Two new immigrants had a dream of opening their own business in Hong Kong.
It was a dream that came true for them, but it quickly turned into a nightmare for most of their franchisees.
Last year Zhang Chao and Mak Wing-ho won Television Broadcasts Limited’s “I am a Boss” reality show and, along with it, a capital of HK$200,000 (US$25,800) to start their own noodle shop.
Full of confidence and enthusiasm, the two entrepreneurs, who are in their 20s, inaugurated their Dou Hua Mei Noodle Shop in Sham Shui Po last March.
Just four months later, the duo quickly expanded their business into a network of nine outlets through franchising.
They also set up a food processing factory in Kwai Chung to offer one-stop services for the franchisees.
But it looks like their management skills are not keeping pace with their ambitious plans.
Soon they found themselves facing a debt of HK$700,000, according to Apple Daily. Also, most of their franchisees have closed shop because they continued to lose money.
Franchisees accuse the duo of failing to keep costs down.
Grace became a Dou Hua Mei franchisee in May, excited by the prospect of being a business partner of the two entrepreneurs.
“I thought they were brave and trustworthy during the TV show,” she said.
To realize her own dream, she borrowed more than HK$700,000 from her family.
“I have no idea about their poor management or how much the two have lost before I joined,” she said.
Grace described the company’s accounting and finances as “chaotic”.
“I once ordered 24 preserved eggs, and they gave me a bill for HK$1,728, which was the price for 24 boxes of preserved eggs,” she said.
“However, they only delivered 24 eggs. What’s more, most of eggs were spoiled.”
The company also reportedly overcharged for raw materials supplied to franchisees.
A box of meat sauce packs, for example, costs around HK$20, but, according to Grace, the supplier asked HK$65 for each box.
Although she assailed the overprice, there’s nothing much else she could do as the contract she signed stipulated that the franchisor would be the sole supplier of the franchisee.
Within a couple of months, Grace decided to fold the shop, losing about HK$500,000.
She later found out that she’s not the only victim.
Another franchisee, who opened his Dou Hua Mei in Sai Wan Ho in April, got the chance to meet other franchisees, and learned that he’s paying 10 percent more for supplies.
“[The franchisor] told me the prices are standardized, but in fact it is not,” he said, noting that he has to pay HK$7,000 more each month for the monthly fee and marketing fee.
“What marketing have they done? They just post a thread on their Facebook page!” he said.
He now plans to sell snacks other than Dou Hua Mei noodles at his store.
– Contact us at [email protected]