Making money “the old fashioned way”
BrandAmerica
follows for the franchise route to profits.
Don’t you just miss the good old days of the Internet boom? Remember
when originality of business concepts was held in such high regard that
budding entrepreneurs were racking their brains to come up with innovative
solutions to problems that did not exist.
Well, the subsequent demise of many such companies has put things back
into some rational perspective: Hey, what’s wrong with pursuing
“old economy” business ideas that have proven successful
and profitable in the past?
“About 90% of new American companies go out of business in their
first year of operation, while more than 90% of new franchisees are
still in business after five years,” comments Michael Sadak, founder
and CEO of BrandAmerica Inc. “A franchise would ensure, if there
were such a thing, better business success,” he adds.
Currently,
BrandAmerica is actively developing two U.S. franchise chains —
Gold’s Gym and Black Angus Restaurants. Earlier, Sadak was instrumental
in bringing the popular California Fitness chain of gyms to Asia.
“The two chains which we are building up in Asia, have been around
since the mid-1960s. Not only do they bring time-tested technology but
they also bring buying power. In addition, they bring a large amount
of brand awareness and technical know-how that can be transferred to
a new market,” says Sadak. Gold’s Gym has facilities in
Taipei and Manila, while it operates two Black Angus restaurants in
Singapore.
According
to Sadak, American chains welcome the opportunity to expand their businesses
into Asia. “Many of them are in a highly competitive market here
in the US and are limited in terms of expansion because of the amount
of competition,” he explains.
“We are able to come in and control the amount of resource allocation
that they would have to deploy to address the opportunities in the Asian
markets, which are the fastest growing in the world,” says Sadak.
“We also have enough of a successful track record, that we are
actually building a confidence level with these potential companies
as there is usually some ongoing benefit the American company can achieve
by going into the Asian markets. Therefore, they would certainly want
to feel that we are in it for the long haul.”
Former investment banker Sadak caught entrepreneurial fever around
10 years ago, when he was working in Hong Kong as the Managing Director
of Chase Manhattan Bank’s Asian M&A business and has worked
with many Asian entrepreneurs, whom he got to know and learn from. “You
got an appreciation for the entrepreneurial process as well as the risks,
which all unfolded in front of me during that time. I then felt that
after 16 years of banking, it was time to get out and see what I can
do… and I don’t think I would be able to go back.”
BrandAmerica’s core management team has successfully worked together
for around five years. Apart from Sadak, other members are Mark Robinson,
COO and CFO William J. McCaffery, both former senior MNC executives.
The team rounds out with Carol Fitzpatrick, Controller and Dominic Taverniti
as CTO. Collectively, the team has over 50 years of experience in Asian-American
business ventures.
BrandAmerica is currently raising ... (capital) to finance its strategy
of introducing more American chains into Asian markets. “We are
talking to a lot of different people but we would like to have the predominance
of our investors coming from the Asian markets,” says Sadak. ...
The new capital will be used to co-invest alongside the Asian investors.
“Our intention in the Asian markets is to look for a strong partner
because without a strong partner it would be difficult to get the right
position, as well as to get the kind of market information you need
to be successful,” says Sadak.
In most parts of Asia, BrandAmerica prefers a partner that is a fellow
investor — a company or individual who would not be a minority
player. “They would typically like to see 50% or more of the transaction
and would bring in two thirds of the money required to develop the brand.
BrandAmerica will bring the other third,” says Sadak.
by Allen Lee
ASIAN VENTURE CAPITAL JOURNAL
August 2002
