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YKKO: From small shop to major brand

From a small neighbourhood shop selling vermicelli and meatball soup about three decades ago, Yan Kin Kyay Oh (YKKO) has grown into a prominent Myanmar brand with 38 outlets across the nation.

“We have branches in five cities – Yangon, Mandalay, Nay Pyi Taw, Mawlamyine and Bago. By the end of this year, we expect to open four more shops, and we expect the total number of shops to reach 50 by 2020,” said Daw Aye Myat Maw, director of YKKO.

But it has not always been smooth sailing for YKKO. The company was incorporated in 2012. By 2014, the business had grown from 16 to 33 outlets, at which point, many operational requirements became obvious, such as the need to strengthen cash flow. As a result, YKKO had to shut a few outlets in order to control costs.

“We decided to temporarily stop our rapid expansion and focus instead on improving our management and the functioning of the head office,” Daw Aye Myat Maw said.

Fortunately, help came earlier this year when Singapore -listed Yoma Strategic acquired a 65 percent stake in YKKO, in a deal worth US$12.6 million. Yoma said the Myanmar restaurant complements the foreign brands in its food and beverage portfolio, which includes KFC, Little Sheep, and Auntie Anne’s. The remaining 35pc of YKKO is owned by its four original stakeholders.

Daw Aye Myat Maw, whose parents were among the founders of YKKO, discusses the restaurant’s journey from a neighbourhood shop to a national brand:

How did YKKO start?

Yan Kin Kyay Oh was established by the late U Nyan Lin, his wife, Daw Yu Yu Lwin (the current chair),and my parents in 1988. When the second branch in Saya San street opened in Yangon in 1993, we started using the abbreviation YKKO. In 2003, outside partners joined our family business and a shop was opened in Hledan street downtown. Later, as more and more shops opened with different shareholding structures for each one, accounting became tiresome so we decided to form a holding company in 2011 for more efficient management.

What difficulties have you faced in opening new branches?

In the beginning, it was difficult to get our accounts accurate. We then managed to improve our accounting system with the help of one of our partners. As we have added more chains, the challenge shifted towards offering consistent quality. We’ve provided many training programmes to staff. Another challenge was the supply chain. We buy a lot of pork, so you’d expect economies of scale. But in fact, it was quite difficult to get the quality and quantity we wanted, so we had to pay more. Getting chicken used to be a problem too before CP entered.

Even now, it is still difficult to get good quality mustard leaves in the quantity we need.

As we continued to improve our brand, everything was by trial and error. In Myanmar’s food and beverage industry, YKKO has the biggest supply chain, so there was no one to show us the way. We tend to be one of the first in the field to make changes and improvements. Whenever our late chair U Nyan Lin went abroad, he’d learn from successful international chains such as Starbucks. He read many books and implemented what he learned.

In analysing new locations, we used to choose according to our gut feeling, but we made bad decisions and had to close about 5-6 shops. Some were closed because there was not enough disposable income in the area to sustain us. We review underperforming stores for 2-3 years before we decide to close them.

Which towns and cities is YKKO targetting for new branches?

For the four shops that are opening this year, we have chosen Taunggyi in Shan State and Taungoo in Bago Region. After opening our 30th shop in 2015, we had to slow our expansion, particularly in Yangon, where we have many branches. We have to make a thorough assessment of costs. In the past, all our shops were stand-alone, but as we faced traffic congestion and insufficient parking in recent years, we began to open more in shopping centres.

What is the estimated cost of opening a branch?

It depends on the location and whether it’s a stand-alone or in a shopping mall. Each has its weakness and strength. A stand-alone shop has more space and lower rent but the renovation cost is higher. We also need to invest in a generator. Renting space in a shopping mall costs much more but the initial set-up cost is lower. With higher rents in malls, the new generation of our shops are smaller. If it cost K300 million to set up a larger stand-alone shop, a smaller shop in a shopping mall would cost K150 to 200 million.

Is YKKO the market leader in kyah oh?

We were lucky. As we expanded fast at one point, our large network added to our advantage. We always try our best to ensure quality service. We need to thank our customers. They bear with us through some problems – they complain but they continue to love us. So it is with their support that we are lucky to have the leading position in kyah oh. Our normal kyah oh costs K4700, but it can be complemented with fried chicken or hotpot.

Do you think the country has made economic progress?

YKKO’s fastest expansion was from 2010 to 2014. During this period, it felt as though the country was developing fast. There was a lot of hope. But the economic progress now comes mostly from speculation in the property market. As speculative spending or growth is not sustainable or all-inclusive, the economy became sluggish from 2015 to 2017 as the real estate market cooled. After the new administration took power, they analysed government spending and did their best for the economy. They have started to be stricter in tax collection.

Although business expenses are higher due to increasing electricity charges, they were lower before because the government was subsidising electricity at a loss. A strong infrastructure is essential for development, so everyone should cooperate. Higher electricity charges are good because they would bring more investment and allow more people to be connected to the grid in other parts of the country. The government is implementing better policies for the people, but some might think the changes are too slow. I think it will pick up soon. Faster changes have been seen in 2019 than in 2018.

What are businesses expecting of the government?

Everyone wants to see better changes in the shortest possible time. What I expect most from the government is to appoint the right persons to the right positions. Changes will happen faster if departments have the authority to make changes on their own, rather than waiting for the central government to decide. The current government has given chief ministers more power to carry out necessary tasks in their regions or states.

It’s important for the government to continue improving infrastructure and economic development. It’s going a little slow but in the right direction.

Source: Myanmar Times

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