MINISTOP PHILIPPINES
Dante Colawet, Melissa Lim, Darwin Renolayan
We are dragging Robinsons Retail Group down. For fiscal year 2008-09, we were the only
business unit in the Group that lost money. The current fiscal year is about to end by next
month, September, and we are deep in the red. Were supposed to get out of the funk this
year, just to remind everyone, again.
These are the words of Johnson Robert Go, Jr., President of Robinsons Convenience Stores, Inc.
(RCSI), Philippine licensee of MINISTOP Japan, during the weekly Management Committee
meeting. Hearing these, the Department Heads (Franchising, Merchandising, Marketing,
Purchasing, Human Resources, Store Development & Planning, Construction, Operations, and
Logistics) knew they are in for another very rough ride in the next fiscal year.
Note: Johnson is also the Business Unit General Manager of Robinsons Movieworld, and Director of the Gokongwei
Brothers Foundation, Inc. He also used to manage the now closed-down Hot Loops and Litton Mills Textile.
ABOUT MINISTOP PHILIPPINES
MINISTOP is the flagship business of RCSI. It is built around the business model of franchising:
utilizing an established and tested system of selling fast-moving consumer items in a
convenience store setting. The Ministop franchise system boasts of lower business risks relative
to nearest competitor (7-Eleven), and with higher success rate compared to the traditional sari-
sari and grocery stores. It applies the concept of mass merit the benefit of one is equal to the
benefit of many.
Table 1: Comparison of a Sari-sari Store, Convenience Store, and Grocery Store
Sari-Sari Store Convenience Store Grocery Store
Store Size 20-30 sq.m. 70-110 sq.m. 1000-2000 sq.m.
Operating Hours 15h (6am-9pm) 24h (6am-6am) 9h (10am-7pm)
Number of Stocks 300-500 pcs. 2,500-3,000 pcs. 20,000 pcs. & up
Items Purchased Per Visit ave. of 2 items 2-5 items ave. of 15 items up
Consumption on premise on premise at the destination
Period of Consumption 1-2h 1-2h within 2-5 days
Market Radius people w/in 50m radius people w/in 300m radius people w/in 1km radius
Ministop was established in 1980 as a wholly-owned subsidiary of Jusco Co., Ltd. with initial
capitalization of 30million yen. In July 1980, it opened its first store in Okurayama in Yokohama,
Japan. After 5 years, in May 1985, Ministops network breaks the 100-store mark with 80
franchised and 20 directly managed stores.
In November 1990, the first Ministop outside Japan was opened in Seoul, South Korea. With the
penetration of South Korea, in March 1988, Ministop had 1,000 stores are in full-blast operation,
where 922 are franchised and 78 directly managed.
August 2000 saw Robinsons Retail Group of the Gokongwei Group of Companies, Mitsubishi
Corporation, and Ministop Co., Ltd. seal the Shareholders Agreement to establish Ministop,
Philippines. December of the same year, the first Ministop store in the country was opened in
Robinsons Galleria, EDSA Node. In May 2002, the company held its first ever trade conference
in, and in January 2004 it reached its own 100-store mark when it opened Ministop Centerpoint
Building in Ortigas Center.
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Table 2: Growth of Ministop in Number of Stores
Growth in Number
370
No. of Ministop Stors
400
350 300
300 230
250 190
200 150 160 Ministop Stores
150 85 105
100
50 1 15 32
0
00
01
02
03
04
05
06
07
08
09
10
20
20
20
20
20
20
20
20
20
20
20
Year
Company Vision
Ministop is the leader in the convenience store industry, preferred by customers in terms of
assortment, price and quality of products and value-added service.
Company Mission
Ministop contributes to the enhancement of communities by providing customers with wide
assortment of popular conveniently packaged merchandise and fast food products of high quality
at affordable prices through excellent service in a clean, safe and friendly environment. It
provides business opportunities by offering attractive franchising package to local entrepreneurs.
Goal
Based on a Ministop study, basic reasons why people go to convenience stores are:
1.) the store as an extension of the household refrigerator
2.) for emergency items
3.) for items customer forgot to buy from the grocery or supermarket, or simply ran out of
stock
Given these, Ministop aims to be the main source of nearby markets daily purchase by offering a
wide variety of grocery items catering to the different needs and types of customers.
THE MINISTOP FRANCHISE SYSTEM
Combo-Store Advantage
Ministop franchise system attracts investors with its shared investment scheme, smaller capital
requirement compared with 7-Eleven, and the combo store advantage with its recent
introduction of fast food meals such as fried chicken or dimsums with rice, and rice toppings. The
combination of convenience and fast food stores under one roof is what makes Ministop unique
when compared with competitors.
