IN September, the German beer bar and restaurant Brotzeit opened the doors to its newest outlet at The Star Vista mall in Buona Vista. Seating 195 diners, this is Brotzeit's fourth outlet here and a testament to the group's success since it opened its first store in VivoCity in 2006. "One of the things that mall operators now recognise is that Brotzeit as a tenant does very well and is a benefit to the landlords in terms of bringing people to the mall," says CEO Sean Flynn. "Around us, constantly, whether it's at 313@Somerset, Raffles City or VivoCity, the concepts that are next to us will change occasionally. But we've gone from strength to strength."

In fact, the company claims to have been "profitable from day one and has registered better than 10% growth every year". Flynn says this has to do with Brotzeit's superior "unit economics" — the nature of the restaurant allows it to sell both beer and food in high volumes. "Because we carry high-quality German beers, our volumes tend to be twice those of other successful restaurants. We do a big beer component and we do a big food component," he explains.

There is also a big emphasis on quality food. "We have focused on German food because our view was that there are plenty of high-quality German beer houses. What we needed to do to differentiate ourselves was to really focus on the quality of the food." This focus allows Brotzeit to prosper both as a restaurant during weekdays and as a beer bar in the night and on weekends. "Friday happy hour is a huge success here; but if we were a restaurant, we'd be dead," notes Flynn.

The company's successful formula has allowed it to expand its franchise overseas. This year, it announced the opening of its first franchise-operated outlets in Hong Kong and Ho Chi Minh City, Vietnam. An outlet was also opened in Sunway Pyramid, Malaysia. And it has signed franchise agreements for new outlets in Taiwan, Indonesia, Shanghai, Beijing, Guangdong and the Philippines.

Flynn plans to open 80 stores in the next five years — 20 in Southeast Asia, 30 in North Asia and the rest in key markets such as New Zealand and Australia. "We're looking over the course of this year to conclude [agreements in] Japan, South Korea, Thailand, Australia and New Zealand," he says. After building a base in Asia-Pacific, the company will move on to Europe and North America — regions from which Flynn says he has already received expressions of interest. "We're holding people at bay in markets that we're not yet ready to go into. We have made a very conscious decision to focus on Asia-Pacific. We want to get our foundation built so that as we go to Europe and North America, probably from next year, we've got a very firm foundation."

Rapid expansion
Flynn admits that 80 stores is an ambitious number. But thanks to the franchise model he's developed for Brotzeit, he doesn't think it's out of reach. Brotzeit's practice is to sign area development agreements that require franchisees to open a minimum of three to 10 outlets in a specified number of years. Franchisees have the option to open more outlets — subject to Brotzeit's approval — and are guaranteed exclusivity in their areas of operation.

The size of the area as well as the number of outlets can vary. In a large country like China, for instance, Beijing, Shanghai and Guangdong are considered three separate areas. But smaller countries like Taiwan and Hong Kong are each counted as one market.

By working with more than one franchisee in larger markets, Flynn says Brotzeit not only spreads out its risks but can also grow more rapidly. "When companies issue a master franchise for a large country like China, all of their eggs are in one basket and their success is then dependent on the franchisee 100%. If we, in a country like China, have five or six different area franchisees, we manage our risks. Secondly, it allows us to grow at a quicker rate because we have five or six franchisees simultaneously building out [one store every year]. So, we achieve our objectives quicker."

Of course, it doesn't make sense to allot each franchisee too small an area because they won't be able to open as many outlets. "The amount of effort typically required in entering a market and working with a franchisee on their first outlet is really enormous. But by the time they open their second, third, fourth and fifth outlet, they are able to do so with much less effort and with a much greater degree of success as well because they know what they are doing. It minimises the amount of involvement from the corporate office after the first outlet is opened," says Flynn.

When working with owner-operators, the company will typically sign an agreement for three to five outlets. "[These are] the kind that come from the industry, love the brand and want to do it themselves. But if we're talking about a corporate organisation that is adding a brand to its suite of brands, then [the number might be] five to 10. But of course, it all depends on the market," says Flynn.

Building a franchise model
Even if the capital expenditure and coordination going into opening new stores are being offloaded onto a franchisee, it still takes some work on Brotzeit's part. "The key for that model then becomes making sure we've got the ability to support the franchisees in each region," Flynn points out. That is precisely what he was hired for.

