Can someone give advice?

[newbusiness]

Hi

I'm thinking of starting a F&B business in Thailand but do not have any details on rent and labour cost.

I would like to open an outlet (with a kitchen and floor space of around 700 square feet) in shopping malls like MBK or Siam Square. Does anyone knows how much rental will cost for such an outlet? An estimated cost will be very much appreciated?

If there is available space for lease, what is the usual contract terms and how many months deposit is required?

Also if I am to employ Thai labour as waitress/waiters, how much is the market wage rate like?

Would greatly be thankful if anyone here can help with a rough figure. Thanks in advance!

[wish_i_was_there]

http://www.boi.go.th/english/business/costs_labor.html

it's thai offical link so may be higher than normal wage paid

[sting01]

hi,

in my opnion Sunbelt must be able to give the most accurate answers for renting ... try to message him

[benny]

Not sure about the F&B business, but can give you some idea of the costs that my wife incurred with her retail business. She had about 18m2 within a well known commuter centre. Initially she had to pay for the shop area with a one off 10,000 baht per sq metre (other retailers within the same complex paid 15k per sq metre - i had this checked)  and give 2 months deposit and one month up front (all together approx 200,000baht). Her monthly rent excluding utility bills was 30,000 baht + government taxes (list price for space was 3k a sq metre) , air con and lighting added another 6k to that each month (the shop was open 12 hours a day 6 days a week).

She employed a shop manager at 6,000 baht a month and one retail asst at 4,000 baht a month they rotated shifts.

She closed 3 months ago - be careful, she felt that by opening in a popular area in a well known centre the volume of people passing through would generate a fair return on her initial investment (a great deal of money for a Thai national). In reality the high costs for ground rent and the initial setting up (the above figures exclude the shopfit, which was expensive, and the intial stock) made the project not viable.

On several occassions I tried to help with the business, but repeatedly found myself lost dealing with thai suppliers and the thai management company that leased the space...I left dealing with thai officials all to my wife.

Please be careful she lost a great deal of money!

???  ???

[Butterfly]

interesting experience.

I know that a lot of these small Thai businesses run at no profit or little profit. Basically, they are being used to support the owner independance or the familly independance when they are making money. Like everything in Thailand, commissions can be so low (with prices also low) that only Thais with lower standard of living can run such businesses. It also explains why so many of them don't find the courage to keep running the business because at the end they get very little when they paid all their costs. Even some "hi so" businesses make little profit despite the large sales they make because their costs are also so high (I know one real case like this).

Who are the money makers you ask ? obviously the rich owners of the premium commercial space who rent at a very high premium those spaces. In Panthip, it costs as much as 100K bath per month for the rent of a small shop. With computers at 10,000 bath and a profit of 500/1000 bath per computer, how long do you think these small shops are going to survive before they give up ?

also a lot of farangs open small shops/businesses to keep themselves busy or have their Thai GF busy. Not a bad thing. They don't expect to make much but as long as all the costs are covered, and the rest pay for beer money, they are happy.

Of course, you have the usual farangs businesses in Pattaya but we all know those are front for farangs money laundering in their home country.

[plachon]

Hey 'fly, you saw that dodgy survey a month or two back that said Thailand has the highest rate of new entrepreneurs in Asia, if not the world? It was quoted back at us one time, as a sign that everything is cushty. Well, what it didn't reveal was the number of failures of businesses within a year or two of set-up. Of couse the mega bizes like TPI get protected up to the hilt, but the small one get left to fry. Lots i see up-country don't even make it past 6 months. What does that tell you about the economy fundamentals?

[newbusiness]

Hi benny and butterfly....

Thanks for the useful info...gues I need to be very careful and do my maths before comitting myself to anything...

Thanks!

[Butterfly]

Hey 'fly, you saw that dodgy survey a month or two back that said Thailand has the highest rate of new entrepreneurs in Asia, if not the world? It was quoted back at us one time, as a sign that everything is cushty. Well, what it didn't reveal was the number of failures of businesses within a year or two of set-up. Of couse the mega bizes like TPI get protected up to the hilt, but the small one get left to fry. Lots i see up-country don't even make it past 6 months. What does that tell you about the economy fundamentals?

well, Thailand has a very good environment for entrepeneurship. It's easy for a Thai national to open a business, and since not a lot of paperwork or social payments is needed to start a small business, anyone (only Thais of course) has the opportunity to open a shop or a small business. This is really good and pretty unique in this world. That explain why there are so many small family businesses in this country, because it's cheap and easy to setup. Unfortunately, this is also what makes it close to impossible for them to succeed. With so much competition and demand for the same commercial space (MBK is one example), they drive themselves out of business. How many cybercafe can you have on a single block ? see my point ? it's so easy that they all do it at the same time when they see the opportunity, and of course they all die at the same time when the opportunity dry. I have seen it so many times. Cybercafe, small supermakets, jewerly shops, clothes shops etc... can pop up from anywhere and disappear as fast. How many bar girls have opened Beauty Salon or little shops to see it failed forcing them to go back to the bar ? quite a few. No wonder that a rich farang is the only "safe" opportunity they want to focus on.

I don't know about that report you mention but they might be right if they meant the motivations for the Thais to become entrepeneurs. This is different from being successful as an entrepeneur. Thais are far from lazy for being creative and taking risks and opportunities. However, it takes more to develop and run a successful business.

[Butterfly]

Lots i see up-country don't even make it past 6 months. What does that tell you about the economy fundamentals?

well, it gets bad when they have to borrow the money to setup the business and of course can't pay it back when it fails. If it's the bank financing or the "1 million bath" village fund, the money is gone and will have to be "written off" somehow by the investors or the tax payers. Of course, money does not grow on trees (despite what some here believe), so that "loss" will have to be compensated somehow by higher economic growth. Of course, when the growth stop because there is no longer any money to finance it (all taken by the failed businesses), you are in trouble. Playing with money (borrowing) can be very tricky because of its very strong impact on a country economic growth (the famous multiplier effect). Something the Thai Officials do not seem to have fully understood yet.

[singa-traz]

I don't know about that report you mention but they might be right if they meant the motivations for the Thais to become entrepeneurs. This is different from being successful as an entrepeneur. Thais are far from lazy for being creative and taking risks and opportunities. However, it takes more to develop and run a successful business.

It takes a Thai-Chinese to run a successful Business !

[Butterfly]

I don't know about that report you mention but they might be right if they meant the motivations for the Thais to become entrepeneurs. This is different from being successful as an entrepeneur. Thais are far from lazy for being creative and taking risks and opportunities. However, it takes more to develop and run a successful business.

It takes a Thai-Chinese to run a successful Business !

oh amen to this. You are perfectly correct. The Chinese have been very successful businessmen across the globe, except on their motherland.

[kwiz117]

My experience as a Finance and IT Consultant and working for around 3 Companies in Thailand during last couple of years is somewhat different.

To tell you, I do not have any clue on how F&B business and retail businesses in shopping malls been run in Thailand. One above reply has given some good practical experience about some retail business.

What Butterfly mentioned about Pantip Retail Computer business is correct. But one little addition to that is, in Computer Hardware business, many of those retail guys do have one or two agencies. That is one area they are generating profits. Also some do smuggling. You will see that no one will provide you with VAT or official invoices. So they all survive and some will make good money. Some products like Intel processors, the dealers will get a rebate from Intel. That is another area where they earn money. But the key for all of them is the “Inventory Turnover”. The more they turnover the Inventory, they will earn more. So it is true that they sell even at 500Bht profit margins.

Now let me revert back to where I started.

The businesses that I have worked with are all belongs to falang companies. One guy has started at a very small scale. All these businesses are based on Manufacturing and then sell to Distributors. They earn good money. But the key is, they all do some underhand dealings.

If you are not ready to "dress up" your accounts, then it is not possible to survive or even come to a Break-Even in Thailand. I am not encouraging illegal activities here in this forum as a professional.

But sadly, majority of Thai Companies do this type of dealings to get competitive advantages over the other. But I have heard some companies’ does very ethical businesses. So please do not generalize what I have written above.

If anyone advice you saying that you can do a business in Thailand [When all competitors under cut prices by dressing up accounts etc] then do not trust them. That is what I have experienced over the last 3 Yrs.

From them, you can get a good business idea where others are not into or where others can not enter into easily. That is different.

Not having a professional accounting body in Thailand is one key mistake that Thailand has done. Many Thai companies do not have any “Tax Planning” concepts like in UK. Instead most of them practice “Tax Evading”. Go to Pantip. That will be the best and very open example that I can give it to you.

[Butterfly]

kwiz117 ? have you ever worked for Public companies listed on the SET ? is the accouting manipulation still going on in those companies (of course it does, I just want another confirmation) ?

