Franchise Readiness Audit

Kedai Ayamas

Franchise Readiness Audit Kedai

Ayamas,
(Draft for Discussion)

Prepared by SAFA Consultancy

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Franchise Readiness Audit

Kedai Ayamas

1.0 INTRODUCTION
1.1Safa Consultancy Sdn Bhd (the Consultant) is to undertake the
franchise

readiness audit on

Kedai

Ayamas,

the

first

company in Malaysia to introduce the sales of chicken and

chicken-based products ready to eat chicken products, and
operating a quick service restaurant, through a network of
company-owned, air-conditioned stores.

The Scope of Study

1.2The Consultant has conducted a franchise audit of Kedai
Ayamas existing business model and intended business
model for franchise to ascertain the readiness of Kedai
Ayamas to venture into franchising.
1.3The Consultants approaches were:

visited a Kedai Ayamas outlet at Wisma KFC and Kelana

Jaya.

collated, compiled and reviewed Kedai Ayamas relevant

documents; and

discussed with the management and executives of Kedai

Ayamas regarding its existing business model, intended
franchise business model, management experience and
their aspirations, understanding of the franchise business
system, the products and services offered, the set up
cost of the franchise business model, overview of related
industries, prospect, competition, and corporate and
marketing strategy.

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The Findings
1.4The findings of this report address pertinent issues namely:

is

Kedai

Ayamas

business

model

to

be

adopted

franchiseable and feasible?;

is

Kedai

Ayamas

business

model

replicable

and

transferable?;

is the industry conducive for the Kedai Ayamas business

model to be adopted?;

does the product appeal to the market?;

is the investment affordable?;

has Kedai Ayamas established a comprehensive and

integrated system to be developed into a franchise
operation?;

has Kedai Ayamas acquired the depth of the knowledge

on the business?;

has Kedai Ayamas acquired an infrastructure for the

franchise package to be launched?;

does Kedai Ayamas has the financial resources to support

the development of a franchise business system?.

1.5With this exercise, the Consultant hopes that Kedai Ayamas

would have a better understanding in laying the foundation
for a franchise venture to ensure the business concept is
financially sound and franchiseable.
2.0

CONVENIENCE STORE TYPE FOOD INDUSTRY

2.1Malaysians was introduced to convenience stores such as 7-11
in the 80s and 90s. There is still scope for new chains as
the convenience store and food market in Malaysia is a
growing one. This is attributed to the:

expanding population;

increasing purchasing power of the people;

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Franchise Readiness Audit

Kedai Ayamas

changing lifestyles such as preferences for leisure,

convenience and eating out;

changing role and independence of women as more of

them enter the labour market; and

urbanisation as urban families can afford and are more

willing to incur higher food expenditures.

2.2These changes have encouraged the development of diverse

eating habits and tastes among consumers for convenience
and pre prepared foods.
3.0

THE COMPANY
3.1Kedai Ayamas chain markets HALAL, high quality branded
chicken that is hygienically processed and packed in the
Company's own plants.
In addition to its chilled chicken products and value-added
further processed poultry products, the Kedai Ayamas retail
chain was the first in the country to offer a delicious array of
chicken roasters and light chicken-based snacks. One can
easily purchase nutritious and tasty, ready-to-eat food for
convenient takeaway, ready-to-cook frozen products, fresh
chilled chicken and sundry products ranging from special
sauces

to

confectionery

and

beverages.

The

first

convenience store was opened at Seapark on 29 April 1988.

Today, it has 74 stores nationwide.
The Vision
3.2Kedai Ayamas aspires to be a leading homegrown Preferred
Specialty Food Shop convenient food chain that serves the
finest chicken & chicken related products and the healthier
choice for customers.
The Mission

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3.3Kedai Ayamas mission are:

a. To continuously provide high quality food, fresh, chilled,
frozen & canned.
b. To serve our customers in a convenient and modern
environment.
c. To ensure accessibility & availability in your community /
neighborhood.
d. to render exemplary quality service;
e. We are guarantees that all the products are Halal.
f.

to

establish

and

promote

the

brand

locally

and

internationally;
g. to position Kedai Ayamas outlets at premier locations. to
appreciate the multitude of customers by offering them
better quality products and services.

The Financial Highlights

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3.4The income statement of Kedai Ayamas based on the Audited

Statement Accounts for 2011, 2012 & 2013 is tabulated
below.

