Yoon Sun Kyu’s first two business ventures in Malaysia failed. Today, he owns Daorae, the largest Korean restaurant chain in Malaysia, with 11 outlets. And the appetite for Korean food, culture and entertainment has a lot to do with it.

When the Asian financial crisis hit in 1997, Yoon Sun Kyu was running a bistro and pub in the city of Incheon in South Korea. Three years later, with the effects of the crisis still lingering,  Yoon packed his bags and left for Malaysia in search of business opportunities, with his wife and two kids in tow.

It was his first visit to the country.

Yoon says he picked Malaysia because he wanted his children, aged 10 and six then, “to learn English in a country where the language was widely spoken”.

However, his early entrepreneurial journey here was marked by two failed business ventures. Acting on the advice of someone he met, Yoon invested in a pub in a shopping mall in Selangor, but it closed down after four months because of a lack of business.

“I had no friends when I moved to Malaysia, so I looked for anyone who could help me out,” he says, explaining that he was not involved in managing the pub, as he was merely an investor with preference shares.

He says his second venture, a buffet restaurant in a hotel in Kuala Lumpur, also ended badly when he was swindled.

“Of course I was disappointed with Malaysian life. But I had no money to go back to Korea, so I stayed on,” said Yoon.

In 2005, a penniless Yoon launched into a third venture and relied on the kindness of friends who offered not just money but rice to start a Korean barbecue restaurant in Desa Sri Hartamas.

Yoon named the restaurant Daorae, which means “Welcome everyone” in Korean. Putting aside his early failures, the entrepreneur had spotted a business opportunity — most Korean restaurants then were located in downtown Kuala Lumpur and Ampang to cater to Korean expatriates. The choice of locations for these 20-plus Korean restaurateurs then was no accident — many, if not most, Korean expatriates at that time resided in Kuala Lumpur, particularly Ampang, which still boasts a “Little Korea”.

According to Korean Tourism Organisation Kuala Lumpur (KTO) managing director Yun Jae Jin, there are more than 20,000 Koreans residing in the country, with the densest Korean residential areas being Ampang, Mont Kiara and Desa Sri Hartamas. “There is also a growing college student population in Subang and Sunway areas,” says Yun in an email interview.

“There were not many restaurants outside of KL in the suburban areas catering to local Malaysians,” recalls Yoon, who had managed a Japanese restaurant in Seoul and, before that, a hotel.

The name Daorae thus reflected his hopes of drawing locals instead of targeting the Korean expatriate community. But a cash-strapped Yoon had to depend on the kindness of friends and even strangers.

“A friend lent me a few thousand ringgit to encourage me to do business. We spent most of it on renovation. We did not even have money to buy a fridge, so we used a normal icebox to store beverages.  A few people helped me to wash dishes… I had failed to be successful then but I was successful in terms of friendship,” says Yoon, speaking through an interpreter.

Yoon was fortunate too that the contractor who undertook the renovations allowed him to pay the RM80,000 cost in monthly instalments.

The outlet was “a tiny 1,500 sq ft single-unit shoplot with seven tables”, says Yoon. There were five employees — Yoon’s wife, a chef, a kitchen helper, a waiter and Yoon himself.

When the owners of Korean restaurants in Kuala Lumpur got wind of Yoon’s plans, they were critical.

“People condemned me, saying that there were not many Koreans living in Desa Sri Hartamas and that there was no market for Korean food here,” he says.

Yoon thought otherwise. “When we were starting out, Desa Sri Hartamas was an upcoming high-end area, which I expected to be packed with fine dining and more local customers one day,” he says.

Still, he thought it would take time to build a clientele. But, to his surprise, Daorae was packed with customers on opening day.

“Many people said I was lucky! But it was very good timing to open the restaurant then, as [the interest in] Korean food and culture was booming. The famous Korean TV drama of the imperial lady chef, Dae Jang Geum (Jewel in the Palace), also got local people interested in Korean cuisine,” he says, referring to Hallyu, or “Korean wave”, which hit Malaysia in the early part of the last decade.

It didn’t take long before Daorae broke even, as its start-up capital was relatively small by current standards, says Yoon.

Setting up a new outlet today requires an average investment of RM1 million. Currently, Daorae has 11 outlets — seven in the Klang Valley, two in Penang, one in Melaka and one in Ipoh, which opened on Jan 24. Daorae’s biggest outlet — in Tanjung Tokong, Penang — measures 10,000 sq ft and can seat 300 diners. It is currently the largest Korean restaurant chain in Malaysia.

Daorae’s popularity grew by word of mouth, particularly through the blogs of teenagers, Yoon says. Blog entries often mention framed photographs of Yoon posing with Korean music artistes displayed prominently in the Hartamas outlet. Yoon says sponsoring the meals of Korean music artistes and sportsmen who visit Malaysia is his way of extending hospitality to his countrymen who miss Korean food when they are abroad. But, as it turns out, it’s also a good marketing gimmick.

