EDKL Interview: Five founding partners, including Malaysian MP Syed Saddiq, empower new restaurateurs at COOX
June 18, 2021
Ken: Essentially, we're a cloud kitchen that provides kitchen space to all F&B brands of different sizes, and we are creating an entire ecosystem to support the F&B industry.
Ken: A cloud kitchen is something already out of the norm in the industry. In the US and UK, it started five or six years ago. It only started last year in Malaysia.
Conventional cloud kitchens are hidden in back alleys or unwanted spaces. The goal is to get cheaper entry for F&B players.
Ours are always front-row, in a mall. We have dine-in - that’s a major difference from the typical cloud kitchen.
We're building more than just a kitchen space - we also provide basic kitchen equipment for all our merchants. For the typical cloud kitchen, it’s a kitchen space and that’s it. We provide the basic standard equipment, so that the entry point for F&B brands is even lower.
To run a kitchen, you'll need a chiller, freezer, a table rack, stainless steel table, and a cooking station. We provide these five key items to get any brand started.
On top of that, we have a strong tech team. One of our founders, Siong, is a software developer. He built our entire tech support system backend from scratch.
On the tech side, we have an order management system. The main ingredient would be consolidating all the delivery partners’ orders. When you're a restaurant running food delivery, you have GrabFood, Foodpanda, AirAsia, Beepit, etcetera. You essentially need a lot of devices to monitor the orders.
With our system, we're integrating with our delivery partners. The integration with Grab is already done. In the future, brand owners only need one device, and they can see all orders filled in.
There are a lot of modules on top of that - the CCTV in the kitchen would be available for the brand owner, the manager, to view how the staff is doing, checking in and out of the kitchen via biometrics. All the data will be collected and be viewable.
All our utilities - the electricity, the gas and the water - will have smart meters, to be integrated in the app as well. Brand owners will be able to see their utility bills, so they can operate multiple brands remotely, without being physically there.
Vinesh: There's also the last mile. Assuming that consumers order directly from COOX and want to integrate to Lalamove or GoGet or any of those platforms, the big advantage is there is no limitation on delivery radius. If the consumer is willing to pay for delivery, it can go up to 50, 60, 100 kilometres.
Ken: One of the key components that differentiates us is our close partnership with major delivery partners. We have a successful partnership with them, resulting in lower commissions incurred by the merchant. We cannot disclose how low is it, but we are definitely lower than the market.
At the same time, you want to bring the element of tech to it, so that’s where we have API integration. Everything’s integrated to the app, so you can check how much the costs are, how much sales, where you break even.
Once you combine it all, we provide a wholesome experience for food-preneurs to come in at a very low entry cost to experiment.
Ken: All of the above! One will be the well-established brand that's in almost every mall but in the current pandemic is paying crazy rent while only doing 70% sales on delivery. So that doesn’t make sense. When they’re shrinking, the next best option is something like COOX.
The second is other brands that have one or two or three branches, maybe a branch in Puchong, or Cheras, or even out of this region, in Johor.
Third are the mom-and-pops: AirAsia pilots who've lost their jobs, home-based cooks or chefs making muffins at home, people who have their own brands on social media, who want to scale but don't have the capacity to build their own restaurant or bakery. This is a testing ground to scale bigger, to create more products in a proper kitchen instead of at home.
EDKL: What notable businesses are here so far and will be here in the future?
Ken: The first brand that we actually spoke to was A&W, because they closed their outlet in Kota Damansara. But our current location is too close to their other branches. I think they will be very interested in our future branch in KL or Puchong.
We also have startup brands and homegrown newcomers, such as Mama's Kitchen, Emm's Cafe, Mario's Napoli Pizza, Sambal Lah, Kofilosofi and Dalca Penang.
EDKL: Your flagship location is in Glo Damansara. How has the response been? Have your 26 kitchen suites all been taken up?
Vinesh: We're in the middle of Damansara with a good delivery radius. In terms of occupancy, we're at 70%, but that was prior to this lockdown. Hesitance has increased a bit, but we’re pretty confident because of our price point.
Because we are a holistic provider, our margins come from ancillary services. Hence our rent is at the lower end compared to the competition out there. Our most expensive option is cheaper than the cheapest option in the market - that’s why we’re confident about filling up the spaces.
We launched in March and started taking deposits in March and executing agreements in April. The 70% are still committed, but they want to defer the starting time, so we've actually come up with a package to defer deposits.
