacher of an entrepreneurship course during my MBA programme told us that the ability to control stress was a key to becoming a successful business person.
The number of cities in Asia that Awfully Chocolate have outlets in, including Taipei, Beijing, Jakarta, Dalian, Guangzhou and Shenzhen