Why Are Restaurant Owners Still Opening New F&B Outlets Amid Doom & Gloom?

Concerned about the market conditions, Hong and his partners weighed their options for the new business venture carefully.

“Should we even continue in F&B, or should we pivot to our growing wholesale business?” he asked.

“What we realised is that F&B and wholesale, they’re symbiotic … we fought to preserve that link.”

Ultimately, they forged ahead with the decision to buck the trend and start his restaurant against the backdrop of a tepid market.

In August, Hup Lok, which is along Havelock Road, served its first bowls of prawn noodles to customers.

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When CNA dropped by his store to talk about his fledgling business, the steady stream of patrons affirmed Hong and his team’s decision.

On a Thursday evening two months after the opening, nearly every table in the restaurant was occupied, online food delivery orders continue to roll in, leaving little respite for the cooks and the front of house staff.

Hong reflected on Hup Lok’s uncertain start amid a challenging environment for the F&B sector.

The first month was a struggle, Mr Hong was quick to say, noting that Hup Lok had a quiet start before business improved.

“I think the location is kind of off the major foodie stretches,” he said. “But it’s been picking up, and I think (that is) based on word of mouth – that (the food) is not expensive and really good.”

As some eateries close, others open

F&B closures have dominated the headlines this year, from small, independent outfits like Flor Patisserie quitting the industry to the sudden shuttering of Prive Group restaurants.

Even bigger, international brands have not been spared, with hotpot chain Haidilao closing its outlets in Bedok Mall and Clarke Quay.

The Monetary Authority of Singapore (MAS) previously said the food and beverage sector has been in broad decline for three years, and projected “tepid, uneven growth” next year with limited support from resident household spending. 

As locals spend more overseas, the Ministry of Trade and Industry said it expects lacklustre growth for F&B.

Amid the doom and gloom, however, there have still been more openings than closures in the industry.

A total of 3,102 food and beverage services businesses were formed this year as of Oct 1, while 2,286 businesses ceased, according to data from the Accounting and Corporate Regulatory Authority.

Business registrations are often used as an indicator of restaurant openings, though it is not an exact measure.

“A noticeable portion of new entrants are overseas brands, drawn by Singapore’s reputation as a food hub,” said Mr Geoffrey Tai, a manager at Temasek Polytechnic’s school of business in the lifestyle and consumer experience cluster. He used to lead a team in culinary and catering management at the school.

One such brand is seafood noodle eatery Hai Kah Lang, which has eight outlets in Malaysia, and opened its first Singapore outlet in Funan last month.

“We have always wanted to be in Singapore,” the brand’s founder Mr Steven Tan told CNA, noting that Teochew cuisine has deep roots in Singapore.

Asked why Hai Kah Lang decided to expand to Singapore at this time, he said the timing is “perfect” because the brand found an “amazing location”.

Hai Kah Lang had faced some issues in hiring and arranging for permits for ingredients, but are “working relentlessly” to overcome the hurdles, said Mr Tan.

Overseas chains like Chick-fil-A from the US & Chinese eateries setting up shop here

International chains from China also likely formed a significant portion of business formations in Singapore this year.

In February alone, Nong Geng Ji – which was founded in Shenzhen and has more than 100 outlets in China – held grand opening promotions for three new outlets in Singapore.

Milk tea brand Chagee promoted the opening of four stores on Facebook in July.

Other big players from America such as Chick-fil-A and Chipotle will also enter the Singapore market soon. 

Such global brands likely have “strong capital backing”, said Mr Ernest Tan, lecturer at Singapore Polytechnic’s school of business who has experience in the F&B industry.

But some independent, local businesses are also expanding operations and opening new outlets, seemingly swimming against the tide.

Sellin hae mee instead of sushi

To Hong, the concept of his new restaurant aligns with the trends in the industry.

He observed that customers had been spending less in recent years, and there was a chilling effect in the market as living costs increased.

“What do we do (as consumers)? We go to Johor. Or we trade down – we cook at home, we use CDC vouchers,” he said.

In response to the shift in demand, he took up an opportunity to go into the wholesale seafood business in 2023, and made a conscious decision to make Hup Lok a casual restaurant.

Mr Hong said: “You could open a paella place also, but you wouldn’t. A bowl of hae mee (or prawn noodle) has much wider reach in the local context, we don’t need another ‘atas’ (or elevated) concept.”

