Costs incurred to hawkers

Study on the above topic will help most hawkers. For example, cost components for average hawker stall and other information conducted by Ministry of Trade and Industry (MTI) is important (ref. 1).

It suggested that raw material played the most cost for average hawkers, whereas rental contributed about 12% and utility at 9.3% (both at 21.3%).

Fig. 1 Cost component of average hawker centre (dated 2015; ref. 1)

As mentioned previously, the average cost of rental is $1500 with a range of $5 to $5000 (as offered bids; ref. 2). If a business operates daily without rest, then this translates to $1500/30=$50 per day from rental. Assume 12% rental cost is true, then total cost is $50/0.12 = $416. If daily total cost is true, then the cost of utility and rental would be $416 * 0.21 = $87.36. If raw material is approximately 60%, the cost is $416 * 0.6 = $250. Daily, a hawker would be spending $337.36. The rest is manpower and other service fees at approximately 20% (which is variable, because manpower could be business owner’s fixed salary and other service fees are variable).

To break-even, a business needs to achieve $337.36. If a bowl of product is $3, then the business owner needs 113 bowls per day. Subsequent bowls would be operating profit.

If I am to start a business in a location selling a dish, I will first determine the following:

  • Average footfall in the location per day (and especially compared during weekends)
  • Average peak time per day in hour.
  • Number of competitors
  • Average price of similar product around the location
  • Seats available
  • Parking area
  • Type of customers, e.g. workers, students, or other market segment.
  • Other marketing strategies.
  • Operations consideration, e.g. storage, freezers, footprint (sqm), process area (or kitchen), payment method (cash or cashless), and stall service provider (their efficiency), stall hygiene level (study the NEA awarded hygiene level, should be above Silver level; ref. 3)

Reference

  1. Examining the cost drivers of hawker food prices by MTI (https://www.mti.gov.sg/-/media/MTI/Legislation/Public-Consultations/2015/Examining-The-Cost-Drivers-of-Hawker-Food-Prices/fa_1q15.pdf)
  2. Hawker stall rental using bidding system is flawed (https://siekitchen.com/2020/05/16/hawker-stall-rental-using-bidding-system-is-flawed/)
  3. New food hygiene recognition scheme to replace existing grading system (https://www.channelnewsasia.com/news/singapore/new-food-hygiene-recognition-scheme-to-replace-existing-grading-10446030, 19 Jun 2018)

Hawker stall rental using bidding system is flawed

Bidding is a process where the person with the highest price wins the thing that is offered.

National Environmental Agency (NEA) of Singapore is body that offer the tender for bidders (ref. 1).

Bidding is susceptible to spikes and outliers, e.g. a lady who bidded $10,028 per month for a hawker stall to sell drink. According to NEA, the average price is $1,500 within a range of $5 to $5,000 (ref. 3). This would mean that the rental is $1,500 +/- 20% or from$1,200 to $1,800. That is considered very high for a stall.

It is also susceptible to those bidders who are out to win the bid and then sublet or assign the winning at higher price to others. NEA said they ensured that sublet and reassignment are not allowed, but did not elaborate how they will monitor and control this.

For more information refer to ref. 4.

Reference

  1. NEA tender notice (https://www.nea.gov.sg/corporate-functions/resources/tender-notices)
  2. Bidder ends deal on record $10,028 monthly rental bid for Chomp Chomp hawker stall (https://www.straitstimes.com/singapore/10028-monthly-rental-bid-for-chomp-chomp-hawker-stall-highest-in-3-years-bidder-walked, 30 Aug 2018)
  3. NEA adopts transparent tender system for hawker stalls (https://www.nea.gov.sg/media/readers-letters/index/nea-adopts-transparent-tender-system-for-hawker-stallshttps://www.nea.gov.sg/media/readers-letters/index/nea-adopts-transparent-tender-system-for-hawker-stalls)
  4. Information for stallholder (https://www.nea.gov.sg/our-services/hawker-management/information-for-stallholders)

Hawker profit margin analysis, real experience

Introduction

CNA highlighted an article about profit margin of hawker. The piece was written by a Fishball noodle seller, who claimed that a bowl of his Fishball noodle had only 20-30 cents profit margin.