Our target is 80% occupancy. We’re almost there.
We’re in the midst of a fundraising at the moment with very strategic investors. Once the fundraising is complete, our target is to start building an additional nine locations across the country, predominantly in the Klang Valley, the rest in the Peninsular, like Penang and Johor.
The main reason our interest is in scaling across the Peninsular is to offer franchise brands the opportunity to go nationwide by just executing one agreement with us.
A very good example is someone like Taco Bell, which has opened in Cyberjaya and amassed a lot of publicity, but it’s going take four to five years for them to amass national reach. We want to be the infrastructure provider that they can come to, sit with us over one boardroom discussion, and execute a contract and start within a month and have nationwide reach, riding on the publicity and marketing that they have done. That’s the vision of the future for the short term.
Our locations are selected very much with data. We work closely with delivery partners for them to rate locations and give us information on where the order density is. It’s not just a feel-good factor in terms of the location.
At the end of the day, merchants need to succeed for us to succeed. We need to look at all the metrics.
EDKL: Cloud kitchens have gained momentum because of the past year’s circumstances - but will they still have traction next year, once things return closer to normalcy and demand for deliveries potentially slow down?
Vinesh: This idea of COOX was conceptualised in June to July last year, and we were asked the same question: Is this a COVID business? Because if it is, I don’t think all the founders and shareholders would be interested. We’re here for the long term, we want sustainability.
In my opinion, the demand for cloud kitchens is on the rise. Consumer behaviour has changed due to the first lockdown last year. The number of people who have the Grab and Foodpanda apps on their phone has gone through the roof.
Given that Malaysians love the F&B experience, obviously we’re not going to go 100% to delivery. But I believe the not-so-important meals, the ones people eat for the sake of eating, will move towards delivery - the lunch, the breakfast, a few dinners except for Saturday or Sunday dinners.
Plus, the F&B sector is extremely competitive. With international brands joining the scene, it makes life even more difficult for local brands. From an economic standpoint, there’s competition for revenue, while costs are going up because consumer behaviour has changed towards delivery and outlets have no choice but to pay delivery commissions, while their fixed costs are fixed and are actually increasing year-on-year because of inflation.
F&B operators are getting squeezed in between their revenue and their cost, and that’s why you’re seeing many F&B operators shut. This is where we see the opportunity, the economics behind F&B, where we can moderate the fixed costs a lot better because we have the scale.
Today, we can already deliver the economic benefit with one location. With 10 locations, that economic benefit will be amplified a lot more.
EDKL: What is COOX’s perspective on how to remain relevant beyond the pandemic?
Vinesh: A conventional cloud kitchen is not very visible, where rent is very cheap. The European or American model is, you open a kitchen in a dark alley somewhere and send the food out.
In Malaysia, or regionally in Southeast Asia, there is hardly any disparity in rent between the front row and the last row of, say, Taman Tun Dr Ismail. Given that fact, we're going to fractionalise the top end instead of the low end.
It's hard for brands to come to a location like Glo Damansara. We're going high visibility and high footfall but cheap price, because we’re fractionalising expensive space. On top of that, we bring our scale into play to negotiate with higher-end malls. Given the current situation, it's the time for us to capitalise on being a tenant.
That way, all our merchants who open with us will have locations at decent names. These would be places like Glo, Subang Parade, One City, which on their own they would not be able to get into.
EDKL: Restaurants say they are stifled by high commissions charged by delivery platforms. How does COOX hope to be a positive force for Malaysia's F&B industry without becoming completely consumed by profits and scaling up? Is there a way to nurture distinctive F&B operators with their own unique character in COOX, or will it end up being a collection of generic brands, one selling nasi lemak, another burgers, another pasta, just to cater to volume?
Vinesh: Everyone has a part to play in this market. I don’t look at high (delivery) commissions as a deterrent. There’s a reason why when people complain about high commissions, they still use the platforms. The reason is because the traffic is phenomenal. That’s the reality.
There are two ways that you address this: You either create a marketplace, or you have one superstar champion who raises 12 billion dollars over the course of nine years and brings the volume to its platform.
The delivery model, similar to the ride sharing model, has morphed over the years. It started as filling up excess capacity. Grab comes along and says, why don’t you do delivery and we will support you. People said yes because of the incremental revenue.
The situation has now turned to be a lot more delivery-centric. It’s no one’s fault, but that’s the way the market has moved. They were in the right time and the right place. If the market did not move, would a 30% commission be something people complain about? The answer is no. Because they were taking the 30% from the incremental revenue, because dine-in was paying the bills.
