Food cart guru gives tips on successful business

Terry Yap says location is so important in a food cart business, it makes a big difference on how fast a P100,000 investment can be recovered.  A perfect location can return the investment in six months, even as short as three months, if it attracts the right traffic, he says.

Yap knows the ins and outs of the food cart industry, being the business development and franchising director of Mister Donut Philippines, the group behind over 2,000 Mister Donut outlets all over the country.

His group has recently diversified to other food brands through Stallmart Inc., which now offers franchise packages for Tik-Tok and Siomai Central as well as the newly launched Fold n’Roll, ThirTea and Little Mexico.

2013_sept29_biz1“A lot of entrepreneurs like to jump the gun and get into the food business,” he says, although many of them lack the required technology, marketing insights and an established brand.  Some entrepreneurs are even unsure of the kind of business they want to get into, he says.

Yap says StallMart aims to help entrepreneurs overcome these hurdles. “One of the biggest hurdles for any entrepreneur would be the investment cost.  So one of the tasks and objectives that we would like to do for StallMart is come up with very affordable investment costs that would be able to give them return on investment in a short period,” he says in an interview at the Fort Bonifacio Global City.

He says StallMart provides advice on good store location and ensures the supply of high-quality and fresh products.  Its stores are built uniformly for brand and image consistency. StallMart brands target the CD market as it offers meals costing P25 to P35 per box.

Yap says Stallmart  seeks to address the growing demand for high-profit but low-investment businesses such as stalls and kiosks.  It offers affordable packages for aspiring businessmen and provides support to franchisees such as site evaluation assistance, staff training and operations and marketing support.

Yap manages the business development, franchising, and logistics departments of Mister Donut Philippines and Stallmart. He graduated from the Philippine School of Business Administration with a degree in Business Administration.  Prior to joining Mister Donut/Stallmart, he served as the general manager of Ho Tsai Dimsum Inc., the company behind Mr. Choi Kitchen, from 2009 to 2012.

Now with StallMart, Yap says by leveraging on the strength and experience of Mister Donut in the country, the young company aims to replicate the success for other entrepreneurs.  StallMart now has over 90 franchised stores and continues to add more outlets, he says.

“One of the advantages of the Mister Donut brand is the expertise in terms of site analysis, because of the research that we do and in trying to determine what is most acceptable products.  It is one of our best strengths so far,” he says.

Yap says the food cart or food stall business is one of the most successful ventures for entrepreneurs right now.  “This segment has been positively growing for the past few years,” he says, adding that Mister Donut emerged as the leading kiosk brand in the country, based on a study by market research firm Euromonitor International.

“Currently, we have more than 2,000 distribution points of Mister Donut across the country.  We have kiosks and restaurants,” he says.

Yap explains that Mister Donut and StallMart are two different companies, “but we use the same facilities in terms of logistics and distribution.”

“We are using our strength in Mister Donut brand to be able to distribute Stallmart brands altogether,” he says.

Yap says Mister Donut has 22 plants across the country, supplying Mister Donut products.  The production plants range from 100-square-meter facilities to 1,000-sqm mega plants.  “Our mega plants are here in Metro Manila.  We have one in Pasig and one in Las Piñas.  We have another in San Fernando, Pampanga,” he says.

“Those mega plants for the Mister Donut brand produce for us 100,000 pieces of donuts a day.  Sometimes, we go beyond 100,000, depending on the season,” he says.

Mister Donut has been operating in the Philippines for over three decades now, with 2,000 outlets, including franchised shops, institutional and key accounts, dealerships and ambulant bikes.  Investment for a two-year Mister Donut franchise package starts from P145,000, with no advertising fee, freight or delivery charges or royalty.

StallMart’s first brand, Tik-Tok, which was launched in November 2011, proved successful and now has 61 shops located mostly at MRT and LRT stations in Metro Manila.  Of the 61 outlets, only 15 are still operated by the company while the rest were given to franchisees.

Tik-Tok offers chicken innovations such as isaw fries, chicken balls, and burgers.  Its market consists of transient customers, students and minimum wage workers.  Investment for a Tik-Tok food cart starts at P160,000, with no franchising and advertising fee.

“We give our support to franchisees for their start-up. Our support team will be there for them,” he says.

Siomai Central took off in May 2012.  “Currently, we have 66 shops nationwide.  We still have four or five that are company-owned,” he says.  Investment starts from as low as P40,000.

