4. BACKGROUND INFORMATION ON THE GROUP 4. BACKGROUND INFORMATION ON THE GROUP ~1 GROUP STRUCTURE As at the date of this Prospectus, the structure of the Group is as follows:-BFood 100% BRoasters 4.2 HISTORY AND COMMENCEMENT OF BUSINESS OPERATIONS BFood was incorporated in Malaysia under the Act as a private limited company on 21 October 2009 under its current name. It was converted into a public limited company on 3 December 2009. Pursuant to the completion of the Acquisition which comprises part of the Listing Scheme as detailed in Section 4.6 below, BRoasters subsequently became a whollyowned subsidiary of BFood on 19 January 2011. Further details of BRoasters are detailed in Section 4.6.1 of this Prospectus. The business of BFood is that of an investment holding company. Through its wholly-owned subsidiary, BRoasters, the Group is principally engaged in the development (which includes inter alia, setting-up and expansion of new KRR restaurants) and operation of the KRR chain of restaurants in Malaysia vide an MDA entered into between BRoasters and RAPM, a wholly-owned subsidiary of BGroup. Prior to the Acquisition, BRoasters was a wholly-owned subsidiary of BGroup since its commencement of operations in 1994. Pursuant to BGroup’s, the holding company of BFood, completion of the acquisition of KRR International Corp in April 2008, BGroup effectively holds the worldwide KRR brand including the KRR franchise. The relationship between BGroup, KRR International Corp, RAPM and BFood upon Listing is depicted in the diagram below:74.65%
Master franchisee 100% 100% .——–, Master franchisee for 1—RAP Asia Pacific regionI
Cayman (other than Hong’—-Ir—–‘MalaysiaI ‘—-,——-‘ Kong and Malaysia)I Grants I 100%Ifranchise I..
right I I
KRR Holds the I worldwide KRRInternational brand… Corp 13 Independent Franchisees in Malaysia 4. BACKGROUND INFORMATION ON THE GROUP KRR was originally set up by Country and Western singer, Kenny Rogers, and former Governor of the state of Kentucky, John Y Brown Jr, in 1991. Seeing an opportunity to provide healthy and delicious food in a restaurant environment, KRR opened its first restaurant in Coral Spring, Florida, in August of 1991. Besides Malaysia, KRR has restaurants in various countries around the world such as the United States of America, Singapore, the People’s Republic of China (“China”), Bahrain, Indonesia and the Philippines. For three (3) consecutive years (1996, 1997 and 1998), Restaurants and Institutions Magazine, a leading publication from the United States of America, had awarded its prestigious America’s Choice Award Winner for the Best Chicken Chain to KRR International Corp. RAPM was also awarded the Master Franchisee of the Year 2000/2001, 2002/2003 and 2008/2009 for the KRR brand by the Malaysian Franchise Association, an affiliate of the World Franchise Council. BRoasters had, pursuant to the MDA, obtained the franchise to develop and operate KRR restaurants in Malaysia on a non-exclusive basis with first right of refusal in respect of any franchise proposed to be granted by RAPIVI within Malaysia to third parties (Le. Independent Franchisees). Pursuant to a separate agreement in 2004, it was agreed that RAPM may from time to time during the tenure of the MDA, grant franchises to third parties (Le. Independent Franchisees), subject to RAPM obtaining BRoasters’ prior consent as to the location or site of the restaurant proposed to be operated by third parties. The franchise rights have been granted to the Independent Franchisees since year 2000. As at the LPD, there are thirteen (13) Independent Franchisees-owned restaurants in Malaysia. In February 2008, BRoasters and RAPM entered into a supplemental agreement to the MDA pursuant to which the parties agreed that BRoasters’ franchise right under the MDA shall thenceforth continue on an exclusive basis with the right to grant franchises to third parties in Malaysia. Hence, RAPM’s right to grant further franchises to third parties in Malaysia accordingly ceased. With this, BRoasters became the sole franchisee of RAPM in respect of the development and operation of KRR restaurants in Malaysia, save for the abovementioned thirteen (13) Independent Franchisees-owned restaurants. As master franchisee of the KRR brand in Malaysia, RAPM’s primary role is to act as custodian of the KRR standard of operations and procedures (inclusive of consistent application of the KRR marks and logo) and to ensure strict adherence/compliance of such standards and procedures by the sub-franchisees (namely, BRoasters and the Independent Franchisees). Whilst RAPM is the master franchisee for the KRR brand in Malaysia, BRoasters (as part of BFood Group) was chosen by the Promoter as the listing entity in view that it holds the exclusive franchise right to develop and operate the KRR chain of restaurants in Malaysia and owns the largest number of KRR restaurants in Malaysia. In addition to BRoasters’ primary activities including the setting-up and expansion of new KRR restaurants and the operation of its KRR chain of restaurants in Malaysia, BRoasters (which is the single largest operator of KRR restaurants in Malaysia) is also responsible for amongst others, the development of the KRR brand in Malaysia (via advertising and promotional activities), the introduction of new menu items (with the consent from RAPM), and acting as the central procurement agent, on behalf of all KRR restaurants in Malaysia. Since the opening of its maiden restaurant in November 1994 which marked the commencement of the KRRfranchise in Malaysia, BRoasters has successfully built a nationwide restaurant network in Malaysia over a span of sixteen (16) years. As at the LPD, BRoasters has 51 restaurants located throughout Malaysia.
