Thursday, January 31, 2008

Finding a business location in the Philippines

My girlfriend has been talking to me about a group of collegue guys who have got together to form a business. The 5 of them have together raised $2,000 each, thats $10,000 to develop food stalls in the Philippines. Their plan is to franchise the idea.

Of course I wish them the best. Its great to see young people motivated to achieve from such a young age. Its great that they have found a support base among friends at such a young age. That is of course a good way to start a company, and a good time. It seems a sensible strategy for several reasons:
1. They can share the responsibilities between 5 people
2. They can work or manage the business to make extra money if they need it
3. They can share business skills

The only problem I see is that the tendency for them to rely on 'friends' as a basis for setting up a business with limited capital might mean they lack coverage in certain skills, particularly if they are all studying the same subjects at university. The reason I pose this concern is because they have decided to move their reataurant from one part of a shopping mall to another part. They assumed that because other businesses were making money, so they should make money as well. Being so young, they will lack experience, but I would suggest the reason they are not making sales is not the location, but their value proposition. They are selling a meat & vegetable wrap for take away. I dont think people come to a mall for take-out food, they want to sit down, and not back at the office. They want to escape the office for 30-60mins, and even if they are not coming from an office, they are not going to eat a wrap standing up. The implication is that they have not well-located their business. They really need to be in the part of the food court where there are tables to sit down. Otherwise they need a shop rather than a stall. Apparently they were paying P22,000/month in the low traffic area, but now they are paying P30,000/month. Apparently they are earning P90,000/month, so they are not doing too bad.

Very easy business to set up and its a great area. Eating out in the Philippines for singles is actually only about 30% more expensive than eating at home if you are buying food from a shopping mall. Why? The shopping mall model is very lucrative because everyone wants to go to an air conditioned place. Surprising there is no Westfield here? Maybe there is alot of corruption? But I think the Chinese managers of these businesses is terrible. They are so anti-intellectual in implementation. Which is precisely I see as the problem for these students, though being so young and raised in Asia, you would tend to expect a lack of critical thinking skills. You always want a critical thinker in your business team. Such under-appreciated people!
Andrew Sheldon

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