Standardization ㅡ key to franchise business
People eat “bulgogi” at a Bulgogi Brothers restaurant in Manila, the Philippines.
'State support is needed to facilitate globalization’
By Park Si-soo
Jung In-tae, chairman and CEO of Bulgogi Brothers, said standardization of taste and services is crucial for successful overseas expansion of Korean franchise restaurants. Courtesy of Bulgogi Brothers
“Standardization”
This is the secret of success of franchise Korean restaurant Bulgogi Brothers, owned by Jung In-tae. His franchises flourish in Malaysia, the Philippines and as far flung as Canada.
Inspired by the boom in Korean pop culture abroad, an increasing number of domestic restaurants are venturing into uncharted markets.
Jung is also trying to ride on this wave, seeking a bigger international presence with Korea’s signature traditional meat dish “bulgogi” (grilled marinated beef). The 58-year-old CEO is nicknamed “the master of franchises” for leading the rapid growth of American family restaurant brand T.G.I.F. and Outback Steakhouse in the domestic market in the 1990s.
“Franchise restaurants can survive (in the overseas market) only when they are capable of providing local customers with perfectly standardized tastes, services and atmosphere,” Jung said during a recent interview with The Korea Times. “Maintaining perfection isn’t difficult at single, individually-owned restaurants because everything is controllable by its owner, but tough job for franchise chains.” To ensure standardization, the firm’s inspectors visit all overseas chains at least once every quarter, he said.
The guidebook contains all the requirements its franchisees must abide by or their franchisee license will be canceled.
Stipulated in the guidebook including not only recipes but also cooking methods, tools, types of container, tableware, manner of restaurant and table decoration and even the temperature range within which a meal should be served. Ideal indoor temperatures for dining, the ventilation system, kitchen and dining room structure, standardized names of main and side dishes in multiple foreign languages and frequency and content of employee training and reeducation are also stipulated in the guidelines.
“The most critical item is sauce. We directly sent it from Seoul to overseas outlets in order to keep the taste of the main dishes, including bulgogi, unchanged, while vegetable, meat and other minor ingredients are supplied locally,” he said. “We also apply strict guidelines in selecting them from local markets.”
Learn from experience
Jung learned about the importance of standardization while working at American family restaurant brand T.G.I.F.
The imported restaurant chain hit the jackpot in Korea in the 1990s, when scores of teenagers and young adults waited in long queues to get a seat.
According to many accounts, including Jung, T.G.I.F’s success owed much to its standardization efforts. Unlike Korean restaurants at that time, the imported brand had everything at its outlets standardized, offering customers exactly the same taste with the same table setting and atmosphere as well as the same customer services. The flawless consistency was crucial in building up customer loyalty to the brand. Back then Jung was general manager of T.G.I.F.’s domestic unit.
He left the company in 1996 and then co-founded Outback Steakhouse Korea. He contributed a lot as Outback grew to have 100 stores, the second largest in number after the United States, for which he was given the nickname “the master of franchises.”
In 2006, he launched Bulgogi Brothers with co-founder Yi Chai-woo, another former T.G.I.F. general manager.
The duo mapped out the firm’s operation system based upon the standardization policy of their previous workplace; and deserved credit for its success.
Bulgogi Brothers opened seven franchise outlets only one year after its first restaurant opened in Gangnam, southern Seoul, in October 2006. Currently there are 38 outlets across the country.
The firm opened its first overseas outlet in the Philippines in September 2011 and there are 10 overseas ㅡ one in Canada, four in Malaysia and five in the Philippines.
At the current growth rate, Jung estimated, there will be more than 250 Bulgogi Brothers restaurants worldwide, including 100 in China, by 2023.
State support
The CEO said state support for Korean food exporters is essential. One of the segments he thinks is in urgent need of help is making a standard form of contract for franchise businesses.
“There is no globally-recognized English-written form of contract for franchise business. The absence has forced domestic franchise restaurants to make huge spending on developing basic forms of international contracts under the costly supervision of legal experts at home and in target counties,” he said. “Making the situation worse is that each country has different rules on foreign franchises so that we had to develop new contracts for each market. Thankfully, our financial health was good enough for us to make it on our own, but there are many small but competitive franchises that cannot afford to do this.”
Noting that Korean dishes are widely perceived as “healthy and upscale” and worth paying more for than Chinese food, he said it would be reasonable to see middle and high income earners as a primary targets for marketing.
Inspired by Bulgogi Brothers’ success, Jung has launched five other food brands _ Budaejjigae (spicy stew mixed with sausage, ham, instant noodle and minced beef); Sullungtang (thick broth made of beef-bones and meat); traditional Korean noodles; Bibimbap (steamed rice mixed with various vegetable and red pepper paste) contained in a heated stone bowl; and take out coffee. The five brands will be exported in the near future, he said.
The combined sales of the six brands last year was 53 billion won ($48.7 million), up from 40.6 billion won in 2011. Their target for this year is 64.6 billion won.