4. BACKGROUND INFORMATION ON THE GROUP Over the years since its inception, KRR restaurants gradually evolved from the counterservice restaurant concept to the full-service, mid-casual dining concept. The change was intended to provide better service and convenience to its customers as well as to attract customers from different income segments and age groups. By the end of 2003, all the KRR restaurants had fully evolved to the mid-casual dining concept. KRR restaurants feature rotisserie roasted chicken as their main core item complemented by a variety of hot and cold side dishes and KRR’s famous muffins, jacket potatoes. vegetable salads, pasta. soups, desserts and beverages served in a friendly and comfortable environment. In line with BRoasters’ tagline of “Less Fat…., Less Salt…., Less Calories….”. BRoasters serves mainly healthy meals which are steamed, baked or roasted. The Group’s proforma financial performance for the past five (5) years from FYE 2006 to FYE 2010 and for the four (4)-month FPE 31 August 2010 as well as the number of restaurants maintained are shown in the graph below:60 50 ~ 40 ~ III 30 ~ 20 ~ o 10 ci o Z
2007 2008 4-mth FPE FYE 31.08.10 ~Revenue “”‘,”1 PAT —A—Groupowned restaurants
Note:After excluding one-off gain on disposal of PPE amounted to approximately RM4.4 million 4.3 KEY ACHIEVEMENTS/MILESTONES/AWARDS Amidst competitive business environment, the Group’s in-depth understanding of the food industry enables it to continuously reposition itself within a strategic segment of the market. The table below sets out the Group’s key development and achievement milestones over the years:Year i Events 4. BACKGROUND INFORMATION ON THE GROUP
2001 Master Franchisee for the Year 2000/2001: Awarded to RAPM for the KRR brand by the Malaysian Franchise Association, an affiliate of the World Franchise Council (in recognition of BRoasters’ pivotal role in the expansion of KRR restaurants in Malaysia) 2003 Restaurant-wide transformation: All KRR restaurants were converted from the self-service concept to the mid-casual dining concept Master Franchisee for the Year 2002/2003: Awarded to RAPM for the KRR brand by the Malaysian Franchise Association 2005 Commencement of corporate social responsibility programmes including Roasters Health Watch Programme, KRR Community Chest, Wishing Tree Project and Roasters Chicken Run which are conducted yearly. All proceeds raised from these events are donated to charitable organisations in Malaysia
Year ! Events 2008 2009 ! Commencement of catering and delivery services: These services arei available within a five (5) kilometre radius from selected KRR restaurants in ! Malaysia. To facilitate the catering and/or delivery services, a dedicated i telephone line has been set up for the convenience of its customers I IMaster Franchisee for the Year 2008/2009: Awarded to RAPM for the KRR ! brand by the Malaysian Franchise Association , IFree “Wi-Fi” services: Introduction of free “Wi-Fin services in all KRR !restaurants, allowing patrons to enjoy their meals while surfing the Internet i
4.4 CAPITAL EXPENDITURES AND DIVESTMENTS Save as disclosed below, there are no other material capital expenditures and divestitures (including interests in other corporations) made by the Group for the FYE 2008 to FYE 2010 and the four (4)-month FPE 31 August 2010 and up to the LPD:~ FYE ~ Capital expenditures Office equipment, furniture, fittings, motor vehicles and computers Plant, machinery, kitchen equipment and smallwares Renovation and restoration Total capital expenditures Capital divestments Office equipment, furniture, fittings, motor vehicles and computers Plant, machinery, kitchen equipment and smallwares Building Total capital divestments 2008 RM’OOO 1,277 i i ! I 2,4461! i I I ! 3,745 I ! i 7,468 I I For the four 1 , (4)-month ! i FPE 2009 2010 31.08.10 RM’OOO RM’OOO RM’OOO 2,036 799 165 3,195 I 1,005 29 I I I4,201 I ! 2,631 103 I 9,432 ! ; 4,435 297 I ;
I (172) ! (35) I I
-I I (30) !! (4) I 1,I II-! (2,654) I ! (25) (75) I!
1 September 2010 up to the LPD RM’OOO 284 852 516 1,652
! (30) i (2,830) ! (35) I (25) (75) II
As at the LPD, the Group does not have any material capital expenditure and divestiture outside Malaysia. The above capital expenditure was financed by credit facilities available to the Group and/or internally-generated funds. 4. BACKGROUND INFORMATION ON THE GROUP 4.5 SHARE CAPITAL AND CHANGES IN SHARE CAPITAL The authorised, and issued and paid-up share capital of BFood as at the LPD are as follows:Type No. of Shares Par value Amount
RM RM Authorised 1,200,000,000 0.50 600,000,000 Issued and paid-up 141,348,000 0.50 70,674,000
Details of the changes in the issued and paid-up share capital of BFood since its date of incorporation up to the LPD are as follows:Date of allotment No. of Shares allotted Par value RM Consideration Cumulative issued and paid-up share capital RM 21.10.2009 2 1.00 Cash 2 28.10.2009 4 0.50 Subdivision of shares 2 19.01.2011 141,347,996 0.50 Shares issued pursuant to the Acquisition 70,674,000
As at the date of this Prospectus, the Company has not issued any warrant, option, convertible security or uncalled capital. Upon Listing, the Company may grant Options to eligible employees and Directors of the Group pursuant to the ESOS.