StallMart also offers a franchise package of P110,000 for Fold n’Roll (which sells folded pizza), and P85,000 for ThirTea (affordable milk tea).  Franchise package for Little Mexico (bite-sized tacos and quesadillas) is being finalized.

Yap says with Mister Donut and StallMart, “80 percent of the success is already there.”

“On the average, our successful franchises of Mister Donut brand have been with us for more than 20 years,” he says.  “At least 50 percent of our franchisees have been with us around five years.  Another 20 percent have been with us for 10 years.”

“Currently on board, we have 220 franchisees in our system, operating around 1,000 branches,’ he says.

Yap says only about five to 10 of the total 220 franchisees had failed in their business, but more are joining to help build their brands.

“We do have a few, one or two, who sometimes close the business because they relocate or they have to engage in other businesses. What we do is we try to validate these locations and we try to offer them to other franchisees,” he says.

“On the average per year, we are getting new franchisees from 25 to around 35,” he says.

StallMart offers a two-year franchise package.  “We try to balance out with what is happening with the industry right now.  Previously, we had four-year term, but we cut it down to two, so that the fee would be a bit more affordable,” he says.

“That would also lessen their risks and it makes a lot of difference for them to say yes or no,” he says.

Yap says it is important for entrepreneurs to choose the best location for their store.  They also need to consider other costs of the business, on top of the supplies, such as rents, labor and electricity charges.

“On the average, what we prefer and our target is to have our franchisees get a return on their investment with maximum of a year.  This means they would be able to recover their initial investment up to a year,” he says.

Yap says this depends on the location, as several outlets can recover their investments in six months and sometimes in as short as three months.

“There are cases where our successful franchisees could get their investments in six months.  It depends on the location, how good the sales of the business is.  If they are the only one there and rent is very low, they could get it in three months,” he says.

Supplies will come from StallMart Inc.  “For ordering, we have a recommended level of inventory.  The investment cost would include a supply for one or two days,” he says.

The initial inventory could reach the high side of P12,000, he says, noting that some outlets can dispose the inventory in one or two days.

“It depends on the location and the possible sales that location could generate.  It would vary really from one location to another.  It’s the reason why before we approve one particular location, the applicant has to send us the location and the rentals,” he says.

He says it is important that StallMart knows where the outlets will be established, whether in Metro Manila or outside the metropolis, as well as the labor cost.  This is because labor is more expensive in the National Capital Region.

“As you go outside Metro Manila, labor cost differs in one town to another.  But your selling price is still the same,” he says.

“From there, we would be able to determine the financials for it and the potential sales. Generally, we have to look at the location to see how big the traffic in the area is.  We are doing this based on captured rate,” he says.

Yap says a typical Tik-Tok outlet generates sales of P6,000 to P15,000 a day, depending on the site.  “The reason for the difference is again the number of customers and traffic that pass that particular location,” he says.

The cost of sales, or the supplies, represent about 65 to 70 percent of the total sales.  This means that the franchisee will have a gross profit of 30 to 35 percent from total sales of one stall.

“The average gross profit that they would be able to make in most of the businesses with StallMart would be 30 to 35 percent.  From that gross profit, they should be able to cover their operating cost and generate income from them,” he says.

The gross profit for ThirTea is higher, as the cost of sales for milk tea represents only 40 to 50 percent of total sales.

Net profit for all brands could range from 5 to 7 percent in terms of sales, he says.  This is what is left after deducting other expenses such as rent, electricity cost and wages for store employees from the gross profit.

“For business like this, net could range from as high as P10,000 a month. Percentage-wise, from 5 percent to 7 percent in terms of sales. This is for the segment that we are operating,” he says.

The profit heavily depends on the location, the traffic in the area and the rental cost.  “Depending on the location, rental could vary from as low as P5,000 to as high as P30,000 [a month],” he says.  Margin is much higher for outlets located in sites owned by the franchisees.

Yap says an ideal store is expected to generate daily sales of P10,000.  “On a daily basis, the ideal sales that we have seen for most of our franchisees is P6,000 to P10,000, so that they are able to get that return in nine months to a year,” he says.

“If you have good location, a six-month return is possible,” he says.

A monthly profit of P10,000 is already good for a starting entrepreneur with one stall, but Yap says most of their franchisees hold multiple stalls.

“Entrepreneurs could even operate multiple carts in one location,” he says, referring to the mix of Mister Donut and StallMart brands.

“What we tell them is that 80 percent of the success of the business [with StallMart] is already there,” he says. RTD

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