A toast to Ya Kun’s IP-driven success
By Emma Barraclough, freelance journalist
Ya Kun is a Singapore-based coffee and toast chain with outlets across Asia. Executive chairman Adrin Loi explains how intellectual property (IP) has been central to the business’s expansion.
When Adrin Loi’s father left the southern Chinese province of Hainan Island on a junk destined for Singapore 90 years ago, it’s unlikely that he ever imagined that his family would one day preside over a café empire with more than 100 outlets in a dozen markets in East and South-East Asia.
Fifteen-year-old Loi Ah Koon began working on a Hainanese coffee stall in the downtown district of his new homeland. Soon he opened his own outlet serving coffee, tea, toast and soft-boiled eggs to the traders and boatmen who worked in the area. When he married, his wife began producing her own kaya, a jam-like paste made from egg and coconut, and Ah Koon began to import coffee beans and roast them himself.
Ah Koon devoted the rest of his working life to running his coffee stall business, named Ya Kun (the Chinese pinyin transliteration of Ah Koon).
“Dad really established the business and it seemed a pity not to carry it on,” says Adrin Loi, explaining his decision to take on the stall with his brother Algie in 1998 when their father became ill.
Construction work in the business district forced the two sons to relocate the stall. Rent skyrocketed and they decided they needed to modernize the business if they wanted it to thrive.
Almost 20 years later, the Loi family now oversees a business that has more than 60 outlets in Singapore and 55 across Asia, from Dubai to Japan and the Republic of Korea to Indonesia.
Ya Kun cafes continue to offer customers a core menu of coffee, tea, toast, kaya paste and soft-boiled eggs. Mr. Loi says that his goal was to make Ya Kun a household name and for its outlets to be affordable and accessible.
How has the business grown so fast? Mr. Loi says intellectual property is at the heart of Ya Kun’s strategy. The company has a simple offering, but the Loi family has leveraged its trademarks and branding to offer franchise opportunities to partners. Now, half its coffee and toast outlets are run by others.
“Franchising is one of the fastest ways to grow a business,” says Mr. Loi. “I haven’t been to Dubai and Bangkok but I have licensed businesses there. If we ran all the stores ourselves, it would take a lot of capital. This way, we share the financial burden of expansion with the franchisees.”
Even before Ya Kun coffee shops spread across Singapore and beyond, Mr. Loi was determined to protect the brand that his father had worked so hard to create and uphold.
“When we started, we realized that copycats can easily leverage what we had painstakingly built. There are low barriers to entry in this industry – you just need a little bit of capital.”
Adrin Loi’s wife helped him come up with the name “Ya Kun Kaya Toast Coffee stall since 1944” – a long phrase chosen to deter rivals who wanted to sit on Ya Kun’s reputational coat tails. “Now lots of people in Singapore use the phrase ‘since such and such a year’,” says Mr. Loi. “It implies that your brand has heritage and it’s one way to capture the market.”
Once the Loi family had opted for a franchise model, they knew that they had to protect their IP and consolidate their trusted reputation if they were to attract franchisees.
“We wanted everyone to believe in the brand – from the owners to the managers to the staff. And we wanted that sense of importance of protecting the IP to cascade down to everyone.”
“If our food is good and the service is good then it’s a win-win situation for Ya Kun and our franchisees.”
Ya Kun got its trademarks registered. The business now has a trademark for Ya Kun toast, the Ya Kun word mark, Ya Kun in Chinese characters, and for Ka Kun toastwich. It also has copyright in the designs that it uses for its enjoy-at-home ground coffee and for its kaya paste merchandise. Trade secrets protect its processes for roasting and brewing coffee and its kaya paste recipe.
“We have our own ways of doing things,” says Mr. Loi. “We use a sock for brewing coffee – not the kind of sock you wear, but a special coffee-brewing sock that allows us to make 10 cups at a time, unlike some coffee shops where they can only make coffee one cup at a time. We also offer very full cups of coffee – unlike some of the latte coffees that you can buy elsewhere!”