So today, the question is, how do I increase my volume and drop my cost? This is the gateway fee, the cost of business in 2021. It’s either you give up, or innovate.
Getting back to your question, the F&B industry was very inefficient prior to this. When F&B operators start, they generally want to provide variety. The think of providing a fish dish, a chicken dish, a lamb dish, and a beef dish. One guy wants to do it all, and when you do that, you have very poor economics. You have a lot of stock and you cannot push a particular dish. You’re spread thin.
Where COOX comes in, and where Ken comes in, being a Le Cordon Bleu-trained chef, is in how we can create this variety with the least possible input ingredients. How can I have just chicken but provide 20 different chicken dishes?
How are we going to do it? We’re going to innovate on portioning and menu-ing. We want to create experts and specialists in each of these cuisine categories. So each guy, instead of doing 30 different items, they’re doing high volume 10. And because they’re sourcing for single-stream input material, their operating costs go down.
Ken: We do give the merchants most of the freedom, for them to create and do what they like to do and love to do, to do the product that they think represents them.
On the backend, we will “interfere” in supporting the merchants. We look at their weekly sales, monthly sales, their best-selling items, and we look through their costing. That’s where the saving comes in. When you have a sinking ship, you’ve got to find where the holes are, before it’s too late.
We have a team of chefs and kitchen managers who help merchants to create a more attractive, cost-efficient menu. In terms of storage and operations, we also assist them in the portioning and the reusing of the same 30 ingredients but creating 20 dishes.
A very good example is Subway. They have 25 ingredients, but they are constantly creating different sandwiches. That is one of the keys to keeping your costs down. A lot of F&B brands are not very good at their cost - a lot of times, they overlook that.
EDKL: From the customer’s point of view, why should they choose to order from COOX? What can they expect from the experience that might differentiate this from ordering from another restaurant or delivery platform?
Vinesh: You might order from COOX via another platform. We're not a competing marketplace. We're a consolidated F&B operation.
The second is quality. We have a keen eye to monitor what’s working and what’s not. What’s working gets promoted and tweaked and improved, while what’s not is chopped. That means for you as a consumer, you get the best-quality product out of this kitchen, just from a process of elimination. We let the market decide what’s good and what’s bad. What’s not moving, we recommend for it to be taken off because it’s just filling space, filling inventory, and it’s not doing you any good as a merchant.
Third is economic incentive, because the COOX marketplace doesn’t charge 30% (commissions); we charge a lot less. And for you as a consumer, you've got only one delivery fee.
For us, we have good relationships with the delivery partners, and we believe that’s what they do best. We’re going to support them from the perspective of the infrastructure. Eventually, consumers are going to realise this.
Ken: For the new brands that the customer order from, they're reassured that the food comes from a proper commercial kitchen with all of the health and safety measures taken. We have strict SOPs in hand. We're very focused on that, to make sure all merchants follow that strictly, to make sure that all the food that comes out of every single one of our kitchens is properly handled.
What’s coming for COOX is the subsequent nine locations. We're going to 10 locations within the next 12 months irrespective of what happens. We believe in the success of this model. If we don’t want to be deposit-eaters, we have to stick our head forward and we have to create sales, because that’s what the merchants need.
EDKL (to Syed Saddiq): As the most publicly known member of this founding team, what drew you to COOX? How did you get involved, and what are your goals for it?
Syed Saddiq: I witnessed, during times of COVID, restaurants closing down and the F&B industry being badly affected. And moving out of COVID, I see patterns of people’s habits changing radically. People are buying things a lot more online. The cost of rental and manpower has heavily increased, as we talk about minimum wage, etcetera.
It provides a unique opportunity combined with a more humanistic element of helping people who are badly affected - specifically, small food-preneurs. We're here to disrupt the F&B sector, which is based on the typical brick-and-mortar restaurant, which has a very high cost of entry.
EDKL: To what extent will you use your own public profile and platforms to promote COOX? What would be your personal or professional boundaries in not mixing politics with business?
Syed Saddiq: First things first, to ensure there’s no conflict of interest, no contracts or anything I can give out. I’m focusing a lot more on building this business. I want it to be people-friendly.
When we created the business model, we allocated a percentage to help young entrepreneurs or food-preneurs start up at minimal cost. That's one part for which I and the team feel very strongly, because all of us witnessed how many restaurants closed down, how many food-preneurs had to give up their dreams and hopes. We want to help that particular segment.