Summary

2011 (RM)

2012 (RM)

2013 (RM)

Revenue

76,974,764

70,615,207

63,828,707

[53,015,139
]

[49,508,661
]

[43,328,771
]

23,959,625

21,106,546

20,589,936

2,070,009

2,127,155

2,177,769

Staff Cost

[3,308,393]

[4,138,931]

[4,492,013]

Selling &
Marketing Exp

[20,603,063
]

[26,752,076
]

[25,846,671
]

Other Expenses

[207,697]

[501,587]

[614,884]

Result Frm Opr

Activities

1,910,481

[8,158,893]

[8,185,163]

Finance Cost

[279,029]

--

--

Profit / [Loss]
before tax

1,631,452

[8,158,893]

[8,185,163]

Income Tax

[648,000]

1,438,000

37,000

983,452

[6,720,893]

[8,222,863]

Cost of Sales
Gross Profit
Other Income

[Loss]/ Profit

3.5Kedai Ayamas shows slight profit from its operations in 2011

compared to 2012 & 2013 due to a higher sales volume and
lower staff cost.
3.6Losses in 2012 & 2013 due to high staff cost and other
operating expenses. However, the management adopts
prudent
adequate

financial
financial

risks

management

resources

are

policy

available

whereby
for

the

development of Kedai Ayamas business.

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4.0

THE BUSINESS
4.1Kedai Ayamas is the first company in Malaysia to introduce the
sales of chicken and chicken-based products through a
network of company-owned, air-conditioned stores - chicken
boutiques. Kedai Ayamas chain markets HALAL, high quality
branded chicken that is hygienically processed and packed in
the Company's own plants.
4.2In addition to its chilled chicken products and value-added
further processed poultry products, the Kedai Ayamas retail
chain was the first in the country to offer a delicious array of
chicken roasters and light chicken-based snacks. One can
easily purchase nutritious and tasty, ready-to-eat food for
convenient takeaway, ready-to-cook frozen products, fresh
chilled chicken and sundry products ranging from special
sauces to confectionery and beverages.
4.3The first convenience store was opened at Seapark on 29 April
1988. Today, it has 74 stores nationwide. This is basically a
store with a ratio of 30:70 in terms of retailing chicken meat
versus sundry goods that complement chicken product.
4.4Each year, more and more outlets are added to the chain; and
these are styled to place greater emphasis on the sale of
high-margin ready-to-eat gourmet chicken products.
The Corporate Identity
4.5Kedai Ayamas brand name is KEDAI AYAMAS More than Just
Chicken for both retail and restaurant business.

4.6The logo has been registered under class 16

The Restaurant

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4.7Kedai Ayamas sells Halal chicken meat to the general public

across Malaysia, as well as providing our very own products
at our flagship chain retail outlets, Kedai Ayamas. Our
products include:
a. Chilled Whole Chicken, Chicken Parts, Deboned Chicken
Meat, and Minced Chicken Meat products.
b. Frozen Chicken products.
c. Breaded Freezer-to-Fryer products; Nuggets, Drummets
and Midwings, Breaded Chicken Parts, Burger Patties,
Chicken

Fingers,

Chicken

Meatballs

and

Chicken

Popcorns.
d. Fully Cooked further processed products; Sausages,
Cocktails, Smoked Wings, Meatballs, Meatloaf & Pizza
Toppings.

e. Shelf

Stable

products;

Canned

Curry

Chicken

(Original/Extra Spicy), Canned Masak Merah Chicken,

Canned Rendang Chicken,
f.

Canned Oriental Sauce Chicken with Mushroom and 100%

Fresh Chilli Sauce.

g. Golder Roaster, Pepper Roaster, Percik Roaster, Pepper

Prime Roast, Honey Prime Roast, Pepper Tigh
4.8Since its establishment, the Kedai Ayamas has been able to
attract customers from the surrounding areas to patronize it
and place their orders with the delivery services.

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The Supplies
4.9Kedai Ayamas products are supplied by Ayamas which supply
Halal chicken meat to KFC, Pizza Hut and Rasamas
restaurants across Malaysia, as well as providing our very
own products at our flagship chain retail outlets, Kedai
Ayamas. All our products are top quality Halal products.
Today, Ayamas is one of the biggest integrated poultry
operators nationwide, specializing in the processing and
retailing of chicken for local and export markets.
The Market Segment
4.10

Kedai Ayamas outlets aims at capitalizing on consumers from

all walk of life, young and old, with emphasis on healthy
chicken products.

4.11

The market segments are made up of executives from the

surrounding areas, residents from the surrounding areas and
shoppers (from opening until closing hours).

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Business Issues
4.12

Kedai Ayamas customers attach great importance to the

quality, cleanliness and consistency. Politeness of staff and
type of service form the next important group. The
remaining menu, environment, location and price form the
lowest group. Hence, for the chain to do well, great attention
should be paid to the first two groupings to enhance
customers' beliefs of these attributes.

4.13

To encourage more customers, Kedai Ayamas promotes its

halal and healthy chicken products.