4.6 LISTING SCHEME In conjunction with, and as an integral part of the listing of and quotation for the entire issued and paid-up share capital of BFood on the Main Market of Bursa Securities, the Company proposes to implement a listing scheme which involved/involves the following:
4.6.1 Acquisition of BRoasters An SPA was entered into on 31 March 2010 between BFood as the purchaser and BGroup, a wholly-owned subsidiary of BCoqJoration, as the vendor, where BFood acquired the entire issued and paid-up share capital of BRoasters representing 17,000,000 ordinary shares of RM1.00 each from BGroup for a total consideration of RM72,087,478 which was satisfied via the issuance of 141,347,996 new Shares in BFood at an issue price of RMO.51 each, credited as fully paid-up. The Acquisition which had been undertaken by BFood as part of the Listing Scheme was completed on 19 January 2011. The total consideration for the Acquisition includes a premium over the audited net assets of BRoasters of approximately RM33.3 million as at 31 October 2009 and was arrived at after taking into consideration, amongst others, the adjusted PAT of BRoasters for the FYE 2009 of approximately RM8.2 million (after excluding gain on disposal of PPE) and the earnings potential of BRoasters. The total consideration represents a net price-earnings multiple of 8.8 times on BRoasters’ then adjusted PAT for the FYE 2009 and a price-to-book multiple of 2.2 times on the audited net assets of BRoasters as at 31 October 2009. 4. BACKGROUND INFORMATION ON THE GROUP Based on BRoasters’ audited accounts for the FYE 2010, the total consideration represents a net price-earnings multiple of 8.0 times on the PAT of RM9.0 million and price-to-book multiple of 1.8 times on the net assets of RM40.5 million. Following the completion of the Acquisition on 19 January 2011, the existing shareholders of BFood, namely Tan Lay Hian and Yeoh Cheng Lee disposed of their respective shareholdings in BFood comprising in total four (4) Shares for a total cash consideration of RM2 to BGroup. Pursuant thereto, BRoasters became a wholly-owned subsidiary of BFood, which in turn became a wholly-owned subsidiary of BGroup. Information on BRoasters BRoasters was incorporated in Malaysia under the Act as a private limited company on 14 October 1993. The authorised share capital of BRoasters is RM25,000,000 comprising 25,000,000 ordinary shares of RM1.00 each, and its issued and paid-up share capital is RM17,000,OOO comprising 17,000,000 ordinary shares of RM1.00 each. There have been no changes in the issued and paid-up share capital of BRoasters for the FYE 2008 to FYE 2010 and up to the date of this Prospectus. BRoasters is principally engaged in the development and operation of the KRR chain of restaurants in Malaysia. BRoasters does not have any subsidiary or associated company. 4.6.2 Offer For Sale BGroup is undertaking the Offer For Sale, the details of which are set out in Section 2.6 of this Prospectus.
4.6.3 ESOS In conjunction with the Listing Scheme, BFood has established an ESOS in order to retain and motivate the eligible Directors and employees who have contributed to the success of the Group. The maximum number of Shares to be offered shall not exceed five percent (5%) of the enfarged issued and paid-up ordinary share capital of the Company at any point in time during the duration of the ESOS. For illustration purposes, the maximum number of BFood Shares to be offered pursuant to the ESOS is approximately 7.44 million new BFood Shares representing five percent (5%) of the enlarged issued and paid-up share capital of BFood upon Listing and full exercise of ESOS Options. The ESOS Options will be granted to eligible Directors and employees of the BFood Group on the date of Listing and from time to time thereafter and will be for a duration of five (5) years from the date of Listing. The Bylaws constituting the ESOS are set out in Section 14 of this Prospectus. 4. BACKGROUND INFORMATION ON THE GROUP 4.6.4 Listing of and Quotation for BFood Shares The Company intends to seek a listing of and quotation on the Main Market of Bursa Securities for the following:(a) The entire issued and paid-up share capital comprising of 141,348,000 Shares; and
(b) The new BFood Shares to be issued pursuant to the ESOS. For illustrative purposes, the maximum number of BFood Shares to be offered pursuant to the ESOS is approximately 7.44 million new BFood Shares representing five percent (5%) of the enlarged issued and paid-up share capital of BFood upon Listing and full exercise of ESOS Options.
[THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK] 5. BUSINESS OVERVIEW 5.1 TYPES OF PRODUCTS AND/OR SERVICES The Group operates a chain of mid-casual dining restaurants with rotisserie roasted chicken as its main core item complemented by a variety of hot and cold side dishes. The Group’s menu items as at the date of this Prospectus are as detailed below:All-Time Favourites Healthy Bites • Country-Style Soup • Classic Chicken Sandwich
• Roasted Chicken Salad • Sunshine Sandwich Toast
• Caesar Salad • Chicken D’Lite Sandwich
• Round-Up Platter • ‘Egg’cellent Sandwich
• Garlic Bread
• Veggie Sticks
Kenny’s Greatest Meals • Kenny’s Chicken Meal Choice of quarter, half or whole chicken served in 3 flavours (Original/Black Pepper/Smoked BBO) Served with Kenny’s Home-Made Muffin(s) and Side Dishes • Jacket Potato Meal Freshly Baked Potato with choice of 7 toppings (Tangy Chicken/Beef Bolognaise/Cheesy Chicken/Chicken SaladNegetable Fusion/Macaroni & Cheese/BBO Baked Beans) Served with Kenny’s Home-Made Muffin and Side Dishes • Kenny’s Pasta Meal 3 Choices of Pasta (Beef Bolognaise Spaghetti, Tangy Chicken Spaghetti, Chicken Macaroni Cheese) Served with Kenny’s Home-Made Muffin Light & Easy Selections (12 choices of Side Dishes) • Fresh Hitz • Hot Hitz Coleslaw Golden Corn & Carrot Potato Salad Macaroni & Cheese Garden Pasta Salad BBO Baked Beans Tomato, Cucumber & Onion Salad Garlic Parsley Potato Crisp Garden Salad Aromatic Rice Fresh Fruit Salad Mashed Potato & Gravy Sweet Indulgence • Kenny’s Home-Made Muffins • Muffin Submarine Golden Vanilla • Fruit Jelly Delight Banana Raisin • Jelly Sundae
Chocolate Raisin Freshen-Up Selections • Classic Selections • Chill Out Selections Caffe Latte Four Season Fizzy Vanilla Caffe Latte (Spring/Summer/AutumnlWinter) Hazelnut Caffe Latte Fruit Juice (Orange/Mango) . CaffeMocha Iced Lemon Tea Caramel Macchiato Marvel Bottled Water Americano Coke Light Tea Iced Chocolicious Milk Hot Chocolicious Milk Iced Caramel Milk Hot Caramel Milk Tropical Paradise • Iced Coffee Beverages Jewel Treasure Iced Caffe Latte Triple Passion Iced Vanilla Caffe Latte • Other Fountain Beverages Iced Hazelnut Caffe Latte Iced Caffe Mocha Iced Caramel Macchiato Marvel Iced Americano 5. BUSINESS OVERVIEW • Ice-Blended Beverages Chocolate Extreme Iced Blends Caramel Chocolate Iced Blends Caffe Mocha Iced Blends Cappuccino Iced Blends Strawberry Dream Yoghurt Iced Blends Mango Magic Yoghurt Iced Blends