The concept for Brotzeit came from a group of Bavarians and Austrians living in Singapore who wanted to bring the Bavarian culinary experience to the country. With the help of Singapore-based restaurant group Garibaldi Group of Restaurants, Brotzeit was launched in 2006. But it wasn't until 2010 that the company signed its first franchise agreement. That was when Flynn was hired to build a franchise operation.

Drawing on his 30 years of experience managing both franchisors and franchisees for F&B names such as Movenpick, Pizza Hut, Smitty's and Shakey's Pizza, Flynn spent nine months building the infrastructure needed to franchise Brotzeit's concept. This included operation standards, sausage recipes and marketing tools. "Once one has identified and defined the concept thoroughly, any deviation from that is only marginal. But if you don't define it in the first instance, then deviations begin to pile up on each other and before long, a restaurant doesn't resemble its original concept," he says.

For instance, all Brotzeit stores feature the Brotzeit mural — whimsical animals, some of them in traditional Bavarian dress, enjoying beer and Bavarian pretzels. However, the mural also allows for variations unique to a store's location. The one in the newly opened Star Vista mall, for instance, features a drawing of the mall — done in the same white-on-black pattern.

Brotzeit has also employed the use of technology to standardise and improve service standards and food quality. The service captains take orders on a personal digital assistant that relays the orders directly to the bar and the kitchen. Food and drinks are then brought out by runners. This allows service captains to stay in their sections, Flynn explains. "They are therefore more attentive to the needs of the customer."

In the outlet at Star Vista, there is also a sophisticated oven that allows the pre-programming of cooking times and temperatures for the various foods served on the menu. Everything from pork knuckles to pizza can go into the same oven and a timer beeps when it's time to remove the food. This is the first such oven that the group is using in its kitchens, and all franchisees will be encouraged to use the same type of oven in future.

Smoothing over differences
However, what Flynn is really proud of in his franchise model is the thought he has put into what franchisees want. "It's really using the best practices from all of the companies I've worked with in the past; learning what works best and where the problems are with some of the other models," he says. "What I bring to the table is a very thorough understanding of what the franchisee needs from the franchisor and, just as important, what they don't need."

One of the most important elements is the cost structure, which Flynn says is relatively low. Franchisees can expect an initial investment of about US$600,000 for each store. "As a franchise, Brotzeit does not have the kind of structure that you'll find in most other international franchises, whereby the franchisor makes money from the restaurant fit-out and the ongoing purchases and operations of the outlet. We don't make any money off the tables or the chairs or the beer-dispensing system or the POS [point-of-sale] machines," he notes. "We allow franchisees to build a Brotzeit at the lowest possible cost."

Although Brotzeit has specifications for items in its outlets — such as how tables and chairs should look like — all elements in the store can be sourced by the franchisee locally. That might mean small variations — the wood used at the bar in Vietnam might be a shade darker than the one at Star Vista — but both franchisor and franchisee stay happy.

Brotzeit also does not make money from the ingredients that franchisees buy for the restaurant, something that Flynn says is common in other franchise models. The only exception is the spices that go into the restaurant's proprietary sausages. "But that has to do with ensuring consistent flavour. And the money is so little that it doesn't matter anyway."

This modern franchise model is one reason why Brotzeit is seeing so much interest from potential franchisees, Flynn says. "This whole idea of not making money off the franchisees' purchasing streams eliminates 90% of the conflict within systems. The real irritant, the aggravation that franchisees feel when they're spending more than they have to, to either build or operate their business, is something that we have structurally avoided here. And sophisticated franchisees recognise that and really appreciate it."

Industry man
Flynn's journey into the world of organised F&B began while he was still in university and trying to make an extra buck as a waiter at a Canadian chain called The Keg. "It was a steak and seafood franchise that had been started by the former owner of the McDonald's franchise in Canada. So, my first experience in the restaurant business was in a franchise that was very professionally structured. I was immediately impressed with how systematic and organised and professional the business was," he says.

Within six months, Flynn was in the management team. And the business interested him so much that he took a year off from university to focus on his work. "I was too busy. I couldn't squeeze it all in. So I thought, well let's see where this goes. I focused on that for a while and then I went back [to school]."