2
The following are the justifications for the incorporation of fast food in the convenience store
setting:
1.) allows for greater level of product differentiation
2.) draws more people in
3.) allows for higher customer buying frequency
4.) allows for higher margin
5.) and hence, higher gross profit
Marketing and Operations Support
Ministop merchandise consists of fast-selling consumer items and new products supported by
full-blast merchandising. Target market consists of people-on-the-go and those who are always
on the lookout for quick and enjoyable meals. It also offers a developed fast food line of items to
customers that are of high quality, unique, and satisfying.
Ministop franchisees enjoy the support and strength of the business partners that make up
Ministop Philippines Robinsons Retail Group (Robinsons Departments Stores, Robinsons
Supermarkets, Handyman, True Value, Saizen, Topshop/Topman); Mitsubishi Corp. (net worth of
$15billion and affiliated with Honda Cars Phils., Isuzu Cars Phils., Ayala Corp., MD Distripark,
Philippines Resin, Inc.); and Ministop Co., Ltd. (2,000 stores in Japan, 1,000 stores in South
Korea, and affiliated with Aeon Group with net worth of $10billion).
Moreover, the company extends full marketing support to its franchisees by constantly launching
merchandising activities to create awareness during & after store openings, and to make buying
experience exciting for its customers.
Ministop also has its own distribution center which is the Robinsons Distribution Center, Inc., a
logistics company located in Maybunga, Pasig City put up for the sole purpose of serving
Ministop franchisees. This is a joint venture company of Mitsubishi Corporation and Robinsons
Retail Group. The advantage of having a distribution center is that it allows daily delivery, thus:
1.) there is no need for franchisees to order in bulk
2.) there is no need for larger backroom
3.) there is lesser goods for inventory
4.) there is an assurance that freshness and quality of goods are maintained
Also, distribution center allows franchisees to get goods at wholesale prices even if they dont
order by whole.
Another support structure is the Ministops centralized management information system
consisting of:
1.) point-of-sale (POS) system
2.) merchandise system (inventory management)
3.) platinum system (accounting)
4.) information system (ordering, logistics)
Lastly, there is also the Store Support Group that assists franchisees with their operations. It is
consists of:
1.) Store Operating Coordinator / Store Adviser
2.) SWEDA Information Technology Specialist (POS Supplier Support)
3.) Local Marketing Associate (who designs marketing campaigns / programs for the year for
the store)
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4.) Inventory Management Specialist
FRANCHISE SCHEMES
Ministop franchise schemes are the following:
1.) Standard Type
2.) Standard Lease Type
3.) Creative Lease Type
4.) Master Lease Type
The difference between each type is summarized in the following tables:
Table 3: Schemes Overview
Items S-Type SL-Type CL-Type ML-Type
Land FC Owns FC Rents RCSI Rents RCSI Rents
Building FC Owns FC Rents RCSI Rents RCSI Rents
Business Partner Investor Investor Investor Operator
Contract Duration 10 Years 10 Years 10 Years 10 Years
Investment
Building Cost FC FC FC RCSI
Equipment
Major RCSI RCSI RCSI RCSI
Minor FC FC FC FC
Merchandise FC FC FC FC
Expenses
Wages FC FC FC FC
Utility
Gas / Tel. / Water FC FC FC FC
Electricity 50% FC 50% FC 50% FC 50% FC
50% RCSI 50% RCSI 50% RCSI 50% RCSI
Rent - FC RCSI RCSI
Invtry. Loss / Disposal FC FC FC FC
Packaging and
Supplies FC FC FC FC
*FC = Franchisee
Table 4: Capital Requirement per Scheme
S Type RCSI SL Type RCSI CL Type RCSI ML Type RCSI
Joining Fee 728,000 728,000 728,000 728,000
Minor Equipment 200,000 200,000 200,000 200,000
Major Equipment 2,350,000 2,350,000 2,350,000 2,350,000
Working Capital 400,000 400,000 400,000 400,000
Security Deposit (Merchandise) 150,000 150,000 150,000 150,000
Construction Cost 1,565,000 1,565,000 1,565,000 - 1,565,000
Advance Rental / Security Deposit - 300,000 - 300,000 - 300,000
Initial FC Cash Requirement 3,043,000 2,350,000 3,343,000 2,350,000 3,043,000 2,650,000 1,478,000 4,215,000
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Table 5: Profit Sharing per Type
ML Type Gross Profit RCSI FC
Bracket 1 less than or equal to 275,000 36% 64%
Bracket 2 in excess of 275,000 but not exceeding 400,000 66% 34%
Bracket 3 in excess of 400,000 but not exceeding 525,000 73% 27%
Bracket 4 in excess of 525,000 and above 75% 25%
CL Type Gross Profit RCSI FC
Bracket 1 less than or equal to 330,000 41% 59%
Bracket 2 in excess of 330,000 and above 60% 40%
RCSI FC
S/SLType Gross Profit 35% 65%
Table 6: Simulated Monthly Income from Each Type
S-Type SL-Type CL-Type ML-Type
Ave. Daily Sales w/o VAT
Daily Sales (30 days) 50,000.00 50,000.00 50,000.00 50,000.00
Monthly Sales 1,500,000.00 1,500,000.00 1,500,000.00 1,500,000.00
Cost of Goods 1,080,000.00 1,080,000.00 1,080,000.00 1,080,000.00