Additionally, the Group has commenced its catering and delivery services in February 2008 which are available within a five (5) kilometre radius from selected KRR restaurants in Malaysia. To facilitate the catering and delivery services, a dedicated telephone line (1300 888 878) has been set up for the convenience of customers. [THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK] 5. BUSINESS OVERVIEW 5.2 PRINCIPAL MARKETS The Group’s restaurants are strategically located in various parts of Malaysia. The number of restaurants as at the LPD in each state is as set out below:-
Wilayah Persekutuan selangor Penang -AEON AU2, Ampang -AEON Mahkota Cheras -AEON Seberang Prai City -AEON Prima Kepong -AEON Bukit Raja Shopping Centre -Berjaya Times Square -AEON Bukit Tinggi, Klang -Penang International Airport -Cheras Leisure Mall -Amcorp Mall -Queensbay Mall -KL Convention Centre -Carrefour SUbang -Sunway Carnival, Seberang -KL Sentral ERL -Empire Shopping Gallery, Jaya -Kota Raya Subang 1st Avenue -Mid Valley Megamall -Equine Park -The Mall -Giant Kota Damansara Johor -Setapak -101 Mall -AEON Tebrau City -Klang Parade -AEON Bukit Indah Malacca -Metro Point, Kajang -Tesco, Plentong -AEON Bandaraya Melaka -Subang Parade -Tesco, Tebrau City -Mahkota Parade -Sunway Pyramid -Tesco Setia Alam Negeri SembiIan Perak -Tropicana City Mall -AEON Seremban 2 -Kinta City -The Mines -Seremban Parade -Ipoh Parade -Taiping Sentral Pahang Kelantan -Berjaya Megamall, Kuantan -Tesco, Kota Bahru sarawak -Genting Walk -Boulevard, Kuching Kedah -The Spring, Kuching sabah -Langkawi International -One Borneo Airport -Suria Sabah, Kota Kinabalu -Langkawi Jetty Point 5. BUSINESS OVERVIEW
5.3 GROUP-OWNED RESTAURANTS In general, there are three (3) types of KRR restaurants that may be operated by the Group pursuant to the MDA, namely, “Non-traditional Restaurant”, “Express Facility Restaurant” and “Traditional Restaurant”. “Non-traditional Restaurant” generally refers to a restaurant which is less than 800 square feet and may have little or no seats and may be located in food courts (with the exception of “kiosks-type structures· located within aisles of shopping malls) and is generally not a freestanding structure. “Express Facility Restaurant” is different from “Non-traditional Restaurant” in terms of menu offerings and their methods of quick preparation. “Express Facility Restaurant” is a business that caters for “take-away· services. “Traditional Restaurant” is generally a restaurant that occupies more than 800 square feet, has proper seatings, and located in retail areas. It has a standard menu offering and the food is served in the conventional way. As at the LPD, all the Group-owned restaurants operate as “Traditional Restaurant”. 5.3.1 Planning, Site Selection and New Restaurant Openings (a) Targeted markets. The Group plans to focus the expansion of its restaurant network in larger and more developed cities in Malaysia, such as state capital cities and in relatively affluent regions, where future growth are expected to be concentrated. As at the LPD, most of the Group-owned restaurants are located in these areas.
(b) Site selection and pre-investment due diligence. To maintain overall business performance, the management conducts due diligence and market analysis prior to each restaurant opening and closely monitor the performance of individual restaurants in order to respond to the changing market demand. To evaluate the feasibility and desirability of a proposed site, the management has established standardised procedures and practices for site selection and pre-investment due diligence process. The Group’s pre-investment due diligence process includes multiple on-site inspections, extensive analysis of market and other data, as well as feasibility studies to estimate required initial capital outlay, investment return period, expected investment yield and operating costs and expenses.
In order to prevent competition and cannibalisation among the Group-owned restaurants and Independent Franchisees-owned restaurants, permission to open a new restaurant will only be granted if the management believes that any potential reduction of customer traffic to existing restaurants near such a restaurant will not adversely affect the overall operations and performance of that region. Generally, the Group favours sites located in places of high traffic volume and range between 1,800 and 2,500 square feet in size, with visible shop space or signage. Most of the Group-owned restaurants are located on tenanted premises with a typical tenure of three (3) years with option of renewal. The site selection criteria of the Group takes into account factors such as pedestrian traffic volume and proximity to shopping centres, accessibility and size of the proposed restaurant site, property rental and area resta-urant competition. 5. BUSINESS OVERVIEW (c) Restaurant opening. The Group’s standardised procedures and processes for restaurant openings extend to restaurant design and construction, which is undertaken by its in-house interior design team, which helps to manage investment costs and increase overall efficiency of new restaurant openings. Other internal guidelines include obtaining requisite licences and approvals from the relevant authorities. Uniform decor standards have been employed for all the Group’s restaurants to create a consistent brand image for all Group-owned KRR restaurants in Malaysia. The costs of opening a new restaurant is dependent upon, amongst others, the location, size of the restaurant, and the extent of renovations required. On average, the estimated investment cost required for a new restaurant with a size of approximately 1,800 to 2,000 square feet is approximately RM700,OOO. 5.3.2 Restaurant Management The Group is operating under structured management organisation designed to promote efficiency in supervising, directing and supporting its operations, quality assurance systems, recruitment processes and training programmes in different geographical regions. (a) Headquarters management. The central management of the Group’s overall business operations is based in its headquarters in Kuala Lumpur. Generally, the Group’s nationwide restaurant operations are overseen by two
(2) operation managers where each operation manager is supported by four
(4) area managers. The Group’s headquarters is responsible for all corporate, administrative and operational matters which include new restaurant openings, management-level recruitment, providing training to employees, sales and marketing, procurement from local suppliers and development of the Group’s restaurant policies and/or procedures.
(b) Restaurant-level management. Each of the Group’s restaurant is managed by a restaurant manager who is responsible for different operational aspects. The number of employees employed is dependent on the size of the restaurant. On average, a new restaurant with a size of approximately 1,800 to 2,000 square feet employs about 25 employees. Certain decisions are delegated to the restaurant manager to allow greater flexibility and quicker response to market demand and improve business performance.
