Meeting with Xie Wen Hong – Financial and Management Review

Xie Wen Hong asked why the store is running at a loss. Darryl explained that in the beginning we are driving guest count so we discount and run promotions to build a recurring customer base. By doing this we have enough customers to support the store then we focus on driving the transaction amount per customer up. Right now his first store is at 40% recurring clients and 60% new clients. They want to get to 50/50 before they stop the discounting. They could change directions now, but they don't want to do that before hitting the 50% recurring guest count.

Xie Wen Hong asked, "Why do you have so many employees at this point without the revenue to support it?" Darryl said that in the beginning you overstaff to handle service demands. You don't want customers waiting. You want them to have a good experience and come back. You also have staff who is not servicing customers do outreach in the community. Therefore we are using their time for marketing purposes to build the brand and locations visibility.

Xie Wen Hong asked, what is your plan to fix the location if it is not doing well. Darryl said that they have a whole team and they look at it daily. It is a collaborative effort. We have controls in place to help us manage the stores appropriately.

Xie Wen Hong asked, what is going on with the second store? Darryl said it is about to open on the 25th of July.

Xie Wen Hong said, the first store is still at a loss how are you going to pay for the second store. Darryl said we can transition to break even at any time. With the second store opening, we can transition the first store so it is no longer operating at a loss. Then we focus on using our current cash on bringing the second store up.

Xie Wen Hong said thank. We answered professionally. He feels more comfortable and he will trust us to continue.

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