4.14

Kedai Ayamas has developed the operations manual and

control to ensure the standard operating procedures and
best practices are being followed.

Market Share / Competition

4.15

The convenience store & food business is highly competitive.

To be successful, it must be able to project the right image
as well as meet the needs of customers. Marketing
strategies must be formulated to attract customers.

4.16

Kedai Ayamas believes that its convenience stores has

developed its own profile of customers. To further increase
its market share, Kedai Ayamas plans to open more
franchised outlets.

Marketing & Promotion Strategy

4.17

Kedai Ayamas realized that it will not be able to continue to

spend heavily on advertisement and promotion. Hence, with
franchise networking Kedai Ayamas would be able to pool
the resources and create the market impact.

4.18

Currently, its direct marketing is via advertisement in a

magazine/bulletin circulated in the surrounding residential

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areas

while

branding

through

products

distributed

to

retailers.
4.19

The

promotional

drive

entails

distributing

flyers

and

vouchers in the surrounding areas and food promotion at the

outlets.
Market Entry
4.20

There are no restrictions or regulations to enter the market.

However, due to the high cost in opening and operating a
convenience store, financial strength becomes the key factor
in the long-term survival of this venture.

4.21

The cost of entering the industry is substantial where an

initial capital outlay is required for equipment, renovations
and decoration. A convenience store depends on its turnover
to recoup not only these setup costs, but also recurring
expenses,

such

as

rent,

wages,

utilities

and

kitchen

equipment, as well as disposables. Besides, expenditure is

also incurred on advertising and promotion to establish
consumer awareness and support.
4.22

Thus, to sustain the business, it is necessary to maintain a

sufficiently high volume of sales.

Corporate Strategy
4.23

Among corporate strategies identified by Kedai Ayamas to

ensure its growth and success of the business are:

a. to refine the business model including the logo and

outlook of the outlet;

b. to develop different concepts of Kedai Ayamas;

c. to open more outlets and position its outlets at strategic
locations;

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d. to replicate the business concept locally, nationally and

globally.
5.0

THE FRANCHISING PLAN

5.1

Determined to replicate the business concept locally,

nationally and globally by positioning the restaurant at
strategic location, Kedai Ayamas will promote the franchise
business system as the strategy.

5.2

The proposed franchise business concept would be a Kedai

Ayamas retail chain to offer a delicious array of chicken
roasters and light chicken-based snacks. One can easily
purchase

nutritious

and

tasty,

ready-to-eat

food

for

convenient takeaway, ready-to-cook frozen products, fresh

chilled chicken and sundry products ranging from special
sauces to confectionery and beverages.
5.3It requires a minimum of 1,500 sq feet floor area, ideally located
at a high traffic area in a commercial or shopping complex.
The floor requirement is subject to changes depending on
the location and lay out of the premise.
5.4The initial investment cost is estimated at RM300,000 to
RM500,000

including

RM60,000

working

capital.

The

projected cost is subject to revision during the franchise

development stage.
5.5Kedai ayamas has yet to justify on the franchise fees and
others. It will also be determined during the franchise
development stage.

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Franchise Readiness Audit

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6.0

FRANCHISEABILITY ANALYSIS
6.1Based on the discussion and information provided about the
industry, the management, the business and observation of
the

current

franchiseability

operation,
analysis

the

Consultant

to

determine

conducted
Kedai

Ayamas

readiness and the business model to be franchised.

6.2The analysis covers the following:
a. The Prospective Franchisor
b. The Franchise Business Concept
The Prospective Franchisor
6.3This is to evaluate the expertise and experience of management
of the prospective franchisor, the companys financial
position and infrastructure available to support its franchise
network.
6.4The following factors are evaluated:
a. Management Qualifications and Experience
Kedai Ayamas management team has acquired the
knowledge and expertise in the business. However, it is
critical

for

its

members

to

acquire

the

necessary

expertise to manage the franchise network and to equip

themselves with pertinent knowledge on the subject.
b. Profitability of the Company
The audited accounts show that Kedai Ayamas does not
has

adequate

financial

resources

for

its

business

development. However, to ensure the success the

franchise business system, Kedai Ayamas needs to
allocate sufficient fund to develop the franchise business
especially its prototype and brand development.