The pricing of the dishes was also deliberately set lower, at between $10 to S$20.

“We also have tuna in our (wholesale) portfolio, we can open a sushi place, but we chose clearly, hae mee over sushi, because that’s what the market wants, we feel,” he said.

Also in August, the Oh Wunder cafe opened in Bras Basah Complex, after its owners saw potential in dine-in spaces. The brand is run by the team behind Wunderfolks, a local tart brand that started as a home-based business in 2020.

When the brand started getting larger orders, it rented a place to increase production, but for a long time resisted opening a cafe with space for dine-in for fear of seeing empty seats.

“If you look in, if it's all empty, you'll definitely feel very down (in spirits),” said Mr Dale Thia, co-founder of Wunderfolks.

Besides, in the initial period after they started the business, the focus was on gifting and deliveries because of safe distancing considerations during the COVID-19 pandemic. 

With the pandemic now a distant memory, customers started asking about the option of dining in.

“We see people wanting to catch up with their friends in person rather than just sending (them a gift),” said Mr Thia, 36.

The kiosk set-up would only work if customers are willing to buy their tarts and then find somewhere else to sit, he said. 

The tarts may be purchased for parties but that would be a limited market, and pastries are already probably lower ranked than full meals in terms of priority, he added.

“We see that there's more demand in terms of savoury food, and since then, from tarts, we also moved on to croissants as well as hot food, so that’s where it kind of would go in line with opening up into a dine-in cafe.”

Mr Thia and his team opened their first cafe in June 2024 before launching their Bras Basah cafe this year.

“Not all doom and gloom”

There are always new opportunities to be grasped, so it is not surprising that new F&B businesses keep opening despite the challenges, several experts said.

After all, “every closure creates room for something new”, said Mr Tai of Temasek Polytechnic.

“Singapore’s F&B scene has always been dynamic,” he said.

“Even with high costs, many entrepreneurs are willing to take the plunge because they believe they can offer something better or more relevant.”

New openings are part of the industry’s natural cycle of renewal, and while it is a tough environment to operate in presently, it is not all “doom and gloom”, said Mr Tai.

Singapore Polytechnic’s Mr Tan noted that the barriers to entry are relatively low in F&B, and that makes it attractive to entrepreneurs looking to experiment with new formats or fresh concepts.

There is consistent underlying demand for food, he said. “The challenge lies in navigating an increasingly crowded market place.”

He pointed to brands such as Yo-Chi frozen yoghurt that have drawn long queues in Singapore, and said such entrants can divert attention and sales away from local players temporarily.

“Such hype cycles typically taper off after the novelty fades, allowing well-positioned indie brands particularly those with a strong local story or niche identity to regain traction,” he said. 

The founder of Kyuukei Coffee, who opened a third outlet in August, believes that building a community helped his brand to succeed.

“We buck the trend of cafes serving you coffee and leaving you alone,” said Mr Jonathan Teo, 30.

“Radical hospitality is something that makes us stand out from the rest.” 

Mr Teo said there is an unrealistic expectation that “anything short of virality is failure”, but at the same time, many places that go viral end up floundering because they are not prepared for the surge in customers.

It would be silly not to use social media in this day and age, said Mr Drew Nocente of Il Toro, a woodfire grill restaurant that opened in September. 

But giving guests a great experience and having them tell their friends is “a lot more valuable” than other ways to get the word out such as social media, he said.

“It takes a little bit longer, but it’s a little bit more connected to the guests,” he said.

Location is key, but what about rent?

Those who opened new restaurants recently said hat they cannot afford to ignore the realities of the market and have to navigate the challenges as best they can.

While many blame climbing rents for causing the F&B downturn, these restaurateurs said that it is still possible to capitalise on the right opportunity when it comes. 

Finding the right space for the right price can seal the deal and push things forward, Mr Nocente said.

He and his partners at AC Concepts, which owns Il Toro, had long been interested in setting up a restaurant specialising in woodfire grilled meat.

“Toro was always in the back of our minds, and it all came down to the space that came available, and things just fell into place … seemed like a good opportunity to take advantage of the space,” he said.

Mr Thia of Oh Wunder said that when you sign a contract, it is clear what the rent will be – but the risks may change when the contract is renegotiated after the initial lease expires.

He recounted being invited to open a Wunderfolks kiosk in Wisma Atria at a time when the mall was trying to attract new brands.