“When South Korean teenage golfer Noh Seung-yul won the Maybank Malaysian Open Golf Championship last year, his father — who caddied for him — thanked us for sponsoring his meals,” he says.

Among the Korean stars whom Daorae has hosted are Rain, Super Junior, TVXQ, Beast, FT Island and U-kiss. The language barrier sometimes leads to misunderstanding between Korean management companies and their local counterparts, and there have been occasions when Yoon has stepped in to help sort out problems.

Daorae’s growth points to the growing — and seemingly insatiable — appetite for Korean entertainment and food. In fact, Yoon decided to open a second outlet in Subang Jaya in 2006 based on feedback from customers who were tired of having to queue for a table.

“When the Subang outlet first opened, customers had to take a number and sit at the nearby coffeeshop before they could be seated [at Daorae]!” says Yoon with a chuckle, adding that customers continue to suggest new restaurant locations.

As a foreign entrepreneur, Yoon faced challenges in the early days, among them the language barrier. “Language is no longer a problem because I hired staff who speak English well. But early on in the business, I did not have the finances to hire a good interpreter,” he says.

While his children speak fluent English, having attended school in Malaysia, Yoon can manage only basic phrases. At the interview  for this article, which took place on Jan 19, days before Daorae opened its newest outlet in Ipoh, the company’s chief operating officer Steve Cho, also from South Korea, sat in as interpreter.

Yoon also found that obtaining the necessary approval and licences was slower than in Korea. “It takes a month to set up a company in Malaysia but only a day in Korea… Tak boleh tahan! Too slow!” he says.

As the number of Korean businesses quadrupled in Malaysia, however, there were also more Korean companies and accounting firms that were able to assist him with licensing issues.

Those who were critical of his decision to open an outlet in the Desa Sri Hartamas area ended up riding on Daorae’s popularity and opening Korean restaurants in the vicinity. While acknowledging the competition there, Yoon is confident.

“Daorae’s interior design was basic compared with other restaurants that spent more on interior design. Many customers went to the other restaurants but eventually they came back,” he says.

Yoon is also unfazed by the new entrants into the Korean restaurant business. His rationale is that “more than 90% of them still target Korean customers”. By contrast, only a fifth of Daorae’s customers are Korean, says COO Cho.

“Now there are more than 20,000 Korean residents in Malaysia and about 200 Korean restaurants, which means you can accommodate only about 100 Koreans per restaurant if you target only Koreans. Malaysia has a population of more than 28 million,” says Yoon.

His observation is that, generally, 60% of new Korean restaurants tend to close down, while only 20% break even and another 20% become really profitable.

Certainly, Daorae has many competitors — according to KTO, there are at least 105 Korean restaurants in the Klang Valley.

“All restaurants are competition for Daorae but we do not consider any to be close rivals. Some restaurant chains are serving different types of food while another Korean restaurant chain has only four branches,” says Cho.

The 48-year-old Yoon, a physical education graduate, likens the restaurant business to a battle. “There will not be many winners… but Daorae is a winner!” he says with a laugh.

Daorae’s business has been stable for the past two years, Yoon says. With Klang and Johor Baru outlets on the cards this year, the company is targeting RM40 million in sales by year-end, up 33% from RM30 million last year.  Yoon says next year, Daorae may expand to Kuantan and branch out regionally to Indonesia and Singapore.

Korean food generally tastes similar but there are variations from province to province, the way the local dish bak kut teh differs in taste from one location to another.

“Bak kut teh in KL, PJ and Klang have different tastes but different people have their favourites. Likewise, Jeju Island Korean food is different from Seoul Korean food,” says Yoon, referring to the island that is a popular tourist destination with Malaysians.

Daorae employs three chefs — including an executive chef — from Seoul to produce its Seoul-style menu. “Seoul is the capital of Korea, so the cuisine is generally more well accepted by most people,” says Yoon. Every month, Daorae’s three chefs visit the different Daorae branches to train the chefs and conduct food-tasting sessions over the course of a week to maintain high quality control and consistency in taste.

Daorae was recognised by the 2009 Miele Guide as one of the top 300 restaurants in Asia. The annual publication ranks Asian restaurants according to judging and votes by restaurant critics, food professionals and the public. Of the four Korean restaurants listed, Daorae was the only one based outside South Korea, says Daorae COO Cho.

Customer service is also one of Daorae’s strengths, says Yoon. “Our motto is ‘The customer is always right’, and we train our staff to think that way. We tell them the customer pays their salary.”

Yoon is proud of his restaurant workers — who are mostly Nepalese — because they feel responsible as ambassadors of Daorae. “They work hard because we treat them like family; sometimes we scold them like a father would his sons and, other times, we give advice,” he says.