There was no sharing of his cost breakdowns, revenue and other financial data to help readers. For example, operating revenue is revenue – all costs. Costs included cost of goods sold (direct cost) and indirect costs (e.g. rental, utility and others).

If Desmond wanted to know his net profit, he would need to discount any loan interest, and subsequently income tax. That would be his net profit!

Profit is subjective

Desmond Ng does not represent all Fishball noodle sellers. That is because, to be a successful business owner, you have to be resourceful. That said, you need to reduce costs (either by sourcing for suppliers and drafting long-term contractual agreement with them), and operate more efficiently.

Instead of lamenting low profit margin, he should be differentiating his product. If he can differentiate his product to be more than just Fishball Noodle, he will be able to price his value-added plate higher.

Instead, he is attributing customers as the main reason his profit margin is low. His reasoning that customers are reluctant to pay more is flawed. Customers compare and select. If there are other Fishball noodle sellers selling at a particular price, they expect the price to be within that range, else they have avenue to select and abandon those who priced more. That is what supply and demand works.

Real experience

To be able to assess and analyse the claim that hawkers’ profit margin is low, I have to get into the industry myself.

This is part 1 of my research.

Reference

  1. Profit margins for hawker fare? As low as 20 to 30 cents (https://www.channelnewsasia.com/news/cnainsider/profit-margins-for-hawker-centre-fare-as-low-as-20-to-30-cents-10948414, 20 Nov 2018 by Desmond Ng). Note that Desmond is a Fishball noodle seller who shared his personal profit margin.

orange carrot cake

ingredients

ingredient A

  • 1 2/3 cup flour
  • 1 1/2 tsp baking soda
  • 1 1/2 tsp ground cinnamon
  • 3/4 tsp baking powder
  • 1/2 tsp salt

ingredient B

  • 2 eggs
  • 1/2 cup sugar
  • 1/2 cup dark brown sugar
  • juice of 1 orange (70 mL)
  • 1/4 cup canola oil

ingredience C

  • 2 carrots grated
  • zest of 1 orange

steps

  1. preheat oven 180oC
  2. combine A. set aside.
  3. in large bowl, on medium speed, beat eggs until blended. add in sugar, beat, 2 min. on low speed, beat in orange juice and oil
  4. add in A and stir until combine
  5. stir in C
  6. pour batter into pan and top with almonds
  7. bake 2 min
  8. lower temperature to 160Oc and bake 25 min until cooked
  9. cool in pan, 10 min
  10. invert cake and cool completely

ginger shallot soy BBQ sauce

ingredients

  • 1 kg chicken wings
  • 1/4 cup soy sauce
  • 1/2 tsp salt
  • 2 tsp light brown sugarr
  • 3 tbsp fresh ginger root, grated
  • 6 garlic cloves, minced
  • 1 tsp paprika/red capsicum
  • 3-4 shallots, minced
  • 1 tsp pepper

steps

  1. mix all ingredients until thorough
  2. marinate refrigerated >= 4 hrs to overnight
  3. grill at low heat (or BBQ) until golden brown

ngoh hiang (five spice fritter)

ingredients

  • 1 packet bean curd skin
  • 500g minced pork belly (fatty)
  • 500 g fresh shrimps, minced
  • 400 g chestnuts (or jicama)
  • 1 egg
  • 6 garlic
  • 6 shallots

seasoning

  • 1 tsp light soy sauce
  • 1 tsp salt
  • 2 tsp white pepper
  • 50 g flour
  • 1 tsp five spice powder

step

  1. mix all ingredients and seasoning together and marinate, >= 1 hr
  2. place 3 tbsp filling in lower half of bean curd skin (soaked first)
  3. roll it in and seal edges with egg yolk/washes (egg wash is mixture of egg, water, milk, cream and salt)
  4. optional step: steam >= 10 min, cut into smaller pieces, coat with flour and proceed to deep fry
  5. deep fry until ngoh hiang turns golden brown
  6. drain excess oil and paper towel
  7. serve