Less: Loss 15,000.00 15,000.00 15,000.00 15,000.00
Disposal 15,000.00 15,000.00 15,000.00 15,000.00
Cost of Sales 1,050,000.00 1,050,000.00 1,050,000.00 1,050,000.00
Gross Profit 450,000.00 450,000.00 450,000.00 450,000.00
GP% 30% 30% 30% 30%
FC Gross Income 292,500.00 292,500.00 242,700.00 232,000.00
65% 65% 54% 52%
Operating Expenses
Wages 91,000.00 91,000.00 91,000.00 79,000.00
Electricity (50%) 42,500.00 42,500.00 42,500.00 42,500.00
Telephone 2,000.00 2,000.00 2,000.00 2,000.00
Water 2,200.00 2,200.00 2,200.00 2,200.00
Preventive Maintenance 6,700.00 6,700.00 6,700.00 6,700.00
Insurance 600.00 600.00 600.00 600.00
Supplies (1.5% of sales) 22,500.00 22,500.00 22,500.00 22,500.00
Loss (1% of sales) 15,000.00 15,000.00 15,000.00 15,000.00
Disposal (1% of sales) 15,000.00 15,000.00 15,000.00 15,000.00
Rent - 50,000.00 - -
Total Operating Expense 197,500.00 247,500.00 197,500.00 185,500.00
FC Net Income 95,000.00 45,000.00 45,200.00 46,500.00
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AGGRESSIVE EXPANSION PROGRAM
Since it started operations, Ministop has yet to enjoy a decent net income. While it has achieved
its target of becoming the fastest growing convenience store in the country, adding by an average
of 37 stores per year in 10 years, it has never reached its target in terms of return on investment
(ROI).
During its early years, Ministop Management was one in saying that Ministop should be able to
deliver desired earnings when it hit the 200-store mark. But what happened in 2008 was much
worse. Net income dipped to record low so much so that Robinsons Retail Group Management
questioned whether or not they made the right decision in entering the convenience store market
via Ministop. Ministop President responded by stating that increased operational expenses
brought about by the changing dynamics of store operations, at the same time escalating utility
rates, has deeply affected the previously forecasted payback period of the Ministop investment.
And so, since 2008, Ministop Management has launched an aggressive campaign to increase its
number of stores by 80-100 per year, to exact 7-Elevens number by 2015 which currently stands
at 700 and growing by 30-50 per year. More Ministop stores popped out like mushrooms in the
Central Business Districts of Makati, Ortigas and Fort Bonifacio. And franchise applications to put
up store in as far as Laguna & Batangas in the South, and Pampanga, Bataan & Subic in the
North of Metro Manila were approved and quickly constructed.
Two years after the campaign was launched, however, the business unit is still losing money.
Robinsons Retail Group President Robina Gokongwei-Pe has grown anxious about continuing
the business, and has been discussing with Johnson on some possible solutions to arrest the
bleeding.
Currently, out of the total 370 stores, 185 ML Type franchised stores, 70 are of the CL Type, 40
are of the SL Type, 25 S Type, and the remaining 50 are all directly managed stores. Out of the
50 managed stores, only half are making money, with the other half either breaking even or losing
money. The S, SL and CL Type stores are either breaking even or making money. Majority of the
ML Types are either breaking even or losing money, and contract pre-termination is very common
among losing franchisees.
Losing franchisees has complained about Ministops low level of support for their stores. Late,
incomplete and no-deliveries are rampant. Head Office people they complained were also non
responsive to some of their requests. Some of them are hard to transact business with. I dont
feel them treating us as business partners. They dont listen to our suggestions, for example
regarding the merchandise mix and the profile of my stores market which are subdivision
residents, and they are so bossy, said Christopher Sims, one of the owners of struggling
Ministop stores. I thought I got a bargain in Ministops Php700,000 joining fee for a 10-year
contract and lower investment compared with 7-Elevens, says an SL-type franchisee who is till
trying to recuperate his investment in 5 years of operation. Moreover, some of them have
complained about Ministop putting up another store near their location. They say it eats up a
portion of their daily sales. They now wonder if the company is planning properly their expansion.
Ministop Operations Department from their end has also complained about many of their
franchisees not taking store management seriously. Some of the ML Type franchisees who are
required to supervise the store for 8 hours a day repeatedly violate the rule. Some of them also
misrepresent operational expenses like one who declares high salaries for store personnel but
pays way below minimum wage, as reflected by the high turnover of personnel, says Area
Operations Manager Joy Alviar. There are so many erring franchisees, most of them with grave
offenses that we are forced to pre-terminate their contact with us. I wonder how our Franchise
Group is doing with regards franchisee selection. Its like were going after quantity and not quality
lately, she further added.