The other part to it is, I don’t want to be just a silent shareholder. I meet up with all the investors, and we discuss things together and collectively as a team. The team is not just made up of random people or friends. We're all purpose-driven: Ken the F&B expert, Siong the tech expert, Vinesh who I believe is the Tim Cook or Steve Jobs of Malaysia, who comes up with the business plans and the pitches – all of us come together as a purpose-driven team to ensure we can move forward together.
EDKL: Could you foresee leaving full-time politics for business in the next few years, including if COOX takes off and requires more of your focus?
Syed Saddiq: I always believe that public service is my line of duty, but public service can come in many ways, including serving young entrepreneurs.
In politics, I always believe in the politics of disruption. In running a business, I believe that if it’s just a conventional, typical, traditional model, then it’s not worth it.
Young people like us are meant to disrupt. So this is why I bring this level of disruption to the F&B industry as well. So whether I do full-time, part-time, either way, whichever path I take, I want to disrupt, and this is one of the paths of disruption which I pick.
At far left is Stewart Leong, another COOX founding partner and a construction expert.
EDKL: Ken and Vinesh, how did you both get started with COOX?
Ken: Me and Vinesh have been longtime friends. We came across this idea in late 2019, but we weren’t very sure about where it was going to go. We were paying attention and looking at the States and Europe and even in Indonesia, where food delivery was picking up. Even in 2019 (in Malaysia), there was a rise in Foodpanda and Grab, with promo codes, so we were already paying attention. After further monitoring in 2020, we thought this was the right time to get into it.
Vinesh: I was on the front lines, watching F&B operators get squeezed, and that’s what triggered the conversation with Ken. What made me decide to go all in was the fact that I could get a fairly strong team together.
Ken: One of the best moments is to actually see our first location up, live. And seeing merchants come and seeing riders at our pick-up area,.
One of our merchants closed one of their branches at Brickfields, and we came in at the perfect time, so they could move in straightaway and bring their staff into our kitchen. That's something very impactful.
I’ve seen and learned enough to know that everyone has a dream of running a restaurant, or a bar, or a cafe, or a bakery. But it’s not as easy. Once you're in, it’s tough, it’s really tough. But hopefully, with our help and what we're providing, the merchants have a better chance of surviving.
Vinesh: Of the two challenges that I've experienced and still experience, number one is awareness. There are mixed thoughts around this model because the level of awareness is low.
For us, we want to be the stewards of this perception. We don’t want people calling cloud kitchens deposit-eaters or anything like that. And the only way we can do that is we continue to deliver, irrespective of the situation. So we cannot waver.
The second challenge is engineering, on several aspects.
The second is engineering of the tech solution. What I'm referring to is the WrapAPI. Just assume you're an F&B operator in a brick-and-mortar shop. If you download the COOX app as an owner of that shop, you immediately have access to all the services we have integrated into this app.
So you suddenly have a virtual shop without developing a website, without you doing anything. On your Facebook and Instagram, you just put a link to your virtual shop on COOX. And this is something brand-new, something that has not been done before. But because of our strong engineering team on our backend, we're shooting in the dark, we're throwing things to the wall to see what sticks in regards to this holistic solution.
In terms of the best moments, there are two. I’ll give you a bit of context before I answer this question. I run a business called FatHopes Energy. FatHopes Energy collects used cooking oil from 18,000 restaurants across Malaysia, Singapore, and Thailand, and I was on the front line of watching F&B operators get squeezed last year and close down. Many of them. Big brands were permanently closing locations as well. And Ken was also looking for his outfit to move into a cloud kitchen, and this is where we collaboratively came together and started chatting about it.
But we very quickly realised we couldn’t do this alone. And for the first time in my entrepreneurship journey, I pulled together a team of five very purposefully selected individuals to be responsible for different areas, the five most important areas for this business. It’s not five friends, it’s five individuals, with five different expertises that came together. And the first joy that I continue to have is seeing these five individuals who hardly know each other work together towards a common goal, which is helping F&B operators.
We’re a team now of about 15 people and very quickly in these past six months built this dynamic team and inculcated this culture of the common goal.
Second is really watching all the interest. We’ve had phenomenal interest compared to the other ventures I've started. We are only six months old. We have investors coming forward to us locally and internationally and actually conversing with us because they align and see the common goal.
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