The East West Hospitality Scribe

Honeymoon Dessert - A Scalable Business Model For Asia Pacific

  I don't apologize for being a fan of Honeymoon Dessert. In fact I am more of an addict!  This dessert Company began selling its delicious South China sweets in Hong Kong in 1995 and 13 years later has over 20 sores in the territory but more importantly 44 stores overseas of which 40 are in Mainland China.  Many years ago I asked some friends in Hong Kong and China about the international development potential for this concept and was treated to a long lecture about all the regional cuisine differences in China and why Honeymoon Dessert could not develop a national footprint on the Mainland.  First, they were selling desserts which is not exactly a big part of Chinese cuisine.  Most people prefer fruit after a meal and dessert is really treated as an after-thought.  Second, they were selling South China style desserts which were alien to people living in other parts of China.  Third, selling desserts and drinks by themselves is not an easy business considering the limited hours when most people are comfortable eating this type of food.  In the language of the restaurant industry, were there enough "day parts" to sustain the business?  And yet by the end of 2008, the Company had stores in Shanghai, Hunan and Jiangsu Provinces in addition to Guangdong.

Where's The Sofa? What Comfort Means To The Chinese.

     Above:  A Typical "Western Restaurant" in Wuhan, Hubei Province.

We were all very excited about the opening of our first Italian Restaurant in Shenzhen in December 2006.  We had done our homework in terms of understanding price points and menu offerings and we felt pretty good about our ability to appeal to the local Chinese in the Futian area. We knew we would need to change some things after a few months and were eager for the feedback from our new customers.

The big opening day came and went and the business was slow. While the whole Mall was slow, our store was especially slow! Some Chinese customers would come in, take a look around and just leave without even looking at the menu. Day after day this was happening so I asked my staff to find out what was going on.  Why just come in for a look and then leave?  So I decided to approach a group of women who after taking  a look, were on their way out the door. "Why are you leaving," I asked?  "No Sofa!  Where's the Sofa?" one responded.  And then it began to hit me right between the eyes.  I had walked by many so-called "Western Restaurants" in Shenzhen and other cities in China and noticed that the Chinese customers were sitting awkwardly in giant sofas trying to eat their meal or have a drink.  It did not make a lot of sense to a "Westerner" like me who had lived in Tokyo, Hong Kong and Singapore and was familiar with the typical cushioned booth or chair that was common in Western restaurants.  Surely these type of sofas made it difficult to digest a proper meal!

A Letter From The US Commercial Service

Over the past five years I have met with many US Commercial Service officers in key Capital cities of Asia.  These are the local country nationals who work every day to facilitate business transactions between US companies and their Asian counterparts.  They have many comments, suggestions and criticisms to make to their US clients but are reluctant to do so out of courtesy or fear of offending.  I am taking the opportunity here to send an open letter to US hospitality companies interested in doing business in this part of the world representing their collective voices.

TO THE CEO'S OF AMERICAN HOSPITALITY COMPANIES

We in the US Commercial Service are anxious to help you to develop business relationships in the Asia Pacific region. In this letter, we offer some suggestions that we hope you sincerely consider.  We are confident that these recommendations will make your business activities more successful going forward.

First, be willing to adapt your products or service to the local market conditions or you most assuredly will fail.  Change your menus to include popular local dishes. Upscale the ambiance and seating to match Asian customer expectations. Price your products to be reflect the same relative positioning that you enjoy in the US.

Krispy Kreme - Why Did the Concept Fail in Hong Kong?

In October 2008, the franchisee of Krispy Kreme in Hong Kong announced that they would be liquidating the company and closing the majority of their 7 stores in the territory.  The main reason cited in most press announcements was the high tenancy costs in Hong Kong.  Obviously low sales lead to high tenancy costs and it is fair to say that Krispy Kreme just did not catch on with the local Hong Kong bakery customer.  So why did the brand fail when donut concepts have been highly successful in Japan, Taiwan, Korea and most of Southeast Asia and are recently gaining a following in Shanghai?

First, the product was just too sweet for the main Hong Kong Chinese bakery customer.  They prefer salty over sweet and the sweets they do eat are far less sweet than what is common in the USA or Korea.

McDonald's China Slashes Prices Up to 33%

It was all over the news last week about the McDonald's decision to slash prices by up to 33% in China.  But is it as it seems?  Are these actions due to more price sensitivity among the Chinese customers themselves given the slowdown in the economy? Or is the action as a McDonald's China spokesperson says "in line with the government's direction to stimulate domestic demand" and "help build a stronger economy."

Here are some thoughts to consider.

1) McDonald's and KFC are already expensive in China considering the average guest check is around 15 RMB (US$2.20) for a developing country with an average Household income in major cities of about 4000 RMB (US$612).  In the USA for example, the average guest check is around US$5.00.

2) McDonald's engages in extensive couponing already.  I am a frequent visitor to their restaurants and I never fail to see one of their employees outside the restaurant handing out coupon flyers.  If McDonald's permanently slashes prices or uses a loyalty card then the overall guest check may not change very much.

In The Beginning

   

As a University student in Tokyo during the early 1970's, I witnessed the first wave of American restaurants to hit the Japanese shores.  It started with the large crowds at the Kentucky Fried Chicken booth at the Osaka Expo in 1970 and was quickly followed by the opening of the first McDonald's on the ground floor of the MItsukoshi Department store at the main Ginza crossing.  Every Friday afternoon my classmates and I would gather at the McDonald's near Yoyogi Station to share news about home and to have a little taste of "America." It was a nice break from our daily diet of Japanese home cooking.  More American chains soon followed - Baskin Robbins, Mister Donuts, Denny's, Hard Rock Cafe' - to mention a few.