Mr. Boonyong Tansakul, Chief Executive Officer

March 2019

Please explain the history of ZEN group

ZEN Group was established in 1991 and began creating new experiences in authentic Japanese Food with our first restaurant Zen. Since then, ZEN has continued to create new experiences in Japanese cuisines including contemporary Japanese cafes and yakiniku restaurants. Then in 2016 we looked at ourselves and asked the question ‘do we want to remain a Japanese only restaurant group?’ and decided that we wanted to expand our capabilities and offerings to include Thai cuisine. Hence, we acquired the “Tummour Group”, a renowned restaurant group focused on North Eastern Thai cuisine, an easy to eat concept with multiple existing brands and franchises throughout the country. Following up from this we expanded our Japanese portfolio by acquiring Sushi Cyu to provide a high end Omakase experience. Thus over nearly 30 years ZEN Group expanded from a single Japanese restaurant to a group with two cuisines covering the entire spectrum of customers and geographically throughout the country, continuing to provide our customers original recipes, quality materials and best in class services.

What is ZEN’s current business structure?

We separate our company structure into three groups: restaurants, franchise and food services. Within the restaurant segment we have our 12 brands split into Japanese and Thai cuisines with a total of 110 branches at the end of 2018. Within the Japanese cuisine, the brands are Zen, Musha by Zen, AKA, On the Table, Tetsu and Sushi Cyu; within the Thai cuisine under Tummour Group are Tummour, Lao Yuan, Jaew Haun, Pho, De Tummour and Khiang. The franchise group is predominately driven by the Tummour Group of restaurants that has 145 branches. Within the restaurant and franchise group, ZEN can serve customers across different segments and geographic locations, from shopping malls in the cities to petrol stations and modern retail centres throughout the country. The Food Services segment is very important for us and has multiple segments, as we see ZEN becoming more of a Food Services leader in Thailand. The food industry in Thailand is changing dramatically due to technological changes, consumer behaviour, new entrants and this requires us to be flexible in our approach. In the past our group did not have any delivery business and we began linking some of restaurants to the major delivery applications in December 2018. So far, we have seen a high growth rate for deliveries and in mid-2019 we will be investing in our own delivery call centre to link all of our brands together. Furthermore, we are exploring the opportunities to create delivery only branches as we want to prevent bottlenecks at our existing branches. So we can see a future where there may be main branches surrounded by satellite branches that are smaller in size. Catering is an additional service with a dedicated team where we provide items such as our Bento Boxes at seminars, meetings or conferences. We also provide restaurant management and management consulting services for customers that wish to develop their own branches or outlets. Our team has been doing this for decades and are able to set up a branch within a month. Our team has passion, deep knowledge and experience, a network of designers, interior and exterior contractors and we are then able to provide customers that may have a hotel or an office building and wish to develop a cafeteria or restaurant. Finally, we started to brand our own unique sauces under Tummour such as Tummour pla ra, Tummour jaew, Tummour phad thai to name a few. Our aim is that one day our sauces will be recognised all over Thailand and used by all vendors in the same way that fish sauce and soya sauce is today.

What differentiates ZEN from its competitors?

Our philosophy is to continually improve and not remain complacent because there are so many opportunities to expand our outlets, the variety of food and shop design to attract new customers. Operationally we are different from the Quick Service Restaurant chains in that we do not have a central kitchen. Ingredients come from the farm directly to the table at our locations because we prefer to provide ingredients that are prepared as fresh as possible to our customers and support OTOP communities. In this connection, our chefs can develop different menus with the fresh OTOP ingredient and serve this in our restaurants. An example is when you go upcountry and enjoy the local cuisine; the meal is made with love and care by local people. It is very important to emulate this in our restaurants because it enhances the quality of the cuisine for our customers. In today’s business world the winner is not the largest any longer. Rather, speed and flexibility are more important. Another example is when you see a small shop at the end of a street where there is no parking but has delicious food, in the past these types of restaurants would have been limited to their neighbourhood. But with the advent of technology and delivery services and the ability to market on social media, places like these have a chance to do very well. There is no longer a limit to one’s potential.

How important are franchises to your business?

Franchises are very important. In the past we waited for the shopping mall groups to expand throughout the country and then we could follow but with the franchise model we are able to expand more efficiently throughout Thailand and the region. We have invested heavily in our support team with the necessary IT systems to manage, monitor and control all aspects of the restaurant. With Tummour Group, ZEN was able to acquire a franchise business that was focused in the upcountry area and today we can see that one franchisee may have three to five branches, with the largest having ten branches. A recent exciting development is with the launch of a new brand Khiang, which serves basic delicious Thai street food dishes such as Phad kapao, Phad see-iew and Kao phad. The concept is affordable, quick and good tasting street food that is made-to-order and freshly prepared at every location. The average store size is 50 sqm and our target is to open 40 branches of Khiang in 2019. This is possible for Khiang brand because we provide our current franchisees with the location and a loan package to help them open more than one branch per franchisee as the investment cost is lower than the other brands. This will lead to a faster expansion for ZEN Group and a shorter payback period for our franchisees. We are also thankful that major commercial banks in Thailand such as Kasikornbank and Siam Commercial Bank are willing to provide 100% financing necessary to our franchisees. This type of structure allows for ZEN Group to focus on enhancing the quality of our brands, creating new menus and developing new brands.

What impact does tourism have for your business?

For our F&B outlets located within the Bangkok CBD area, tourism is an important factor. But in areas outside of Bangkok and upcountry, the focus is more on Thai customers. It is difficult to forecast, attract and rely upon tourists solely in this business. For example, in the first half of 2018 many businesses were doing very well but with the economic issues in the second half several businesses suffered or even closed down. So, for us it is more important to focus on a domestic customer base. When we conduct our feasibility studies for new locations, we focus on how well the F&B outlet will perform during the normal work week and consider both the weekend as a bonus and tourism as an added bonus.

Why did ZEN Group decide to become a publicly listed company and what are plans with the raised capital?

The main objective for listing is for expansion capital. Our aim is to expand the total number of outlets and since Q4 2018 we have been upgrading and renovating existing F&B outlets starting with prime locations. The renovation plan will eventually cover all outlets and this will freshen up the appearance and drive more traffic. We experienced one interesting development during the IPO process. Example, people who recognised our brands but had not returned to the ZEN Group of restaurants in a long time re-ignited their desire to return and re-experience our restaurants. Being a listed company also gives our customers the knowledge that ZEN Group has 12 brands and it allows us to explore more opportunities to acquire other great local F&B brands.

Where do you expect to see ZEN Group in five years from now?

We want ZEN Group to be world class in terms of quality and operations as well as a leading food services company. Over the coming years we will focus on expanding internationally with the franchise model, starting in the ASEAN region. Currently we have 2 branches for “AKA” in Yangon, Myanmar and Siem Reap, Cambodia; and 1 branch of “On the Table” in Phnom Penh, Cambodia. Finally, the Thai government’s strategy to expand tourism to second and third tier cities will be fantastic not only for the country but will also for the entire food industry. This will be a very challenging and exciting period for the ZEN Group.

Source: https://investor.zengroup.co.th/en/newsroom/executive-talk