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5 Questions With Sakae Holdings CEO

Sakae Sushi has been synonymous with Kaiten, or the conveyor belt sushi concept. In an arena that is commonly associated with up-market pricing, Sakae Sushi has managed to dish out food at competitive prices. Anchor Christine Tan spoke with the founder and CEO of the company, Douglas Foo, about surviving the financial crisis and dealing with the current bout of food inflation.

Sakae Holdings Founder and CEO Douglas Foo
CNBC.com
Sakae Holdings Founder and CEO Douglas Foo

Q: Right smack in the middle of the financial crisis you had to close down your Chrysler Building in New York in 2009. What happened?

A: It has a lot to do with timing. We signed the leases at the height of the whole economy, and we have a 15 years lease on that. Before that, people were coming to us to want to take over the leases because it was such a valuable piece of asset.

But when we opened, the crisis happened. The business went down by a lot but the rentals won't go down. We were stuck with a high rental that we have signed for 15 years. Not seeing any light at that point in time, and instead of trying to do that business and having it drag the rest of the company down, we knew we had to make a choice. It was a very painful decision, but it was a necessary decision in order to preserve the company for the future.

Q: You had to write off your whole U.S. investment. What lessons did you learn from the entire experience?

A: There were a lot of lessons. I think it was a very valuable lesson for us, of how we have to enter a sophisticated economy like the U.S. We were going into uncharted waters in that sense and so a lot of things we had to do it in-house. We had to rely on our network.

At the end of the day, you can plan all you want, but when things happen, you need to reassess very quickly. You can imagine you're not having cash flow income but you have to start paying for all the rest of the expenditure, it's scary, it's a scary thought.

Q: You posted a net loss of 3.8 million in 2009. Despite tough times, you took the decision not to retrench staff to cut costs. What measures did you have to resort to eventually reduce your cost structure?

A: Well I cut my own pay. Yeah. I think for a start senior management decided that we’d take a lead. It actually acts as a commitment that we'll want to make things happen, and we want to work together as a team to go through this particular difficult time.

We reinstated everybody’s pay since last year. At the end of the day, the lesson learnt from this particular session is that when you have good times, you need to be prepared for bad times ahead. Wise men once highlighted to me that at times of war, prepare for peace, in times of peace, be prepared for war.

Q: Let's talk about China. You have less than 10 outlets in Beijing and Chengdu. You say you've dated some partners but never ventured beyond that. Are you afraid of getting ripped off?

Actually our first entry was working with a Chinese partner, but we realized that it was not a long-term vision. We were in there for the long term, but they are just dating you for the initial gains and not going for a long-term ride. So instead of us getting married and divorce later, we decided to call it quits. We stopped at the girlfriend and boyfriend level.

Q: You say your major concern is rising food prices. What are you doing about this problem?

A: We need to be a lot more efficient. In terms of being innovative, we can use different parts of the fish to create more dishes, so that at the end of the day, we are able to create that value for the customer, yet at the same time do business out of it. Like the fish skin. It used to be thrown away, but now we actually make dishes using the fish skin, which is actually very nutritious as well.

This interview is an excerpt from CNBC’s longest-running feature program Managing Asia. Catch the full interview with anchor Christine Tan every weekend on CNBC.

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