Skip to content

Why some businesses are allowed to fail

October 7, 2009

Not all businesses are created for profit. Yeah, no sh*t. And I’m not talking about the “non-profit” or charity types either. These businesses have nothing to do with helping humanity but are set up to lose money.

Let me relate to you something I’ve seen.

There’s this restaurant near my business partner’s office that’s the size of a small parking lot. Yeah, its huge. Because of its location its a convenient place for me and my associates to hang out after our meetings.

For as long as I can remember, whenever we go there, we get no service. Yeah, the waiters ignore us. Its not just us. Everyone that comes into the restaurant will be ignored. I’ve seen customers give up waiting and walk off in a huff.

What the waiters do is bunch up near the cash register to chat among themselves. Sometimes they walk around aimlessly. You can wave your hand, call out, or wolf-whistle at them. They’ll just glance at you briefly and continue ignoring you.

So how do we get service? One of us would walk up to the cash register and tell the guy what we want. If we’re lucky the food or drink comes in 5 minutes. If not, we get it in 10-15 minutes.

Imagine waiting 15 minutes for a drink in what’s basically an empty restaurant.

Now this restaurant is operating out of a dedicated single-story structure on prime land fronting a busy street. I estimate the owner must have spent $4 million to buy the building, $200k to outfit it, and is probably burning $50-70k a month running it.

On average, I see no more than 10 customers at any one time, meaning most of the time its 90% underutilized. I often see more waiters than customers.

Just running the math off my head, I estimate their income to barely cover a third of their expenses. Unless they’re running some racket in the kitchen, its clearly loss-making. If you take the capital costs of building and fixtures into account, you’d be looking at a permanent loss-making gig because your income can never catch up with your expenses, let alone give you a return.

Despite that, I’m told they have been there for a few years, operating this way, with the same attitude of service.

Can you think of a reason why a business owner would run a joint at a loss for 5 straight years and probably have plans to continue to run it at a loss for another 5 straight years?

Could there be more than meets the eye?

Ta da…! (drum roll) 😀

Advertisements
4 Comments leave one →
  1. October 7, 2009 1:50 pm

    Just like those shops in KLCC . Selling weird ass furniture and decoration and paying a RM40,000 rental .

    Probably money laundering .

    I played for several Pubs/Clubs that has the same situation . Paying the band RM2000 a night , with loads of workers , and hired chicks to drink with customers ..
    and every night i can only see that few 5-6 regular customers ..

    Anyway , another similiar place is Murni and Williams . The difference is the workers are trying their best . But they just couldn’t cope with the volume .

    Most customers will put up with the waiting when the waiters are genuinely busy but when the staff simply aren’t interested, they just get up and leave.

    Money laundering? Tell me more! 😀

  2. October 7, 2009 11:27 pm

    money laundering? quite a lot ler. pubs/discos/clubs, etc. some w/o biz, some very good biz. but all hv the same objective – to generate ‘healthy’ cashflow.

    Then I wish my biz is a money laundering conduit, then I can relax and not have to worry about $ coming in. 😀

  3. October 8, 2009 2:45 am

    Alvin is right . Pubs , restorans and F&B are the easiest because you can generate unlimited amount of fake sales , that you can never trace .

    The only way to trace a food sale , is to cut open my stomach after i eat em’ .

    You should blog something about creative accounting , ahhh 😉 That was the only thing that i thought was useful when i was still studying in Uni .

    Hmm… I wonder if the revenue inspectors wud be interested in a portable x-ray machine bundled with a portable surgery kit. 😀

    Creative accounting.. yeah if only I am that ‘creative’, haha.

  4. October 8, 2009 1:49 pm

    😀 We all seem to have only one conclusion, esp in this land where many things are more than meets the eye. Another Chinese saying ( should be universal) is, nobody goes into a losing business… Maybe these rich fellas just want to generate employment for certain section of the population or these are fronts for ‘other’ lucrative operation?

    If I had to guess, I’d go with the latter. What better way to channel money to another universe than to create an artificial ‘black hole’ and shoveling money into it…

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: