The trade can be lucrative but coffee shop owners and operators also face more than a cuppa of challenges these days.

From staffing bottlenecks to escalating costs and competition stirred up by other food and beverage (F&B) outlets, those in the industry have plenty to deal with on their plates.

Last Tuesday, The Straits Times reported that a businessman was selling six coffee shops in HDB estates for a collective price of around $65 million. It prompted discussion on whether there is money to be made in an industry where coffee shops seldom change ownership.

'The main problem we have is the difficulty in hiring helpers,' said Mr Hoon Thing Leong, 60, owner of the Kim San Leng chain of 23 coffee shops.

Coffee shops have to hire a certain number of Singaporeans or permanent residents before they can hire foreign workers.

Owners have to hire three Singaporeans before they can take on a Malaysian. To employ a second Malaysian, two more Singaporeans have to come on board first.

And yet another two Singaporeans must be hired before a third Malaysian can be signed on.

Chinese nationals can be recruited only after the above quota of seven Singaporeans and three Malaysians has been met.

Mr Hong Poh Hin, vice-chairman of the Singapore Foochow Coffee Restaurant and Bar Merchants Association, said its members have been grappling with the issue for some time but it is only recently that the complaints have grown, as they find it harder to cope.

The association has more than 400 members.

'We're still collecting feedback. After that, we will have discussions and may approach the Ministry of Manpower,' added Mr Hong.

He is also working with Mr Thomas Foo, chairman of the Kheng Keow Coffee Merchants Restaurant and Bar Owners Association, which has more than 300 members.

Currently, their only solution to the manpower shortage is to rope in family members.

The staffing issue also spills over to those who run food stalls in coffee shops.

Coffee shop operator Joseph Lim, 43, said fewer people are willing to run stalls because of difficulties in hiring helpers.

'Coffee shop operators end up having to absorb the costs of vacant stalls,' noted

Mr Lim, who has been selling chicken rice for 23 years. He took over a coffee shop in Toa Payoh Central about six months ago.

Then there is competition from other F&B players.

Heartland malls with themes, such as the Japanese food street in Jurong Point, food courts and the sprouting of low-cost coffee joints such as Old Town White Coffee have led to greater options for HDB residents.

This is the view of Ms Sarah Lim, a senior lecturer at Singapore Polytechnic's school of business.

Mr Marc Leoi, chief development officer of Koufu, agrees.

'There is a very large group who would opt to eat at air-conditioned food courts within the heartland malls,' he said, noting that their prices are still affordable.

Koufu owns 38 food courts, 10 coffee shops as well as 14 cafes and kiosks.

But it is not all doom and gloom for coffee shop operators. The business is still viable as long as owners and operators can find good locations.

According to the Housing Board (HDB), there are about 700 coffee shops in heartland estates.

On average, there are four to five eating houses in the town centres of the older estates, three to four in each neighbourhood centre, and up to two in each

precinct.

In newer estates, some of the commercial facilities in the town centre and neighbourhood centre are built by private developers who decide on the number of eating establishments, said HDB's spokesman.

Said Mr Foo: 'Coffee shops in livelier places, such as those near MRT stations, are the best. The customer flow is good and stalls don't just depend on business from regulars.'

Such places can command rents of at least $80,000 a month while lower-density areas command between $10,000 and $40,000.

Besides choosing the right location, Ms Lim advises coffee shop owners to ensure they have one or two anchor stalls that are popular with the customers.

Operators of coffee shops can also improve on general design and hygiene levels, she added.

For Mr Lim, the way to customers' hearts is through their stomachs.

'These days, our food must really have the standard to attract people to eat.'

Source : The Straits Times © Singapore Press Holdings Ltd. Reprinted with permission.