08
May-2017

How to Set Up a Hamburger Business in the Philippines

This, the hamburger business, is the first business I’ve established in the Philippines, albeit I have lived in the country for almost 2.5 years in all and first came here around 5 years ago, in 2012.

 

Why a hamburger business?

 

Some weeks ago, I was trying to come up with a proposition that was relatively unique to the area of Siquijor island, and yet, an idea that was already very well established in other parts of the Philippines. As such, the business model would be well tried and tested on a similar minded clientele and a relatively similar income group.

 

When I previously resided outside of Cebu City, I habitually frequented a hamburger stall whereby you could get a burger and a really good cup of coffee for around 80 pesos (at the time, that was equivalent to almost $2 US. Now, the exchange rate is much more in favor of the US dollar, so we’re currently looking at 50 pesos to $1 US).

 

Actually, I don’t eat meat, but I would enjoy the egg “burger” instead, along with plenty of reasonably hot and spicy chili sauce.

 

I said that I enjoyed the egg “burger,” but that only occurred providing the member of staff who was servicing the joint agreed to let me have an egg on my bread roll as opposed to a burger, since an egg roll was not on the menu and the idea that a customer could have something that was not on the menu was not always keenly viewed upon. A sincere lack of flexibility going on there, then.

 

As it happens, while there is a hamburger stall in Siquijor town, I don’t believe there is another burger stall near to my chosen location, and Siquijor town is about 12km (8 miles) distant from where I’ve opted to establish my joint.

 

Will hamburgers et cetera sell here?

 

If priced keenly enough, then yes, I have little reason to doubt it.

 

The local people are paid, on average, a very small income. Likely the average income here is around 300 pesos per day ($6 US). So my reasoning is to price the basic burger – bread roll/ bun, burger, mayonnaise combination – at 25 pesos ($0.50 US).

 

That in turn would provide a small profit of around 8 pesos. Not much, I know it.

 

However, though at the time of writing this I am not familiar with the cost price of the likes of a 300ml bottle of fizzy drink e.g. cola, let’s assume that it is around 6 pesos. And a small bottle of cola usually sells here for 12 pesos. There’s a 50 percent markup of 6 pesos.

 

Presuming that for around 75 percent of the burgers we sell, we manage to sell a burger/drink combo, even with regards to the basic burger and a drink, that’s a profit of 14 pesos.

 

As mentioned, local wages here are kinda abysmal. However, local prices in general reflect that, and it would be no different with regard to my basic burger – a very small price, with a very small profit margin, but still in keeping with the local average wage, meaning that locals can, and hopefully will, choose to stop and have their burger and drink on a regular basis.

 

 

 

The Land

 

A short note on the land: It is, in fact, the front “garden” area of my partner’s parents, and they (particularly Mom, since the land belongs to Mom) have been kind enough to permit us to utilize the land in the form of a burger stall and a seating area. In all, our “slot” will take up approximately 20m sq. and the cost of that is 12,000 pesos ($265 US).

 

 

 

Cost of Hiring a Builder in the Philippines

 

How much is it to hire a builder – or at least someone with the capability of laying foundations for the business structure/s and then building the actual buildings to host the business?

 

I am currently hiring two guys, and for an eight-hour day (give or take a few minutes here and there – this is the Philippines, after all, so the work ethic, again, tends to be fairly relaxed), I pay out a total of 625 pesos for both guys. That’s the equivalent of around about $13 US per day. Would you even get out of bed for that? I thought not. And nor would I, unless I really had to.

 

The quality of work is pretty decent, though not quite up to what we are used to in the Western world or in Australia and New Zealand. Good enough, though. And my “main” guy, the 24-year-old Roy, who I’ve been watching over the past week, is particularly keen on doing a good job and he seems thoroughly competent at doing so, too.

 

Oddly enough, Roy, my key builder, had a dispute with Dad just yesterday, so when I arrived on the site, nothing had been done for the entire day. I am sincerely hoping that the issues between them have been sorted, otherwise, overall work progress will be slower than I even expected.

 

Now, even though he, Roy, takes ages to finish anything, because he is so focused on doing a good job, it can only be a good thing. Though I don’t view yesterday’s event as professional. After all, life is so much about dealing with criticism and getting on regardless with what you have to do.

 

I also give the workers a snack each day – something like a hamburger bread roll and cola – and have to buy some stuff for their dinner in addition. That’s part of the cost which I have to bear, so it adds an extra 150 pesos ($3 US) per day, or thereabouts.

 

 

 

Tourist Trade

 

Now, it’s not only locals that this business will target.

