Ask any urban Malaysian to name their favourite burger joint and we’ll wager a pretty penny that myBurgerLab makes it on the list. myBurgerLab has built a strong community on social media thanks to their ingenious Marketing campaigns that many other brands have attempted to emulate. In the wake of their success, many other burger joints have mushroomed all over the Klang Valley. Eight years on, myBurgerLab keeps going from strength to strength, now grown to include 6 outlets across the Klang Valley.
On 18th March 2020, Malaysia was on a nationwide lockdown, locally known as the Movement Control Order (MCO). Restaurants were not allowed to open their premises for dine-in. As of May 2020, myBurgerLab (MBL) has yet to open up its dining space although the government allows dine-in with strict SOPs and social distancing rules to be adhered to.
“I feel like it was a pressure cooker that everyone was in. Unfortunately, not everyone will come out unscathed. Firstly and thankfully, we are managing to navigate through the days of MCO, but the challenges actually lie ahead. The business model is just not made for this kind of conditions. There’s this meme that was circulating around that illustrates this: “We are not all in the same boat, just the same storm,” and some ships are leakier than others. Here, co-founder Renyi, known for his spirit of advocating for sharing best practices, he talked to us in-depth about how the industry will be evolving for good.
Table of Contents
Key Takeaways
- What are the hidden variable costs you need to take into account as business owners
- You will have new landlords moving forward in this post-pandemic world
- Why 30% food cost rules do not apply to myBurgerLab’s pricing of its products
- Launch of new innovative concepts to replace the seating area. myBurgerLab will not be opening all dine-in area immediately, even when MCO is fully lifted. (as of May 2020)
- This is a year for survival. If you can make money, great – that’s a bonus. If you are at breakeven, there is nothing wrong with that so, don’t beat yourself up.
- Most restaurant business models are not designed to be crisis-proof, with thin cash reserves. No one has an answer. However, what you can do is to keep pivoting and adapt quickly. MBL has launched 7 initiatives so far:
- Takeaway system, order online and pick up in 30mins fuss-free.
- Launch of Home Kit
- Retail frozen patties
- Breakfast offerings
- Collaborations with other restaurants
- Launch of new seasonal burgers
- E-vouchers that appreciates in value over time
The hidden cost of Covid-19
It has been eight years since MBL opened its doors. Let’s go back to 2012, how did it all start?
A disclaimer: We really went in blind when we first started. Honestly, we didn’t understand the F&B game. In fact, the three of us founders had a bit of a quarrel on how to price our burger. We didn’t know about the 30% food cost rule, wastage, yield and trimmings. We were very naive.
The other second lucky strike for us was accidental Marketing. We didn’t have a formula. 2012 was the year when #OOTD peaked. It was a time that if you did things quirky enough, you could get popular very quickly. That allowed us to accelerate what we did. At our peak, we were selling 600 burgers in five hours. When it comes to trends, there’s no logic to it. What it taught me was that the market was huge. It was so large that we were able to sustain this kind of crazy demand for at least the first two years.
We are thankful that we have a good set of brains between us that were able to catch what we did right and scale from that. We were also able to catch what we weren’t doing right and improve upon that.
That was very honest. Eight years on, what are the hidden variable costs that you now have to take into account? What are your learnings?
In this post COVID world: You’ll have two landlords – fixed rental to your landlord (*not taking into account % of GTO) & variable rental to third party delivery
Your new landlord will be your delivery partner(s). There is a 30% cost there potentially from the major delivery names like GrabFood or FoodPanda.
Beep or StoreHub takes a much lower earnings percentage, but there are fluctuating hidden variable costs you need to take into account, such as managing your own refunds, customer complaints, and food that’s not well presented (you have no control over the riders and some are not well trained). In the end, you might need to hire someone to manage customer relations.
A lot of people tell me, ”I see a lot of riders at your shopfronts, you must be making a lot of money. You guys are the king of the MCO.” My business was built for dine-in with third-party delivery services as supplementary sales. So, are we actually making money? Let’s take a look: say, our pre-MCO sales for dine-in is at RM100,000 while takeaways and delivery are at RM20,000. During the MCO, we have to make up the RM120,000 purely with delivery. We now have two types of rental as costs – our fixed shop lots rental, and variable third party delivery services which takes 30% of the sale. 30% of RM120,000 is already RM40,000. That should give you an idea.
Human Resource
Pre-pandemic: 80% of our staff are part-timers. We see ourselves as a platform for young people to learn essential skills.
In the F&B industry, a lot of the work goes thankless
Moving forward, we will shift the ratio to 40:50 (part-timers : full-timers). In this current climate, there are more people with good credentials seeking jobs. We will be hiring more full time people as we need them to be good at what they’re doing.
My business will not be a dine-in business for all 6 premises for a very long time even when the MCO is fully lifted, unless a vaccine is discovered.
I can’t speak for all restaurant owners but for whoever wants to open a restaurant, you would need to consider the ratio of full-timers to part-timers. As we all know, a recession is looming. People are tightening their budgets. There’ll be more people coming out to look for either full time or part-time jobs. My advice is to try to balance it out. You will need your full timers to do all the stuff that requires consistency, and part-timers to handle the less complicated things.
Marketing Initiatives
Let’s talk about all the initiatives MBL has launched. Which have been the more sustainable ones and what are your key learnings?
- Targeted discounts
Our targeted discounts to different groups always worked well. Here’s a good example:
Discounts actually take a huge toll. This can be considered as part of the marketing fund but you cannot quantify or enjoy the returns until a much later time down the road.
In the post MCO world, it will cost more and take a longer period of time to convert customers because everyone will be fighting for them.