Ya Kun imports Robusta coffee beans from countries including Brazil, Indonesia, the Lao People’s Democratic Republic and Viet Nam. Mr. Loi says that the method of roasting is very important in determining the taste of the final product.
Franchising and IP
Adrin Loi on how IP helped the Ya Kun brand grow
What were the main challenges you faced when devising an IP strategy for Ya Kun?
One of the biggest challenges is avoiding disputes overseas.
Some emerging economies are still using very old laws relating to IP and they aren’t really adequate for modern agreements. In some countries there can be disagreement about what some of the legal terms used in the law actually mean. That can create uncertainty in franchising agreements.
We registered our marks quickly and we haven’t experienced any problems with trademark squatting. We are a relatively small business so I think we go under trademark squatters’ radars!
What opportunities and challenges do social media and the Internet offer from an IP perspective?
We are now very well known in Singapore and people can readily identify us. That means we have to be very careful: the more well known we are, the greater is the potential fall.
We have a Facebook page and a website and we have someone to manage social media. We do a lot of marketing online, we sell merchandise via our website and we offer loyalty programmes such as customer rewards that we promote on social media.
People have sometimes misused our brand overseas and one of the biggest challenges we face is how we keep track of brand use. When people use our brand online, we have to look at how they are using it and what the context is before we decide what kind of action to take. We reply to comments on sites such as TripAdvisor – it’s all part of managing our online reputation.
Are you able to protect your recipes using IP rights?
We protect our recipes using trade secrets. We tell people the basic ingredients but we maintain trade secrets over our methods of production. We have kept our methods within the family and we sell the finished products to the franchisees. This has allowed us to protect our rights. There may come a time when we need to share our recipes but for now we treat family members well and we all keep the secrets!
What advice do you have for other businesses considering a franchising model?
Franchising is one of the fastest ways to grow but franchisees must believe in the brand they are taking on. They need to ensure that it is profitable – franchisees must take it on with their eyes open, believing that it will create revenue.
You need to get your trademark portfolio in order. Get a good lawyer to help.
One challenge is ensuring everything is covered by the franchise agreement and set out in full. We try to avoid litigation and so far we have not had any disputes about IP. We make sure that when franchisees take on a franchise, they really understand how they must use the IP.
Some people take on two or three franchises. If they have existing business interests as well then there is a risk that they will neglect the franchises. Although franchisees run the business by themselves, they need reminding of the Ya Kun way, including regular training and a sense that they are part of the family. Make sure that franchisees feel they are part of the business. If they do well, it reflects on you, and if they do poorly that reflects on you as well.
“We sell regular Singapore coffee: it’s something that most local people like. It’s quick and relatively cheap. In some markets such as Hong Kong (SAR) and Dubai we offer Arabica instead, or coffee styles such as latte. We try to offer the same products in all the markets we operate in, because it is easier to control product quality and the consistency of our offer but there are some exceptions. For some markets we ask the coffee plantations to develop a bean that is more neutral-tasting. We have to offer what the market wants. Before launching in a new market, the franchisee does R&D on what products the local people will accept and will sell and then we give final approval.
Coffee is an integral part of Ya Kun’s appeal, and the extent to which the company has to develop products that meet local demand in different markets reflects the growing segmentation of the coffee industry and the role that IP plays in its value chain. The World Intellectual Property Report 2017 – Intangible Capital in Global Value Chains, published by WIPO in late 2017, includes an analysis of the global coffee industry and explains how consumption has moved from the first wave (coffee largely drunk in the home, often to boost energy levels) to the second wave (coffee drunk in social settings such as coffee shops) to the third wave (coffee targeted at consumers interested in knowing how their coffee beans are sourced, farmed, roasted and brewed, and who are prepared to pay a premium price for the drinking experience).
“These new market segments provide opportunities for different participants to upgrade their role along the chain,” says the report, suggesting that Ya Kun’s Singaporean coffee roasting methods and sock-brewing techniques may reap IP dividends to come.
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