5.4 SEASONAL/CYCLICAL FACTORS Generally, the Group is affected by cyclical or seasonal demand conditions. The Group enjoys exceptional sales during festive periods, national and school holidays, and weekends, in view that the Group’s restaurants are mainly located in shopping malls or in places where traffic is typically high during such period. 5. BUSINESS OVERVIEW 5.5 COMPETITIVE STRENGTHS AND ADVANTAGES The Group’s competitive strengths and advantages are as follows:(a) Experienced Management Team The Directors and management team of the Group have extensive management and operational experience and an in-depth understanding of the food and beverage industry. The executive Directors and key management personnel of the Group have been responsible for formulating and implementing the overall business strategy and corporate development of the Group. The senior management team comprises staff with diverse backgrounds and experience in various fields, including food services, trade and commerce, finance, business administration and hotel management. Their different expertise, experience and ability to collaborate as a team contribute positively to the operations and growth of the business. The management team is dedicated to raise corporate standards and has a proven track record of achieving results, which is reflected through the financial and operational improvements recorded over the past few years. The Group has in place a well-defined management structure that supports its wide restaurant network and planned growth. The Group has invested significant resources to recruit, retain and motivate qualified managerial personnel, including restaurant-level management, to assist the senior management. Such management structure enables greater operational efficiency whilst being able to provide management support to the Group’s restaurants in different geographic regions. Further details of the Group’s management structure are set out in Section 5.3.2 of this Prospectus. The Group offers competitive compensation packages, regular training programmes and attractive career development opportunities to qualified candidates and have implemented an ESOS as part of the Listing Scheme to align the long term interests of management personnel with the Group. The Group believes these incentive programmes will assist them in recruiting and retaining management talent, which is crucial to the long-term success of the Group. (b) Nationwide Restaurant Presence with International Branding The Group is amongst the largest mid-casual dining restaurant chain operator in Malaysia, in terms of the number of outlets (as disclosed in the IMRR). As at the LPD, BRoasters has 51 restaurants located throughout Malaysia. Most of the Group’s restaurants are concentrated in the urban areas where the future economic, population and consumer spending growth are likely to be concentrated. The KRR restaurant chain which originates from the United States of America has been present in the international platform since 1991. Besides Malaysia, KRR has restaurants in various countries around the world such as the United States of America, Singapore, China, Bahrain, Indonesia and the Philippines. The management of the Group believes that its established restaurant network together with the Independent Franchisees-owned restaurants enhances brand recognition and market awareness, which facilitates the Group’s expansion into new markets and serves as potential distribution channels for new business opportunities. 5. BUSINESS OVERVIEW (c) Healthy Eating Concept BRoasters’ philosophy is weaved on preparing wholesome, hearty and well-balanced meal which mirrors today’s discerning consumers’ changing attitude towards healthy eating lifestyle. In line with its tagline of “Less Fat…., Less Salt…., Less Calories….”, BRoasters serves mainly healthy meals which are steamed, baked or roasted. BRoasters’ signature rotisserie roasted chicken is a healthier alternative and less fattening compared to other methods of cooking. The chicken is constantly rotated on a skewer while being cooked to drain away the fat. It also allows the chicken to be cooked more evenly to maximise the retention of juices and nutrients. BRoasters’ menu have been thoroughly analysed and evaluated to determine the nutrient content in accordance with its Food Guide Pyramid, based on the United States Department of Agriculture (U.S.D.A.) dietary guidelines. (d) Good PortionNalue for Money
As part of the Group’s core value to serve healthy and wholesome meals to its customers, the Group serves its meals complemented by a variety of freshly prepared hot and cold side dishes alongside its famous muffins. A standard meal typically consists of a main dish, three (3) side dishes and a muffin which is affordably priced and comparable to other prices offered by mid-casual dining restaurants in Malaysia.
(e) Fresh New Contemporary Ambience
The management believes in having a new comtemporary ambience for the Group’s restaurants in order to provide customers with a relaxed, friendly and pleasant dining atmosphere.· For this purpose, the management has its own interior design team primarily responsible for overseeing the furniture and fittings of its chain of restaurants. For branding purposes, the Group has refurbished all its restaurants within the last seven (7) years to ensure consistency of design and to create a brand image for all its restaurants. All restaurants have been designed and constructed with emphasis on efficiency of layout and functionality, maximizing usable space, construction costs management and safety requirements. Moving forward, the Group will continuously seek to improve its restaurants’ design to keep up with consumer demands. 5.6 TYPES, SOURCES AND AVAILABILITY OF CORE RESOURCES The principal raw material used in KRR restaurants is chicken meat which is sourced from reliable domestic suppliers. Being in the food and beverage industry, the Group ensures that all its purchases of chicken meat are certified “halal” by the Islamic Development Department of Malaysia and bear the “Veterinary Health Mark” issued by the Department of Veterinary Services. Malaysia has a significant poultry industry, having an estimated production of approximately 1.23 million tonnes of poultry in 2009 (2008: 1.16 million tonnes) (Source: Economic Report 2009/2010). The Group sources its chicken meat from several suppliers in order to reduce its dependency on a single supplier. Additionally, chicken meat is currently a controlled item in Malaysia whereby a price-cap has been imposed to control its price movements and thus the price of chicken meat has been fairly stable. 5. BUSINESS OVERVIEW Apart from chicken meat, the Group also requires, amongst others, spices, vegetables and premix. as raw material. In general, the Group monitors its stocks of raw material carefully to ensure that they are sufficient at all times to prevent any disruption in its restaurants’ operations. The restaurant managers are responsible for monitoring the sufficiency of raw material in the respective restaurants and will notify the central purchasing department for immediate replenishment of raw material. Over the years, the Group has developed close relationship with its suppliers which ensure the timely and consistent supply of raw material to all its restaurants’ operations. 5.7 BUSINESS PROCESS Business Process Flow Chart in respect of KRR restaurants Perishable food Non-perishable suppliers food suppliers (Poultry) Delivery to central Perishable food warehouse suppliers (Others) e.g. spices, Place orders sauces, paper with suppliers cups, takeaway boxes etc Place Directorders with delivery to suppliers Provide information (e.g. KRRfor delivery dates, types and restaurantsvegetables quantum etc.) on goods to be Central Centralfruits, etc deliveredpurchase warehouse Place orders for perishable (poultry) and non-perishable food KRR restaurants