- Breakfast menu
This is a new form of revenue for us and one that will be a permanent feature.
Would we have launched this if not for MCO? The answer is probably no because it’s extra work for the team. But during a time of crisis, the team needs to push harder and stretch capacity.
- Home kits
This is actually doing pretty well so far. It has spurred a new idea for me, which is the next project I’ll be starting soon. It’s going to be called something along the lines of a “90% meal”.
I had an experience with one of my friends, Hong, who runs Grub where he made a replica of Ramdon inspired from the movie Parasite. Everything was prepared and all I needed to do was to cook the noodles for two minutes – 10% work. My girlfriend was impressed! It is essentially flipping the home kit around. Instead of 10% on our side, it will be a 90% product and the customer just needs to execute the last 10%.
- Frozen Patty Range
This is doing relatively well and it has opened up different doors for us. Like collaborations with other operators, and the possibility of OEM products supplying our patties, buns, sauces etc. to cafe owners, retailers and so on.
- Vouchers
myBurgerLab launched a one-off RM50 e-voucher on myBurgerLab+ app account in April. Only limited to 1,000 e-vouchers, these vouchers build an incremental value as the months go by. The longer you keep it, the more valuable it becomes, just like an investment. The percentage of increase for the e-vouchers launched in May is about 4.4% per month if the voucher is kept until February 2021. Within 24 hours, myBurgerLab successfully raised RM50,000 to tide us over for the next month.
That might be the new way we do vouchers. This helped us spread out our resources instead of having an influx of customers coming in at-a-go.
Also featured here: 7 ways to increase revenue streams
Let’s talk about cash reserves. How is the situation like at MBL?
Oh, man. I can’t speak for everyone. 2019 was a good run for us. We had expansion plans in 2020, which is shelved for now. At the end of 2019, we gave out bonuses to our staff in preparation for 2020, and said, “We did well this year (2019). 2020, we need to work harder and let’s fight hard together.” We are a little bit low on cash reserves now.
In hindsight, my team stayed, fighting hard with us. “In good times, we share whatever we have, and in bad times, we work together to get through it.”
This is still a work in progress but we are going to be on GrabMart soon with our own branded soda, quality cheeses that we already carry in-store, sort of like a restaumart concept. The last few weeks were quite stressful for me and the team.
It’s stressful because you need to go all in. If you go in half heartedly, you don’t get the results. You never know whether it works or not
Restaurant Margins
Now let’s talk about margins. You started pricing your burgers at RM11. Eight years on, your most expensive burger is at RM27.50 (Fat Elvis). Where do you think restaurant margins should be these days and why are restaurant margins so thin?
Again, disclaimer: I don’t think what works for us will work for everyone. We never practised the 30% food margin rule. It just doesn’t work for us. What we are practising is cash ratio instead. As business owners, you need to have a sense of whether a customer will find that price range acceptable.
Say, my food cost is at RM4, we will add RM10 to the selling price. I’ll settle for RM14-RM16. The basic cost for some of my burgers can be up to RM11, but no one would buy an RM11 cost burger at RM33 in our outlets. That does not make sense.
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Of course, we need to take into account brand perception. If people are willing to pay more than RM16, it does not make sense for us to sell them at any price that is lower than that.
Are we more profitable per single burger? I would say we are better at it. We know what sells, we will make sure that the top three products will have the highest margins.
The biggest mistake that one can make is to have a loss leader as your number one best-seller
You’ll bleed. Over the years, once we’ve identified certain products that people gradually gravitate towards because it’s not because of the pricing, right? Because it’s the taste, the experience, we’ll certainly price it at its maximum pricing that will not drive people away.
At one point, we realized that our RM11 burger, which was a loss leader, was dominating 70% of our sales. Clearly, we weren’t making money. Over the years, we are getting better at it. We became smarter in understanding how to create a menu that entices people to spend on certain products which have a higher margin, and loss leaders to draw in the crowd. Post-pandemic, people are trying to save money. Pay attention and react quickly.
And also, we know our numbers. Even on our worst days, we expected a certain amount and anticipated accordingly. Let’s say at 2,000 burgers a day I make RM10 on top of the cost. At a minimum, I will have a profit of RM20,000 times 30 days with RM600,000. So, is the RM600,000 able to cover my other costs and will the profit sustain the business?
There are a lot of ways to approach this but this has worked for us because we are able to keep the quality and people feel that the price range is acceptable.
What businesses need to know is that the “30% food cost” and other generic practices are merely guidelines. You need to know what works for you.
Positive impact of Covid-19
Very inspiring. You’ve been very active during this MCO, like launching the My F&B operator group on Telegram that has exploded to host over 1,000 operators and suppliers. Tell us more and if you have any more positive stories to share?
I think people were just looking for solidarity. What was good that came out of this pandemic is that people realize they can’t do this alone. And they should not. The market is big enough for everyone.
I am an advocate for sharing knowledge. On a smaller scale, I launched Good Food Alliance. A few of us were born out of each other. Like I was from Red Bean Bag, and Strangers at 47 was born out of myBurgerLab, GRUB as well. I think it’s in my nature to want to share – I started being open, telling them about my sales strategies, whether they asked for it or not.
If there’s a silver lining, I think that would be the greatest silver lining that we see here. And I hope that this is not exclusive to just F&B but to every other industry as well because in unity, you’ll find a stronger voice. Entrepreneurship can be a lonely journey but everyone loves company, and F&B is all about the community.
Images credit: myBurgerLab. This interview has been edited for clarity and length. Interview by Theri B. Edited by Lim Aileen.
