Burger King sets up first independently run store in Singapore

Date AddedJuly 22, 2009 08:45:17 AM

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By Timothy Ouyang, Channel NewsAsia | Posted: 16 July 2009 2003 hrs

SINGAPORE: The world's second largest fast-food hamburger chain, Burger King, is opening its first-ever, independently run concept store in Singapore. It is scheduled to open at ION Orchard on July 21.
There are also plans to open another three to five of such stores within the next six months. This will pit Burger King directly against its franchisees and may lead to a shake-up in its current franchise agreements.
The new store is a key step in efforts by Burger King to beef up its brand name in the region.
Peter Tan, Asia Pacific president, Burger King, said: "Customers have become just way too sophisticated that if we're not keeping up with them and even more importantly leading them, we're going to be behind the 'eight' ball.
"Whether we're going to be launching this concept into other restaurants - I certainly hope we do - it really depends on the feedback of the customers because I think what they think is important."
Up to now, Burger King stores in Singapore have been operating under franchise agreements since 1982.
The fast food giant plans to operate its new stores alongside current Singapore franchise owner, Bonfoods, which is a division within mainboard-listed Bonvests Holdings.
Mr Tan said: "It only makes sense that we have a company-operated store here in Singapore because the onus for us as brand operators, as brand owners, is really to always be on the lookout and be in the leading edge for innovation.
"If you look at any of the Quick Service Restaurant operators, there is always a need to have a certain percentage of company-owned stores because it's so critically important to have these stores where they become the base for centres of excellence - be it in product design, restaurant design, innovation in new products and really, just ensuring that operations excellence is being maintained."
Burger King is using the new outlet to test-bed new concepts, such as a new menu line-up.
Its store will also feature a fresh new look, including personalised sound zones which will allow patrons to plug in their iPods and listen to music through individual speakers.
If successful, these concepts will be rolled out not just in Singapore, but also throughout the Asia Pacific.
Mr Tan said: "We will certainly work with all our franchisees as partners. There are always going to be differences of opinions as any business goes and I think it's our responsibility to convince our partners, not just here in Singapore but elsewhere in the region, that what we're doing is going to benefit the brand.
"That's why I think it's important that we're putting our money where our mouth is, so to speak, to show that this is a proven concept and there's nothing like seeing the actual results itself.
"Selling a concept is oftentimes far more difficult than selling actual results. Brands that are willing to take a calculated risk within the boundaries of what the brand allows you to do so, I think that's going to be something that will ensure the sustainability of that brand in terms of relevance going forward."
While Burger King said the franchise model has worked for the company, it told Channel NewsAsia in an exclusive interview that it does not rule out taking over the franchise in Singapore in the future.
The company said it is "always ready to do the right thing" to maintain its brand, if the need arises. And if this happens, it will not be the first time Bonvest will lose its franchise of a global brand.
In 2004, Starbucks Coffee International Inc, a majority-owned unit of US-listed Starbucks Corp, acquired the entire share capital of Bonstar Pte Ltd, which operates Starbucks Coffee outlets in Singapore from Bonvest for S$13.38 million in cash.
The Burger King outlet at Liat Towers along Orchard Road is one of nearly 40 stores that are run by Bonfoods. When contacted by Channel NewsAsia, the company declined to comment on how the new concept store would affect its business.
Legal experts said global brands are becoming increasingly less reliant on franchises and are starting to expand into overseas markets directly, especially Singapore.
Tan Choon Leng, partner, KhattarWong, said: "One of the issues with the franchise model is that you are dependent on someone else's performance to not just deliver the sales target, but to continue to build the brand, to build its image, to maintain that kind of standard.
"In some cases, you can have a franchisor who then says, 'Well, it's much easier if I go into the market directly and just build it up to the standard that I expect it to be.' I think the expectations on the local franchisees have obviously increased.
"They can't just be the point of sale or point of service for the franchisor anymore. They're going to need to find more ways to value add to it, whether in terms of helping to develop products, to develop new services, to give better feedback or in some cases, expand into other countries."
With a lack of an all-encompassing franchise law in Singapore, global brand owners like Burger King may just get to 'Have It Their Way'.