Delivery of goods as per information provided by central Preparation of food and purchasing providing services in accordance with the KRR’s standards and requirements
Customers In general, central purchase (Head Office) will negotiate with suppliers (perishable and nonperishable food) for all the KRR restaurants to obtain the best prices and to achieve economies of scale. All KRR restaurants are required to place orders only with the designated suppliers to ensure consistency in costs and quality of products. Perishable food are basically products which have short shelf life such as poultry, vegetables, fruits, juices, milk etc. whereas non-perishable food have longer shelf life such as spices, sauces, marinades, servewares, “take-away” boxes etc. 5. BUSINESS OVERVIEW For Peninsular Malaysia, poultry is pre-marinated at suppliers’ place before delivery to the KRR restaurants whereas for East Malaysia, poultry is marinated at the respective KRR restaurants as the volume of poultry to be marinated is much higher in Peninsular Malaysia compared to East Malaysia. Each KRR restaurant will monitor its own stock level and estimates the daily requirements for perishable food, which are supplied daily to maintain freshness and quality of the product. For KRR restaurants located within Peninsular Malaysia, the perishable food (save for poultry which is ordered through central purchase) are ordered diiectly by the KRR restaurants from the designated suppliers. For East Malaysia, all perishable food (including poultry) are ordered directly from designated suppliers. For non-perishable food, the KRR restaurants located in the Klang Valley estimate their requirements on a weekly basis and for those located outside the Klang Valley on a monthly basis. Upon receiving the relevant orders from the KRR restaurants, central purchase will process and forward the orders to central warehouse, operated by a com prehensive thirdparty warehouse operator namely PKT Logistic (M) Sdn Bhd. The stocks are delivered on a weekly basis to KRR restaurants located within the Klang Valley and on a monthly basis to those located outside the Klang Valley. Central purchase will, on a weekly basis, monitor the stock level at the central warehouse and will place orders with the relevant suppliers to replenish the stocks. The KRR restaurants will prepare and/or cook the food strictly in accordance with KRR’s standards and requirements using the prescribed recipe guide, which will then be properly stored at the appropriate temperatures (depending on whether it is hot or cold products) to retain freshness and quality. Line checks are conducted on a regular basis by the KRR restaurant managers. 5.8 TECHNOLOGY USEDITO BE USED Operating a nationwide restaurant chain requires advanced restaurant managerial systems and capabilities. The Group utilises operational programmes and tools, including logistics management and restaurant operations information systems to provide the management team of the Group with timely access to financial and operating data as well as to reduce administrative time and expenses. The Group has committed significant resources to continuously upgrade its technological infrastructure to support its business expansion and development initiatives such as the installation of the point-of-sale system in all its restaurants to provide real-time data to its central logistics centre. The point-of-sale system enables the management team to better manage the business and operations of the Group and respond to market changes in a timely manner. The Group also fabricates its kitchen equipment to achieve greater space savings and to increase the work flow efficiency of its kitchen staff. Basic maintenance work on all kitchen equipment are undertaken regularly by the respective restaurant managers who attend specific training programmes for this purpose. Further maintenance and repairs are outsourced for cost efficiency. 5. BUSINESS OVERVIEW 5.9 QUALITY ASSURANCE MANAGEMENT As part of the Group’s vision to establish itself as the leading and preferred mid-casual rotisserie roasted chicken restaurants in Malaysia, the Group places great emphasis on improving the quality of its products as consistent quality would ensure customer satisfaction and secure repeated customers for the Group. In order to maintain high standards and quality, quality assurance procedures are infused at every step of the production process to monitor the quality of its products. Generally, the Company adopts the following approaches to ensure that quality standards are maintained. (a) Compliance with “Halal” Certification To widen its customer base and to attract more customer and sales, the Group ensures that all its food products are “Halal”. Every restaurant will be closely monitored to ensure the “Halal” certificates are valid and/or renewed on a timely basis and strictly adhere to the terms and conditions imposed by the Islamic Development Department of Malaysia at all times. (b) Recipe Guide To ensure consistency of the quality of its food product, the management has introduced a recipe guide for its restaurant employees. The recipe guide details all the necessary ingredients as well as the methodology for the cooking procedures involved in the preparation of every dish available on the menu. Restaurant employees will be reqUired to prepare every dish in accordance with the recipe gUide, supervised by the restaurant manager. (c) Restaurant Line Check The Group conducts line checks to assist restaurant managers in verifying that food products for the cook line are properly stored and at appropriate temperature. Each restaurant has its own equipment to store both its hot and cold food products at controlled temperature to retain the freshness and/or to avoid contamination of its products. (d) Good Catering Practices and Food Handler Training The Group has a strong support centre team which makes routine visits to all Groupowned restaurants to ensure the requisite standards as determined by management are complied with. The support centre team and restaurant managers are required to undergo in-house training to familiarise themselves with the necessary quality-control procedures. Such training ensures that the Group’s in-process quality control procedures are strictly implemented and adhered to. (e) Lab Tests Random lab tests are conducted with laboratory inspection equipment to ensure that the Group’s products consistently meet the high quality standards as well as the taste preferences as demanded by the customers. These internal quality control audits are conducted by the Group’s in-house quality assurance managers who visit the Group’s restaurants on a routine basis. 5. BUSINESS OVERVIEW (f) Quality Customer Service The management believes that service forms an important element in the overall dining experience of its customers. As such, all staff are required to attend in-house training prior to posting. In addition, the Group has in place a station observation checklist whereby a level of competency is demonstrated and checked off on the checklist. Additionally, the Group outsources its mystery shopper programme to obtain feedback from the public and to further improve its quality of services rendered to customers. 5.10 MODES OF SALES AND MARKETING The Group through BRoasters is responsible for promoting the KRR brand and products in Malaysia. In doing so, the Group sets aside on average 5% of its restaurants’ revenue for advertising and to conduct other marketing initiatives for all KRR restaurants in Malaysia. Independent Franchisees also contribute towards the advertising and marketing initiatives conducted by the Group. Amongst the major marketing initiatives carried out by the Group include:(a) Back-to-Back Food Promotions
From time to time, the Group organises food promotions to promote new products and to attract new customers to its restaurants. Such promotions would be advertised and promoted through various advertising media to enable it to reach out to the greater mass.