The brand was offered a discounted rate for a few months, but found that its margins were squeezed when the rent was adjusted upward. 

After about one-and-a-half years, Wunderfolks shuttered the Wisma Atria outlet and expanded into Junction 8 in 2022, and later into Tampines Mall and Lot One.

Its central kitchen also moved from Joo Chiat to Kaki Bukit, and the Junction 8 outlet was closed in the same month that Oh Wunder opened.

The new Bras Basah Complex outlet is much bigger than the kiosk, but Mr Thia said the rent is similar, at around S$7,000 to S$8,000 per month.

“I feel like the cafe is bringing us a lot of hope,” he said. “Throughout the day, we do get a steady flow of people coming just to grab coffee or to dine in.”

Mr Lee Shao Rong, owner of salad chain Supergreen, agreed that rent is just one part of the overall picture.

“We only go into a place when we think that the rent is reasonable, the traffic is good, the demographic is right for us,” said Mr Lee. Supergreen has 13 outlets in Singapore, seven of which are run by franchisees.

“Despite us growing fast, we are also careful with the location … and importantly we don’t expand for the sake of expansion,” he said. “Every outlet we open has to be profitable.”

Meanwhile, Mr Hong intends to shut his first restaurant DAYU, which was previously known as NUDE Seafood, at Marina One at the end of the month because of high rents.

The rent for Hup Lok in Havelock Road is around 20 per cent of what they pay in the city centre.

He and his team will also launch a delivery-only bento business. “Doing that … lets us sidestep the issue of rental. Essentially it's a central kitchen that can supply islandwide, versus being tied down to a location with high rent.”

What it takes

At the end of the day, what matters most for F&B upstarts is how they are able to court the fickle consumer, whether through novel offerings, good value, strong branding concepts or just great food.

Crowds are not guaranteed even for brands that are more established. 

“Sometimes the new outlet (doesn’t) do well immediately,” said Supergreen’s Mr Lee. “At certain locations, people don’t know us, and we also have to start from scratch to market (the brand).”

For his new brand Subarashii, which sells Japanese-style rice bowls, Mr Lee said they are also trying to find their groove.

“We ran a promotion, one-for-one, for a week, and we did well for that week. But thereafter, sales dropped and now we are trying to fine tune to see what is the sweet spot, what is the portion and the price that (would make) the customer more willing to come back,” he said.

To this end, industry veterans like Mr Sufi Hassan, chief product officer at the Black Hole Group, said constant reassessment is an important part of running an F&B business, even in good times.

His company, which has been in the business for around 13 years, owns Tipo Pasta Bar, Tipo Strada and Working Title, among other brands.

To those who are thinking of opening an F&B business, Mr Sufi said: “Think twice about it.”

Competition is stiff, relentless and unforgiving, he said. There are opportunities to grow, but businesses must be open to making adjustments. 

For example, a sandwich shop may realise that business slows at night. It may need to expand its menu to attract a different crowd for dinner.

“I think the most important thing to understand is, no matter what size you are, as an F&B (business), it's important to be nimble and be able to pivot accordingly.”

Smaller independent players should try to tell a genuine story, connect with the local community and build a loyal customer base, said Mr Tai of Temasek Polytechnic.

“Competing head on with big brands rarely works,” he said. “Standing out with authenticity is what keeps indies relevant.”

Businesses need to adapt quickly, stay humble and keep learning in order to survive and thrive, he said.

“What we see in successful local players is that authenticity, consistency, and community focus matter far more than flashy set ups,” he said.

“What are you doing that is right? What is it that’s bringing the people in?” he said. “I would say that is the biggest value to still carry with you, especially in these times.”

He warned against becoming complacent if things are going well. “That’s where you wouldn’t know what hit you.”

Business owners should be cautious and conservative in the current environment, said Mr Andrew Tjioe, president and CEO of Tung Lok restaurant group, another well-established name in the Singapore food scene. 

“We are seeing certain brands, from opening to closing, you don’t even know their name. They just disappear after less than a year,” he said.

Chains from China can be very strong and can easily flood the small Singapore market, and the success of one brand often tempts more companies to try their luck, he added.

“Just like hot pot in Singapore, suddenly (there are) so many hot pot restaurants – we don’t need so many … now you see more and more closing,” he said.

Photos: CNA, Syamil Sapari

Source: CNA/an(nj)

The original version of this story first appeared in CNA.

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