In Pantip, some of the shop owners have 3 or 4 shops in the building, this is how they can keep the competition under control. Unfortunately, your costs and your risks are even more leveraged under such conditions. Not a safe way to run a business in the long run. But sometimes you have no choice as mentionned above, and "under table" deals is your only way to return a profit on your business. Still, I have seen a few businesses in Pantip closing down because they are tired of so much competition and can't keep up or can't afford the rent after a few bad months. 500 bath per PC is not much even with a high turnover. Thailand has the cheapest computers in the world. $250 for a PC ? where else can you get this ? not Europe or the US.

I won't even mention mobiles as they have become cheaper than in Europe and Thailand has become in the last few months, the hub for mobiles traffic

[kwiz117]

Hi Butterfly..

Unfortunately I do not have any experience in any Public Company [Listed in SET]. Therefore, I can not exactly confirm whether those Companies “dress up” accounts or not.

But we all have read in various papers some news about some of these Companies. One example comes to my mind is one of the former ‘Internet Service Providers’. I think they have stopped trading those shares and also in the process of taking legal actions. I do not like to disclose the name of the Company in this forum.

Yes, your Pantip comments are correct. Some have two three shops located in different floors. Some use the same name but some have different names though owned by the same person.

I have heard about the Mobile Market as well. But not much information to confirm it.

Another interesting point I have observed is, many of these Companies who are doing all underhand dealings are registered under BOI.

The actual fact is, if a BOI Company in Thailand [Located in Zone3], do all functions exactly according to regulations and guidelines, they do not need to pay any Taxes.

Then why they do? [ I do not know ]

A once common thing many of these Companies do is, import the material under BOI and part of the end product pump to Thai market. Imagine, how the impact of this for all Non-BOI Companies manufacturing parallel products. All they can do is, find out some other means and somehow compete with these BOI businesses. This is why you will see some products suddenly come to the Market at very low prices. So this is working as a circle in Thailand.

Where is the Accountability in Thailand? Who is responsible? This is why Thailand is having so much direct investments. It is famous for this and for many foreign manufacturing Companies it is very important to put up a plant here to survive from their competitors, who are manufacturing and exporting at cheaper prices from their Thai manufacturing bases.

The Thai BOI focused mainly about the amount of money the Company or the Person bring to Thailand. After that, all they need is a year end P&L and Bal Sheet signed by a Thai CPA. This is the basis for the renewal.

I have studied this process well and some areas hard to even believe. If the Company is very good at Balancing stock in and stock out with relevant Documents [They call it BOI Formulas] and submit all other time to time reports, that is it.

Finally to make all these relevant to the Original Topic, I can say Thailand is not a bad selection to start up a business, provided you know what you really have to do to earn money and to survive. You know what I mean?

[Butterfly]

Interesting. Why would a BOI company do this ? maybe there is a limit on sales or number of items they can sell under BOI rules. Who knows. Easier to open a 100% Thai owned business. The tax is not that high and most businesses can hide their actual sales pretty easily.

[kwiz117]

I can guess some reasons for BOI Companies to engage in under-hand dealings and “dressing up” of accounts.

1. To dispose part of finished products manufactured using Raw Material imported under BOI. .

2. As you mention in your above reply, BOI have restrictions on number of Items they can Import. How they control this is; from the BOI formula. Every BOI Company have to give them a “Bill of Materials” of all the products they manufacture and export. Also they will have to submit Sales forecast. Based on that, BOI will set the upper limits for each an every Raw Material. Some register the same parts two times by using different product codes and descriptions in the same Bill of Material. It is impossible practically for BOI to check one by one “Bill of Materials” and visit each an every Company to inspect production lines. That could be one reason.

3. Some simply over state the Bill of Material formula. [That is number of components used to manufacture each finished product]. So the logical waste can be used to manufacture one additional product.

4. Some just do it without understanding the correct BOI procedure.

Practically it is not possible for them to control this, unless a complain come from inside employee with some proves.

[kwiz117]

The tax is not that high and most businesses can hide their actual sales pretty easily.

Yes, It is easy to register a Thai company and Company Tax may not be high. Also it is easy to hide Sales. But the advantage of a BOI Company is it will give a great saving in Cost of Sales side. This is hard to avoid when import Raw materials in big scale and too risky in long run. For some parts, Import Duty will go up to even 60% on CIF value. The VAT of 7%. These are all direct Cash outflows and also can not be avoided.

Some even get Company Tax exemptions for some fixed period.