 

Fortuitously, the road on which the business will be established is arguably the busiest road on the entire island. And a fair percentage of that traffic comes from tourists that are heading over to a small (very small) town called San Juan.

 

San Juan, from what I can make of it, is merely a single road with a variety of shops dotted on either side. Nevertheless, anything that is not a shop or some other form of business, such as a resort (the largest resort on the island, the Australian owned Coco Resort, is in San Juan) is a short-term stay for backpackers (generally priced around 350 pesos ($7 US) per night – yup, incredibly cheap!) or is a restaurant or a barbecue-style eatery or a bar.

 

Many of these establishments are focused entirely on the tourist trade, on the foreigners that live here, or on the more affluent Filipino, of which there does not appear to be many in this area.

 

Thus, even for the higher priced items (we have been considering stuff like fresh shrimp sandwiches since there’s a place that sells a daily catch of fresh shrimp just down the road, plus, I love shrimp sandwiches, whereas I cannot eat hamburger, so the shrimp sandwiches would cater well to myself) it is likely – very likely, or so I am hoping, that we shall have a market for these higher priced effects, too.

 

 

 

Business License

 

If you intend to start a business anyplace in the Philippines, you need to get a license from the local (or nearest) town mayor.

 

At the time of writing, we do not have this license, but I’m very relaxed about it because I’ve been informed that it’s very simplistic to get, which is quite unlike in the UK, the US, Australia, et cetera.

 

In fact, I have also been informed that with this simplistic business license from the local town mayor, we can then also sell alcoholic drinks.

 

You’d never, ever be able to sell alcoholic drinks based on a “normal” business license in the West, and this could prove to be a bonus.

 

 

 

As a Foreigner to the Philippines, Can I Own a Business?

 

If you are wondering about this, can you own a business in the Philippines, then it’s a thoroughly valid question to be asking yourself, or asking other people for that matter.

 

Okay, so first things first. If you are a foreigner to the Philippines (a non-Filipino citizen), even if it’s entirely your own capital that the business is dependent upon, which is the case for myself, you cannot own the land the business is built upon. You can rent the land, but you cannot own it.

 

Secondly, you cannot own the structure that is the business. Again, you can rent a structure, or you can build a structure. Building materials here in the Philippines are cheap, and as mentioned, the labor is very cheap.

 

There is, so I’ve been informed by a good local source, a way to get around this potential major stumbling block of not being able to actually “own” anything.

 

You can ask a lawyer to draw up a clause for the business whereby anything materials that you have invested in for the business can be sold at a certain point of time in the future, providing you as the business investor, albeit not in fact the owner, at least on paper, agree to the sale at that point of time in the future.

 

For a relatively cheap business like setting up a hamburger stall, it’s probably not worth my time or the lawyer’s fee to drum up this type of clause. Like in other countries, in the Philippines lawyers do not come so cheap. I don’t particularly enjoy having to stump up over $100 US for a lawyer to do half an hour of work, unless it’s a total necessity for one reason or another.

 

I envisage that I will have to invest a total of around 85,000 pesos (US $1,730) to get the business up and running, and if I can’t make that back within the first 12 months, then I’ve obviously got something far wrong.

 

So, my hope is that I can reap back my initial investment within a matter of a few months, and then enjoy the reward of profit. Thus, the potential downside is limited.

 

Nevertheless, for any other type of business in the Philippines, a business that requires a larger investment, I would very strongly advise that you do seek out a good lawyer to get your back covered should something go wrong with your business (or with your relationship with your business partner).

 

I’m fairly risk averse myself, though I have indulged in a few risks of recent that sometimes give me sleepless nights, just because it makes me nervous to be throwing money around when I have little control over the longer term.

 

In essence, that scenario is a little bit like taking a punt, a gamble. If you are somewhat risk averse like me, try to find another way to progress.

 

I’ll discuss more of this at a later date since I am making a few investments here in the Philippines, and while I can likely afford the losses should the worst come to the worst, it’s still going to be a painful experience should it happen.

 

You can’t cover every aspect of insuring your investments when making those investments in foreign lands such as the Philippines, but it is definitely worth while finding out how it is possible to lower your capital exposure – lower your risk as much as you can. After all, I’ve heard quite a few horror stories from foreign guys that have married a Filipina lady only to find that they lose everything but the shirt on their back. And that is a very scary proposition.

 

So, in order to reduce my risk, it’s my thinking that I want to be investing in the type of business that does not call for a huge capital input, but at the same time, it’s very likely that the business model will show a profit within a matter of a few months.

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