Brown Coffee announced yesterday that it has closed all five locations of the Taiwanese-based beverage franchise giant Gong Cha after profits underperformed, Brown’s Chief Executive Officer confirmed.
Brown CEO Chang Bunleang told the Post yesterday that the decision came after Gong Cha had not lived up to expectations, and that Brown would now focus on making its local coffee brand a regional chain.
“[Revenue] was lower than our expectations, even though it is not serious,” he said about Gong Cha, which he first brought to Cambodia in late 2013.
“From now on, importing brands from other countries is no longer [a] priority for the company.”
According to Bunleang, staff at the five Gong Cha locations in Phnom Penh will not lose employment, but will rather be absorbed into Brown as it continues its growth plan.
The company is set to open three new establishments in Phnom Penh over the next three months, reaching a total of 14 branches by the end of this year.
Bunleang declined to disclose Gong Cha’s financial performance.
However, according to a report from the Financial Times in March of 2015, sales at Brown Coffee, including Gong Cha and Fox restaurant, reached approximately $500,000 a month in 2014 with a profit margin of 15 to 20 per cent.
With coffee competition fierce in Phnom Penh, which just recently saw Starbucks open its second location in Aeon Mall, Gong Cha has had to face off against other global franchises like UK-based Costa Coffee, Taiwanese-based Chatime, and Australian-based Gloria Jean’s.
Khorn Chhundara, Chief Executive Officer of Koi Café – a similar franchise to Gong Cha that also hails from Taiwan – said that while the business models for franchises had been based on targeting the youth, the market was rapidly changing. He added that companies need to follow market trends closely in order to carve out a profitable niche.
“The market is small so we cannot absorb as much as we want,” Chhundara said, adding that while it was difficult to predict Koi Café’s long-term stability, for the moment the franchise is planning to expand operations.
Currently, five Koi Café branches are operating in Phnom Penh, and Chhundara plans to open two more by the end of the year.
Phnom Penh has become a hub of global franchises trying to tap into the growing wealth of a younger demographic for good reason.
According to a study produced by Park Café last year, for the capital’s 2.2 million inhabitants, it estimated that daily spending on dining out reached $1.53 million with $810,000 attributed to breakfast and $720,000 to lunch.