Most of the Nepalese staff also speak basic Korean, says Cho. “The senior staff teach the juniors, so they learn by themselves — mostly to communicate with the boss because Yoon speaks Korean,” Cho says. “Nepal was a monarchy for most of its existence, so the Nepalese workers understand what a king is. I ask them to serve their customers as they would a king — with kindness and quick response,” he says.

Waiters are taught to observe customers during their shifts and to note what customers usually ask for. “If a customer drops a spoon, immediately bring a new one before he even makes a request,” says Yoon.

Asked why Korean food is relatively more expensive, Yoon is quick to respond that Korean side dishes and tea are offered in unlimited quantities, for free. “Also, we are doing barbecue[-style meat], not steamed meat. There are two kinds of barbecue — marinated and non-marinated. Barbecue lovers prefer non-marinated meat, so it has to be of very high quality because there is no marinade or sauce to help enhance the taste,” he says.

Yoon says Daorae’s prices are reasonable. Despite the 50% increase in pork prices over the past three to four years, the chain has not increased its prices, he says. Meats such as pork and chicken are sourced from a local supplier; lamb and beef are imported, along with ingredients for seasoning and sauces.

To keep costs low, Daorae does bulk buying for its 11 outlets, which gives it clout when it comes to negotiating with suppliers.

According to Yoon, 70% of Daorae customers are Chinese because Korean food is non-halal. But this is set to change — he has plans to launch a separate halal Korean restaurant franchise business in future.

Offering halal Korean food will allow Daorae to tap the Muslim market, he says. The timing is yet to be determined as “expansion must be parallel with our growth”, says Yoon. Furthermore, Daorae’s management needs time to put together a proper franchising system comprising transportation, people management, training and quality control.

“We’ve been running Daorae as a family business, which means we didn’t need a perfect management system,” says Yoon, who hired his friends and family as branch managers.

His COO Cho is a childhood friend who hails from the same hometown and went to the same school as Yoon.

“I had bumped into Steve when he was a customer at the restaurant. He was in the interior design line in Korea and doing business in Malaysia then, so he gave me advice on renovation. And he speaks better English than I do. When he joined Daorae in 2005, I could expand the business because he was not only knowledgeable about interior design but managing the company and business development too,” says Yoon.

Having family and friends as branch managers increases the level of ownership for each branch, Yoon says.

“All Daorae branch managers are considered as family — this is Korean culture. They treat each outlet as businesses of their own instead of a branch of a company. Some of the branch managers invest as much as 3% in the start-up of their outlets,” explains Cho.

Yoon and his wife own an 80% stake in Daorae; the rest is held by other management staff and branch managers.

Hiring local staff is a constant challenge because unlike the Nepalese workers, who are bound by a minimum three-year contract, Malaysians are unlikely to stay after the first year of training, says Cho. “Being a barbecue restaurant, Daorae’s new hires undergo a year of training to learn how to cook and serve. Since it is a non-halal business, we can’t hire local Malays, so we hope to hire more locals from East Malaysia,” he adds.

Yoon, who has lived in Malaysia for over a decade, travels to South Korea only when he is about to open a new outlet, to buy kitchen equipment and kitchenware. While his wife is no longer directly involved in Daorae except as an advisor on food taste and quality, his son — who is currently doing national service in the South Korean military — is interested in becoming part of the family business. “I will hand over this business to him if he wants,” says Yoon.

As an entrepreneur, his philosophy is that one must “work hard, as if it is life or death” to succeed. “When managing a shop or a company, always think as a customer, not as a boss... Customer is king,” he says.

Last year,  to recognise how important customers are to Daorae’s success, the company set up a “Daorae Fund” as a way of giving back to Malaysians. Among the fund’s beneficiaries was SMJK (C) Heng Ee in Georgetown, Penang, which received RM12,000 to start a school scholarship fund for needy students.

Daorae intends to sponsor meals and gifts for orphanages on a quarterly basis. Last year, it collaborated with the Rotary Club to sponsor meals and gifts for about 50 orphans from three orphanages in Malacca.

This year, the fund aims to raise RM100,000. To achieve that, starting last year, Daorae has been collecting RM500 a month from every branch. “We do this because all money comes from the locals. This is our way of giving back,” says Yoon.

Daorae also plans to open a non-profit Korean cultural centre to cater to the growing demand for Korean cultural experiences. “There will be Korean cooking classes, Korean movies and opportunity to meet famous Korean artistes and sportsmen whom we sponsor,” says Yoon.

According to Cho, Daorae is looking for a suitable location for the centre, which will be financed by the company. “We might consider starting a non-profit company to run the centre,” he says.

Eleven branches later, Yoon still finds opening day a thrilling experience. “Happiness is the opening day of each branch; I never put out any ads but it is always packed with customers. I don’t know how we managed to achieve that but that is why I keep opening new branches. The day that an opening day is not packed is the day I will not open any more branches.”

This article appeared in Management@work, the monthly management pullout of The Edge Malaysia, Issue 844, Feb 7-13, 2011