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iChef is bringing startup savvy to Taiwan’s new class of food entrepreneurs

Kaiyu Chen, cofounder of iChef, at Mazendo in Taipei

Startups in Asia are sometimes scolded for focusing on local issues rather than global ones. But a narrow vision can be an asset since business intuition is at its sharpest when one experiences a market void first-hand. So when a local solution coalesces with a global opportunity, startup magic emerges.

That’s exactly what iChef is trying to cook up. The four-man team from Taipei created an iPad-based point-of-sale system for small restaurant chains that’s tailor-made for the domestic market, but might have a shot at moving beyond Taiwanese borders.

iChef is designed to mark and track every point-of-sale that occurs in a restaurant, from the moment customers open the door to the second they pay their bills. Employees can use a simple drag-and-drop interface to log wait lines, take orders, and input specifications (“there’s a child in this party…” “this party is waiting for two more people…”). The end-goal is to synchronize the knowledge of restaurant staff – the host knows that Table 12 should free up soon, and the server knows that the chef is working on that dried tofu for Table 15.

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The app also records payments, and allows restaurants to manage financials and accounting in preparation for taxes.

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iChef requires no centralized hardware and imposes no limit on the number of devices a restaurant can use. All inputs into the system are synchronized across a wireless network. The company charges restaurants who use the app a monthly fee of US$65, which covers on-site and off-site assistance, training, access to an additional web-based extension, and analytics.

The iChef team won’t claim to have the prettiest or most feature-rich restaurant POS system out there, as that’s not where they excel. The team believes that competing POS systems create a sales bottleneck – by forcing unwanted features down a restaurant’s throat, staff members lose efficiency. As a result, iChef’s software is flexible, which means employees don’t need to use it exactly the same way. If a waiter feels that taking an order via pen and paper is more efficient than using iChef at any given moment, no problem – input the order into the POS system later, or don’t do it at all. Is business slow and the host out sick? Skip out on seating management for a few hours.

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“Traditional startups think that they are more advanced than the restaurant industry,” says Kaiyu Chen, co-founder and CMO at iChef. “But actually they are not. Restaurants are highly evolved. Think about it – they’ve been around for thousands of years. A tablet is not going to magically solve the problems of a restaurant. We have about 160 restaurants using our system, and every restaurant uses it in different ways.”

iChef is far from the only restaurant system POS on the market. There’s Lavu, Revel, Touch Bistro, Breadcrumb, and Ambur, just to name a few. The founders won’t claim to have reinvented the wheel with their software, but they’re betting that the service’s flexibility and ease of use will help make it a hit among small business owners.

Turning an economic slump into economic soup

While flexibility might be the team’s main selling point to potential customers, iChef is also relevant because it emerged out of a growing trend in Taiwan: as white-collar professionals grow disillusioned with their career prospects, retail and restaurant entrepreneurship have boomed.

Kaiyu Chen estimates that 80 percent of newly-registered businesses in Taiwan are retail businesses, many of them eateries. While the restaurant industry is notoriously competitive, from a macro perspective, it remains a promising one for enterprising Taiwanese. According to the USDA, the foodservice industry grew 7.7 percent in 2012 to over $13 billion, and is expected to expand further this year thanks to increasing numbers of mainland tourists, small family sizes, and busy work schedules.

In addition, some of the highest-profile domestic IPOs over the past several years have come from the food and beverage industry. As the rest of the world fawns over the market caps of internet firms like Twitter and Facebook, Taiwan traders will point to Wowprime and Tai Tong Food and Beverage Group as the darlings of the Taiwan Stock Exchange. The former, best known for its popular chain of western-style steakhouse restaurants, raised NT$1.98 billion (approximately $65 million) on its first day of trading in 2012, and has a current market cap of $1.03 billion.

According to Chen, the surge in Taiwan’s new class of restaurants originates in part because the island’s working professionals feel trapped in mid-career ruts. Following the global mass-adoption of smartphones, Taiwan’s semiconductor and PC manufacturing firms have suffered from declining revenues. The sluggish financial performance of these companies in turn hinders the mid-level manager or engineer’s prospects for promotion. Meanwhile, for Taiwan professionals working in mainland China, the urge to return home grows stronger as fatigue sets in.

But with skill-sets that are already highly specialized and networks that are already narrow, it can be difficult for these professionals to break into new verticals within the tech industry. As a result, many young Taiwanese set out to turn that dream dumpling joint into a reality.

“In Taiwan, our economy isn’t moving,” says Chen. “But one thing you see is that for the smart guys, they lose interest in working for banks or hardware companies because those careers are no longer rewarding. Restaurants have evolved and grown in Taiwan because those smart people start to join them. They say, ‘Screw this, I don’t want to make semi-conductors, I want to sell fried chicken.’ And that guy is smart enough to sell good quality and well-differentiated fried chicken. [The move into the restaurant industry] isn’t necessarily a bad thing because their financial payoffs will likely be better, as long as they succeed.”