(b) Network of Restaurants
The Group has restaurants in most major malls located throughout the country as well as in certain major airports and jetty which typically attract a large volume of visitors during weekends and public and school holidays. Its presence in these places creates brand awareness while providing opportunity for the public/visitors to frequent its restaurants.
(c) Leaflets Distribution
To increase the public’s awareness of new product offerings and its delivery services, the Group distributes on the average 50,000 to 60,000 leaflets per month to areas of close proximity to the KRR restaurants. As part of its marketing plan, the delivery services include leaflets drop-offs to neighbouring houses of its customers.
(d) Television Commercials
The Group utilises television commercials as an effective tool to disseminate the message and information of the Group’s products to its existing and prospective customers. The Group currently places about 3,060 spots per annum on both free-toair television and paid television.
(e) Movie Tie-in, Premiums and Movie Premier Screenings
The movie industry in Malaysia is well received and very popular with most cineplexes well-patronised, especially on weekends, public and school holidays. The Group continuously intensifies its marketing and advertising promotions by signing up movie tie-ins, movie premier screenings and offers movie premiums to attract the local movie-going crowd. 5. BUSINESS OVERVIEW (f) Roadshow
The Group participates in various trade fairs and exhibitions which are held throughout Malaysia to create brand awareness as well as to comprehensively promote the Group’s products. In addition, the Group also runs its own charity-driven campaigns such as the annual Roasters Chicken Run and the yearly Roasters Health Watch Contest to promote healthy eating and lifestyle amongst the Malaysian public.
(g) Outdoor Advertising
The Group’s outdoor advertising includes billboards, lift wraps and vehicle wraps in the form of large and prominent advertising structures which are exposed to the general public. The Group’s billboards are mainly erected alongside prominent roads and highways throughout Malaysia.
The Group has an active website, http://www.krr.com.my. where information relating to the Group’s products and services are available to the public. The website is updated regularly to ensure that all the latest product offerings by the Group are reflected accordingly. 5.11 APPROVALS, MAJOR LICENCES AND PERMITS Save as disclosed below, as at 31 January 2011, the Group (via BRoasters) has obtained the following approvals, major licences and permits for the operation of its business:Description of , Major Status of approval/ Tenure of I conditions compliance of licence/permit license/permit I Authority imposed major conditions Business and signage licence All valid as at the LPD with different , Town councils I I of the relevant Staff handling food must have Complied (aj expiry dates but states typhoid injection no later than 20 ; and food January 2012 handlers I certificate —– , “Halal” Two (2) years with Islamic All suppliers to Complied certification (b) various expiry Development I be “Halal” dates Department of certified Malaysia Music Authors’ -With various I Music Authors’ – .._._–Not applicable Copyright tenure, all expiring ! ! Copyright Protection on 31 December ! Protection certificate 2011 1 Berhad ! f- Public 1 January 2011 – .+.! Public -, , – _··__• ____w Not applicable performance 31 December Performance licence 2011 Malaysia Sdn I Bhd j
5. BUSINESS OVERVIEW Notes:(a) Out of the total fifty-one (51) Group-owned restaurants, the business and signage licences for two (2) Group-owned restaurants are still pending issuance/ approvals from the town council of the relevant states. In this respect, BRoasters has submitted all the relevant documents and paid all the related fees, and has taken the appropriate measures to comply with the authorities’requirements.
(b) BRoasters has applied for the “Ha/al” certificates for two (2) recently-opened restaurants (October 2010) and is currently awaiting issuance of the certificates from the Islamic Development Department of Malaysia
The Group has designated specific personnel to monitor and ensure full compliance of the above conditions imposed by the relevant authorities at all times. Periodically, these personnel would follow up with the relevant authorities on all matters pertaining to the licences. 5.12 BRAND NAMES, PATENTS, TRADE MARKS, LICENCES, TECHNICAL ASSISTANCE AGREEMENTS, FRANCHISES AND OTHER INTELLECTUAL PROPERTY RIGHTS The Group carries on its business under the KRR trademark, service mark, trade dress and associated logo, pursuant to the MDA entered into between RAPM and BRoasters. As disclosed in Section 4.1 of this Prospectus, RAPM is a wholly-owned subsidiary of BGroup, which in turn is the holding company of BFood. The salient terms of the MDA are set out in Section 5.13 of this Prospectus. 5.13 SALIENT TERMS OF THE CONTRACTS/ARRANGEMENTS ON WHICH THE GROUP IS HIGHLY DEPENDENT Save for the MDA, as at the LPD, there are no other contracts or arrangements entered into by the Group which the Group is highly dependent on. Amongst the salient terms of the MDA are as follows:Development Rights (a) Subject to the terms and conditions of the MDA, RAPM grants to BRoasters the rights to develop KRR restaurants in Malaysia (“Development Rights”) for an initial term of twenty five (25) years commencing 1 January 2004 (“‘nitial Term”). The rights granted to BRoasters by the MDA are limited to Malaysia and BRoasters agrees that it has not been granted any rights other than the Development Rights in respect of KRR restaurants.