The experience transformed him. When he started his degree in business administration at the University of Regina in Canada, Flynn admits to being nothing more than an aimless youth. "Like most teenagers, I had no idea what I wanted to do. But I think the restaurant industry got a hold of me and never let me go." His work at The Keg led to a stint as a consultant to the F&B industry and later, to a job in Singapore managing the Pizza Hut franchise for Cerebos Pacific in Singapore and Malaysia.

"Actually, there was an interim step: I was down in the Caribbean, in finance. I left the [F&B] industry, but found finance so dry that I came here," he says. It was 1988 and Asia was the place to be. "It was coming out of a recession, so we thought, let's have some adventure," he explains, recalling how he turned up here with his wife to try his luck in the F&B industry.

His successful stint at Cerebos included developing the popular delivery jingle for Pizza Hut — 235 3535 in Singapore and 755 2525 in Malaysia. "We had a hard time getting the number for Malaysia because we had to think not only in Mandarin but also in Cantonese. And the number we had, which was a great number, was — I think — 767 6767, which didn't work in Cantonese [as it sounded like a swear word]. We were nearly all the way through with that, but we had to change it," he says.

After nearly four years at Cerebos, Flynn joined Scotts Holdings — now part of Capita­Land — where he was responsible for the A&W franchise in Singapore and Thailand as well as for Movenpick Restaurants here. Besides his experience operating franchises, he has also been responsible for franchisor operations. From 2001 to 2002, he was president of Shakey's Inc USA, a franchisor of restaurants based in Los Angeles, California. And from 2003 to 2006, he was president and CEO of Smitty's Canada, a family restaurant franchise with 120 outlets and US$168 million in system sales.

Need for flexibility
It was his years of experience working with both franchisees and franchisors that caused Flynn to jump at the chance to work at Brotzeit. By 2007, Flynn had returned to Singapore and was running his own hospitality and franchise consultancy called D.S. Flynn & Associates. "The owners of the business, knowing my background, gave me a call and asked me to do a study on the franchiseability of the Brotzeit concept," he says. "I was so impressed with the concept, the franchising potential, the unit economics and the opportunity that existed — primarily because there's no competition in the German casual dining segment."

Flynn immediately signed on for when­ever Brotzeit was ready for franchise expansion. That call didn't come until October 2010, but when it did, he quickly agreed. It was a huge opportunity for him to write his own franchise model from scratch. "The last two franchisors that I was the CEO of, one was 50 years old and the other was 45. So, I was burdened with legacy issues everywhere I looked. With this franchise, I was able to come in with a blank piece of paper and create and craft the most modern, functional franchise system in the world."

Besides dealing with typical pain points of franchisees, Flynn says Brotzeit will also try to be as attentive to new issues as possible in order to stay relevant. "To me, the key is learning and flexibility." He explains that in the beginning, many of the American franchises believed that things should either be done their way or not at all. "That model doesn't work in this world. I think the successful franchisors have learnt that flexibility — culturally, geographically and operationally — is absolutely necessary." That means maintaining brand integrity while allowing room for adaptation. "Not that we'll ever start selling French food. It will always be Bavarian preparation methods. But if in this market, we like more fish, then we can do more Bavarian-style fish. Staying vibrant is a matter of continual improvement: never thinking we've got all the answers."

In an attempt to better connect with and listen to its franchisees, Brotzeit will host its first annual conference next year. "We will get all franchisees together and share best practices on marketing and the menu. We'll talk about what works and what doesn't, what needs to be adapted, what needs to be changed. And we'll solicit the input of all the franchisees for both the menu and marketing."

With the fourth Singapore outlet opened, Flynn will be scouting around for one or two more locations here. He thinks there is room for five to six Brotzeit outlets in Singapore — with one possibly on the Eastern side of the island. Overseas, the next outlet that is due to open is in Shanghai. Another 25 have been committed in nine different markets.

As the brand expands, Flynn sees its cachet growing. "When you have a brand that is in multiple locations, the value and awareness of the brand actually add value to your own business. It's a compelling proposition from the franchisee's perspective. And obviously, from our perspective, the larger we get, the more substantial the business is for us."

This story appeared in The Edge Singapore on Oct 8, 2012.