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Of course, not every restaurant chain will complete an IPO. Chen believes that the future of Taiwan’s restaurant industry lies in small chains of three to five outlets, run by management-minded professionals who seek a comfortable lifestyle and rewarding career.

“Taiwan isn’t designed to support big chain restaurants,” says Chen. “Smaller restaurants thrive here. If you’re the successful owner of a small restaurant, you’re looking at up to NT$3 million (about $99,500) in monthly revenue, and growth profit will be about 60 percent. In Taipei, the net margin after everything including salaries is about 10 percent, so you can earn about NT$100,000 a month (about US$3,300). Really successful restaurant owners in Taiwan tend to have great resumes. They’re not aiming for a billion dollar lifestyle, they just want a comfortable life they can control.”

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While iChef in theory could be exported to markets all around the world, it’s tailored for the emerging class of restaurateurs in Taiwan that apply MBA principles to mom-and-pop operations. This new class of entrepreneurs doesn’t necessarily have the budget or training to run a sophisticated IT system, but they’ll still be keen to implement a quick-and-dirty POS solution.

iChef’s live showroom

Not coincidentally, the company’s four founders fit their target demographic to a T. After earning degrees from UC Berkeley and Waseda University, CEO and cofounder Sean Hsu spent time working as strategy manager at 7-11 Taiwan (which his father, Hsu Zhongren, transformed into the island’s most iconic convenience store chain) and later at UNI Plaza, a department store owned by Taiwan’s Uni-President Group (the domestic parent company of 7-11 Taiwan) and Japan’s Tokyu Hands Inc.

That venture ended in a massive, high-profile failure, leading Hsu to depart from Uni-President in 2009. After a year of soul-searching, Hsu decided to strike out on his own and start – what else? – a beef noodle restaurant called Mazendo.

Mazendo checks all the boxes for Taiwan Restaurant 2.0. While beef noodles are typically served in no-frills, street-side joints, Mazendo sits in the heart of Taipei’s glitzy Xinyi district. It holds about twenty tables, sports an icy steel-and-wood decor, and sells main courses for about $150NT (US$6) each – more than your neighborhood dive, but well-priced for the quality and atmosphere. The management team’s internal mantra is to become the “Starbucks of beef noodles” – not in regard to scale, but in terms of quality and service.

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After running Mazendo for a year, Hsu began looking for a POS system to help streamline operations. Unsatisfied with the choices on the market, he roped in Spencer Ho, Benjamin Wu, and Kaiyu Chen to help build one. Like Hsu, Ho, Wu, and Chen were working high-profile corporate gigs and longed for a change of pace. Ho worked for the US Army, Wu was still with Uni-President, and Chen was at McDonald’s China.

“Ben brought up the idea to Spencer and I while we were in China and the US. We both wanted to return to Taiwan and have a promising career, but there was no single company we wanted to work for,” recalls Chen. With homesickness creeping in and little interest in Taiwan’s domestic corporations, the three of them quit their jobs and dived into iChef full time in 2012. If they weren’t developing a restaurant POS, these guys could have just as easily ended up running their own upper-middle tier lu wei restaurant.

Noodles without borders

As founders with advanced degrees and experience in retail, the iChef team knows that taking the company outside of Taiwan will be an uphill battle. Not only is the restaurant POS space crowded, the restaurant industry as a whole tends to sit awkwardly alongside the startup and consumer internet world. Managers who run small or medium-scale operations tend to be too busy to sit down and learn how to use a fancy-schmancy iPad app.

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Yet the team remains optimistic. They recently received funding of an undisclosed amount from the Uni-President Group (surely those connections came in handy), which could help the team bring its POS to restaurants with ties to the big conglomerate (Correction: iChef tells us that they received funding from the personal investment fund of Hsu Zhongren, who resigned from his tenure as head of Uni-President in 2012. The team would like to emphasize that they have no connection or partnership with Uni-President. It’s worth restating, however, that Hsu Zhongren is the father of iChef cofounder Sean Hsu). They’ve also been in talks with restaurants and investors abroad, particularly in Japan. The team hopes to reach a total of 600 clients in Taiwan by the end of 2014, and is actively looking for customers in Hong Kong, Japan, and Singapore.

“iChef is like Mazendo, our beef noodle place,” says Chen. “We don’t have something really differentiated, but it’s still a good product at a good price. The secret to running a good restaurant is efficiency. Since we’re so efficient at Mazendo, and our software is so efficient, our competitors won’t be able to catch up.”

Editing by Terence Lee and JT Quigley; final image via Mazendo/Facebook



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