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Business Advice

Killiney's key to survival? It owns the shop spaces

Woon brothers prefer not being at the mercy of landlords
The Straits Times - April 25, 2012
By: Joyce Teo
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Killiney's key to survival? It owns the shop spaces Mr Woon Tek Seng -- ST PHOTO: JASON QUAH

THEIR product is coffee and kaya toast, but the spoon that really stirs the drinks at Killiney Kopitiam is property - with a side order of compassion.

The Woon brothers hate to rent mall space from landlords, preferring to own the shops themselves and ensure that they are masters of their own destiny.

'If you depend on the landlord, you'll be in trouble,' said Mr Woon Tek Seng, 64, director of the chain.

Killiney Kopitiam's secret formula to survival lies in owning the properties they operate in.

In fact, the brothers were investing in property well before they started running the chain.

They had also been in the construction business, but sold out recently, allowing them to run their cafe businesses the compassionate way, said Mr Woon.

That essentially means taking a hit on the bottom line if it means making jobs and keeping people in them while also preserving the sort of traditional cafe that was in danger of disappearing.

'I think these kinds of places should be continued. At that time, there was just Chin Mee Chin Confectionery and Killiney Kopitiam, those were the two Hainanese coffee shops left,' said Mr Woon, who had his own broking firm before giving it up to buy an old coffee shop at 67 Killiney Road, near Orchard Road, in 1992.

That seemingly improbable move for a financial service high-flier has paid off, with turnover reaching about $40 million last year from the 23 Killiney outlets in Singapore and an extensive franchised network across the region.

Seven of the outlets here are family run, with four located in shophouses owned by the Woon brothers. The other 16 are operated by franchisees.

Younger brother Woon Wee Teng, 55, a former lawyer and a director of the chain, told The Straits Times: 'Ours is not just the food... We believe that any kind of food business cannot be sustained without the property.

'You have to own the property so that you're not at the mercy of the landlord. Unknown to people, our coffee doesn't make much money but we had the foresight to acquire the property. It gives us peace of mind.'

The brothers started buying run-down, pre-war shophouses in the 1980s and 1990s and now own more than 20. Most were dilapidated and were fire hazards.

But Mr Woon Tek Seng noted: 'If the location is good, everything inside can be redone.'

When he bought the business and shop at 67 Killiney Road, the whole street was very quiet, but there was huge potential given that the cafe was an old brand name in a prime spot.

It was the same case when he bought the shophouse in Siglap, which now houses a Killiney Kopitiam outlet.

'Property is such that if it's yours, it's yours,' he said.

'I bought the shop in Siglap in 1997 for $580,000, or $414 per sq ft. At that time, the shop had been sitting empty for six months. No one wanted to buy.

'When we opened for business, everything was sold out within the first three hours.'

His judgment was astute: Shops in the Siglap area now go for 10 times more.

The other advantage in owning the cafe properties is that the chain does not have to raise its prices all the time, he added.

But it is not easy running the business here as it is difficult to get staff, he noted, adding that 'secondly, rentals are very high. The costs of raw materials are very high and everybody wants to copy us'.

Most of the other coffee and kaya toast shops or chains here have copied them, the Woon brothers said.

With the market here so small, going overseas - which Killiney does mostly through franchising - was inevitable. It expanded to Malaysia 13 years ago and Indonesia five years ago.

The chain today has 70 stores overseas, 40 of them in Indonesia. It opened in Hong Kong last December and China in January this year, with a restaurant in Zhuhai, China.

Mr Joe Wan, a relative who holds the master franchise for Hong Kong and China, said he aims to have two or three stores in every city in China.

Killiney is also in talks with franchisee partners in the Middle East, including Abu Dhabi.

An outlet in Brunei opens this month, Melbourne got its first last November, and Sydney is to follow soon.

Killiney plans to go into Cambodia and South Korea next year, with Vietnam a possible destination in the future.

The group will go overseas when the right franchisee comes along, said Mr Woon Tek Seng. It can then help people to create jobs and earn a living, he added.

Mr Woon Wee Teng believes the chain could have made more profit. It had a turnover of $38 million to $40 million last year.

'My brother's point is that if you can give a franchise and it can create jobs for the whole family, why not? In its own way, it's beautiful. Compassion comes first.

'There must be a better way of looking at things. If you create a lot of jobs and your income drops, it shouldn't matter. Do you need to report profit all the time? There must be kindness somewhere.'

Mr Woon Tek Seng said he is happy to grant a franchise to an individual, who can then provide jobs for his entire family.

Several years ago, he even granted a franchise for free to a social enterprise, but it failed to take off.

It is quite a family affair at the Killiney group, which has 110 staff. All three of Mr Woon Tek Seng's children and several relatives work in the business.

He added that they run their business in a 'so-called haphazard way but with compassion'.

'If you run it for money's sake, it becomes very merciless.'

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