Dear Mr. Law,
I am one of the landlord of some shops in Quarry Bay and we would like to know if Eat East would consider to lease my shop.
Maybe you would surprise how come I would write to you, since I fully understand as the boss of such large corporation, you would not involve in such detail operation.
Yet, I believe maybe this would involve strategic issue, so I would like to bring to your attention.
As someone who would like to study the business strategy of successful companies. I am curious that how come most of the Eat East stores are located in residential district, esp. focus on public housing estate. It seems very few stores of Eat East are located in commercial district.
I have tried to read the interview of Mr. Law and according to those report, Eat East would tend to set up stores of 500 sq. ft, with rent of about HK$15K.
I am wondering if this is because Eat East is a company with strict cost control, and you found the turnover in store located in the mall of Link is ideal, therefore, you would tend to stick to this strategy.
Yet, I am wondering, if this would help Eat East to maximize the profit or turnover.
I would like to suggest if you would consider to arrange one of your colleague to do the following exercise:
To observe and count the no. of lunchbox sold in your store in Link, vs. the no. of lunchbox sold in other companies store in commercial district.
If you found there is not much difference, then study the no. of people waiting in line for takeaway in commercial district, study what limit the length of the queue , if it is no. of customer who would like to buy vs. the time they would like to spend waiting in line.
In fact, I have spent some time to observe the stores of Eat East in shopping mall of Link. It seems no matter in lunch or dinner, we seldom found people waiting in line.
While in commercial district, for instance in Quarry Bay, you can easily find many shops just selling takeaway lunch box would have over 10 people waiting in line for the whole lunch hour.
I have talked to the sales of one store in Quarry Bay and she said they can sell over 400 lunchbox per day.
Maybe 400 meals per day is not a significant figure. Yet, it seems for these shops, there are always people waiting in line and they need to spend a long time to serve each customers. It is their workflow which limit the turnover, instead of the no. of potential customers.
For most F&B operators, they need to spend significant time to serve each customers and it is their operation which become the bottleneck.
I believe the key buying criteria in commercial district is: able to buy affordable and high quality lunch with reasonable amount of time, as I believe 90% of office workers would take their lunch from 12:30-2pm. Maybe 70% of them would eat from 12:30 to 1:30.
So, how to deal with these peak hour, and minimize the serving time per customers become the key.
In this perspective, I believe Eat East would have leading edge over your competitors, since all your meals are ready, no need to spend time to prepare and package the food.
This is why I cannot understand how come Eat East would not try to make use of your valuable comparative advantage over most of your competitors. That is short serving time per customers, therefore, able to serve lots of customers during the peak lunch hour, esp. 12:30-1:30pm..
If you also agree this is the edge of Eat East, then maybe you can try to estimate the turnover per ..lunch, if you do not need to worry about the no. of potential customers and only focus on the serving time.
According to the report, it seems Eat East used to pay monthly rent of HK$15K per shop. You would serve customers during lunch and dinner, throughout the day. But seldom have customers waiting in line.
In my case, one of my shop is located 5 min. from Taikoo Place and Island East, for GFA of 1000 sq. ft, the asking rent is only HK$30K, that is the asking rent per sq. foot is equal to the rate in shopping mall in Link.
Yet, in this case, maybe you would have customers waiting in line throughout the lunch hour, which we are pretty confident that the turnover would be more than double of turnover of shops located in public housing estates.
The other issues are the size of the shop:
We understand the general size of Eat East shops are 500 sq. ft, this is a reasonable size provided that you assume your customers would not come within a short period.
Yet, in the case in commercial area, very likely 90% of your customers would come within 90min. So, how to minimize the waiting line per customers become the key. So, every issue, from how they select the lunch box, heat it in microwave and pay the bill in cashier would determine the turnover.
So, I believe it is important to set up shops with larger size, so as to increase the no. of customers you can serve per minute.
In case you have patience to read through this email, then maybe you are wondering how come the rent is so low and how come I would bother to write such long email to you to convince you to lease a shop 5 min. from Quarry Bay?
To be honest, while my shop is located in “so called” King’s Road and 5 min. from Island East and Taikoo Place. Yet, it is located in a low pedestrian traffic area. Basically, very few pedestrian would walk by my shop.
Therefore, it is necessary for me to find a tenant who have unique advantage to draw customers to walk extra 1 min. from the “normal” King’s Road, to my shop.
As a very responsible landlord, I sincerely hope my tenant would have success, therefore, instead of using the traditional approach, i.e. find a real estate agent to help me to look for a tenant and pay whatever they are willing to pay.
I want to make sure my tenant would have unique selling point to office workers in the area, instead of just someone who do not want to pay a high rent.
Therefore, I tried very hard to do serious research and believe, different from other F&B operators, Eat East can serve large no. of customers in very short time, so time constraint on serving the customers are not serious issue compare with others. Besides, the price tag of Eat East are highly competitive in the area and people have confidence on your quality. Therefore, in the case of Quarry Bay, which nearly every shops are packed with office workers, with at least 10 persons waiting in line. The high efficiency of Eat East and competitive price would make it highly welcomed by office workers in Quarry Bay.
So, they would be willing to spend extra 1 min. to walk to the shop.
Maybe you would ask, if your shop is located in area which low pedestrian traffic, then how can my customers learn that I have opened the shop? Since most of shops of Eat East are located in area with high visibility.
For this issue, I think there are two approach:
Online marketing:
To send email to all offices located in Taikoo Place, Island East to inform the opening of Eat East shops.
Mobile marketing:
To hire some part time to use :backpack flag, to promote the shops.
It seems in HK, I have not yet discovered anyone using the backpack flag for marketing. Yet, in Guangzhou,真功夫 a Chinese fast food shop which focus on steaming the food would hire part time wearing backpack flag with message about the location of the shop in the flag and the promoter would walk around in area with high pedestrian traffic and lead those customers to the shop, which is located in 1-2 min. from the area yet, not easy for customers to find their existence without such guidance.
If you are willing to use such marketing means, I think you would be the pioneer in HK and this would help you to gain more media exposure, which again would help to draw more traffic to the shop.
Well, I have to confess, I have never engaged in F&B industry and I am sure there is lots of issue which I have not considered. However, I sincerely hope you would study the pros and cons of setting up stores in commercial district and maybe use my shop as the starting point. So as to find out if you can use the model of setting up stores in location which is easy to access but with low visibility, and which you are paying similar rent to shops in public housing estate, which is shops with high visibility but relative few turnover.
No matter you would lease my shop or not, I hope if possible, you can share with me, if my analysis make sense to an experienced industry player.
Thanks for spending so much precious time to read my email.
You can learn further detail about my shops in following linkage:
taikooplacecafe.blogspot.com/
Best regards,
Circle Yuen