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c. Franchise Infrastructure
Kedai Ayamas has essential infrastructure to support the
franchise network in terms of the supplies, products
development and operating system. To ensure the needs
of the franchise network is catered for besides having a
good operating documentation systems and control,
Kedai Ayamas is required to have a team of professionals.
The Franchise Business Concept
6.5This is to evaluate the feasibility of the business concept for
franchising.
6.6The following factors are evaluated:
a. Unique Business Concept
Unlike other quick service restaurants, Kedai Ayamas
promotes chicken and chicken related products.
b. Transferable of Business Operations
The business operations are easily replicable. Kedai
Ayamas has documented the operations manual and
control which will be reviewed and enhanced to minimise
or resolve operational issues.
c. Marketable of Products
The business has a huge potential for growth. However,
Kedai Ayamas has to publicize the Kedai Ayamas outlets
while enhancing its professionalism and service quality
and to engage in aggressive promotional activities.

d. Trade Name

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Kedai Ayamas has registered the trade name to protect

the business. The name is remembered by regular
patrons and is recognized by the community.
e. Franchise Affordability
Based on the initial investment, the cost is on the higher
side. However, bulk of the cost is capital expenditure. The
start up cost is subject to revision during the franchise
development stage.
f.

Business Profitability
Kedai Ayamas has yet to chart the revenue for both
parties and run the prototype for duration of a reasonable
period to ascertain the business profitability. However,
based on Kedai Ayamas experience in managing its
outlet, Kedai Ayamas would be able to chart the
profitability accounts for the franchisor and franchisees.

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The Scoring System

6.7The score is on a scale of 0-10, where 0 indicates Weak and
10 indicates Strong. The scores for each section are
weighted according to the importance of each section.

Score

Weightin
g

Weighted
Score

Management
Qualifications and
Experience

20%

1.6

Profitability of the
Company

40%

1.2

Franchise Infrastructure

40%

2.4

100%

5.2

Score

Weightin
g

Weighted
Score

Unique Business
Concept

15%

1.20

Transferable of
Business Operations

15%

1.35

Marketable of Products

15%

1.20

Trade Name

15%

1.35

Franchise Affordability

20%

1.00

Business Profitability

20%

0.60

100%

6.70

Key Areas

Total Weighted Score

Key Areas

Total Weighted Score

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7.0

A SUCCESSFUL FRANCHISING
7.1While most businesses can be franchised, it is only the quality
and professionalism of the management that will determine
the success or failure or a lackadaisical achievement of the
franchise network.
7.2When considering a business for expansion through franchising,
there

are

numerous

areas

should

be

examined.

The

important ones are:

a. the management depth of the business
b. the financial status
c. the market experience
d. the market appeal
e. the profitability
The Management Depth of the Business
7.3It is critical for a prospective franchisor to acquire the right
expertise to manage the business people who become their
franchisees.
7.4A good franchisor should have the drive, enthusiasm, and
commitment to assist the franchisees, confident of what
they deliver and able to cope with rapid expansion.

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The Financial Status

7.5A franchisor need to be financially sound at the outset and
should not be relying on franchising as an emergency
measure to plug any existing deficits.
7.6Although franchising is self-financing but the franchisor may
need further funding to enhance the franchise network,
negotiate

for

economies

of

scale,

strengthen

the

infrastructure, acquire professional assistance, etc.

7.7Currently, Kedai Ayamas financial status does not reflect that
the company is not saddled with a bad financial situation.
However, Kedai Ayamas has to ensure that its financial
issues should not be detrimental to the franchise network.
The Market Experience
7.8The main reason why people invest or buy a franchise business
is because they can rely on the franchisor which is equipped
with

extensive

market

knowledge

and

experience

to

spearhead the business. Hence, it is critical for the franchisor

to stay focus and ahead of the competition while maintaining
the edge.
7.9Kedai

Ayamas

is

established

nationwide.

Its

franchise

management capability has yet to be tested. A well-planned

marketing strategy should be developed to ensure the
success of the franchised business expansion.

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The Market Appeal

7.10

Kedai Ayamas has to ensure the franchise offered has wide

appeal for national and regional markets. It should also
guarantee on-going research and development of the
products and pricing.

The Profitability
7.11

Any franchise business should have sufficient profit to be

shared between the franchisor and franchisees.

7.12

Both

parties

require

comfortable

return

on

their

investment on time, money and effort besides generating a

realistic trading profit and future security.
7.13

The Consultant is of the opinion that Kedai Ayamas has to

chart the income for both parties at the prototype outlet.

8.0

CONCLUSION
8.1The Consultant conducted the auditing based on many factors
to

determine

Kedai

Ayamas

readiness

to

embark

on

franchise business.
8.2Among the important factors that the Consultant have audited
are:
a. the directors and management of Kedai Ayamas
b. the business model and profitability
c. the product
d. the business operation
8.3The Consultant is of the opinion that Kedai Ayamas is ready to
venture into franchising subject to these important criteria:
a. Kedai Ayamas to formulate the profitable retail business
model.

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b. Kedai Ayamas to realize the business model and run the

prototype for a reasonable period to ascertain the
business and operating issues in order to minimize risks.
c. Kedai Ayamas to prepare the manpower to support the
Kedai Ayamas franchise network.

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