(b) Pursuant to an agreement dated 19 February 2008 supplemental to the MDA (“1 st Amendment to MDA Agreement”), RAPM and BRoasters agreed that the Development Rights shall be exclusive rights and RAPM shall not enter into new franchise agreements or allow any person (other than BRoasters) to open, operate and maintain KRR restaurants in Malaysia, provided always however that the franchise agreements entered into between RAPM and third party franchise owners prior to the 1st Amendment to MDA Agreement (inclusive of the franchise agreements then pending finalisation, as set out therein) to open, operate and maintain KRR restaurants in Malaysia shall not be affected and shall remain in full force and effect.
5. BUSINESS OVERVIEW (c) Subject to BRoasters’ exclusive rights as set out in paragraph (b) above, RAPM retains all rights with respect to the KRR restaurants, the trademarks, service marks and trade dress (collectively, the “Marks”) and the sale of KRR products, and other products and services, anywhere in the world, including, without Iimitation:
(i) the right to operate or grant others the right to operate KRR restaurants at such locations and on such terms and conditions as RAPM, in its sole discretion, determines; and
(ii) the right to develop, manufacture, distribute and/or sell KRR products, and other products and services through any channel of distribution or own or operate any business, under or in association with the Marks or any other trademark.
(d) After the Initial Term, the MDA may, at BRoasters’ option, be extended for an additional term of twenty five (25) years, provided that BRoasters has complied with the development schedule as set out in paragraph (k) below and is not in breach of its other obligations under the MDA. If, however, RAPM and BRoasters are not able to agree on a new development schedule prior to the expiry of the Initial Term, the MDA will terminate without affecting BRoasters’ right to continue operating the KRR restaurants then existing.
Training and Assistance (e) RAPM shall provide continuous training and assistance to BRoasters which include, but is not limited to, providing a copy of its operating manual and other materials describing the confidential and proprietary information, trade secrets, distinctive image, designs, .business formats, methods, procedures, specifications and the Marks which RAPM has been granted the right to use in conjunction with operation of KRR restaurants (collectively, the “System”), providing BRoasters’ personnel with initial and continuous training programmes conducted by RAPM, and providing periodic consultation with BRoasters’ personnel. Specifications, Standards and Procedures (f) Subject to any applicable laws and regulations applicable to it or the operations of the KRR restaurants in Malaysia, BRoasters shall comply with all mandatory specifications, standards and operating procedures (whether contained in the operations manual or any other written communication by RAPM to BRoasters) relating to the operation of KRR restaurants. Insurance (g) During the term of the MDA, BRoasters agree to maintain insurance against claims for bodily and personal injury, death and property damage caused by or occurring in connection with the conduct of BRoasters’ business pursuant to the MDA. The maintenance of sufficient insurance coverage shall be the responsibility of BRoasters. Notwithstanding any other provision of the MDA, RAPM shall have no obligation to prescribe types or amounts of insurance coverage and shall have no obligation to indemnify BRoasters if it does not do so or if the types or amounts of insurance coverage prescribed by RAPM are insufficient to fully cover a claim made against BRoasters. 5. BUSINESS OVERVIEW Records and Reports (h) BRoasters shall immediately report to RAPM, as far as it is aware, any events or developments which may have a significant or material adverse impact on the operation of any of its KRR restaurant, the performance of BRoasters under the MDA or the goodwill associated with the Marks and its KRR restaurants. Compliance with Law (i) BRoasters shall secure and maintain in force in its name all licenses, permits, and certificates required for the performance of the MDA and comply with all applicable laws and regulations. BRoasters shall further refrain from any business or advertising practice which may be injurious to the business of RAPM or BRoasters and the goodwill associated with the Marks and the KRR restaurants. RAPM and/or BRoasters shall notify the other party within ten (10) days of the commencement of any action, suit or proceeding, and of the issuance of any order, writ, injunction, award or decree of any court, agency or other governmental. instrumentality, which may adversely affect the operation or financial condition of RAPM, BRoasters or a KRR restaurant. Fees U) BRoasters shall pay to RAPM on a monthly basis, royalty fees calculated at an agreed percentage of the gross sales of BRoasters. Development Schedule (k) During the Initial Term, BRoasters shall open and operate a minimum of one (1) KRR restaurant per year or a total of 25 KRR restaurants, within Malaysia. Such number of KRR restaurants opened shall be cumulative and, therefore, if additional KRR restaurants are opened ahead of schedule, these will be credited to the subsequent period of performance. Advertising (I) BRoasters shall not use any advertising, marketing and promotional materials and programmes unless they have been approved by RAPM. Confidential Information (m) BRoasters, on behalf of itself and its officers, acknowledges and agrees that neither BRoasters nor any of its officers will acquire any interest in the Confidential Information, other than the right to use it in developing and operating KRR restaurants pursuant to the MDA, and that the use or duplication of the Confidential Information in any other business would constitute a breach of its obligations of confidentiality and an unfair method of competition. BRoasters agrees on behalf of itself and its officers that during the term of the MDA and thereafter, that BRoasters and its officers will, inter alia:(i) not use the Confidential Information in any other business or capacity other than pursuant to the MDA and other agreements with RAPM; 47 5. BUSINESS OVERVIEW (ii) maintain the absolute confidentiality of the Confidential Information during and after the term of the MOA; (iii) not make unauthorised copies of any portion of the Confidential Information disclosed or recorded in written or other tangible form; and (iv) adopt and implement all reasonable procedures prescribed from time to time by RAPM to prevent unauthorised use or disclosure of the Confidential Information including, without limitation, restricting access to Confidential Information and requiring directors, officers and employees who will have access to such information to execute confidentiality agreements in the form prescribed by RAPM. For the purpose of the above provIsion, “Confidential Information” refers to all confidential and proprietary information possessed or developed by RAPM relating to the operation of the KRR restaurants, which includes the ingredients, formulas, recipes and methods of preparation of food sold at KRR restaurants and methods, techniques, formats, specifications, systems, procedures, methods of business management, sales and promotion techniques and knowledge and experience in the operation of KRR restaurants, which are disclosed by RAPM to BRoasters in the operating manual and in training, guidance and assistance furnished to BRoasters pursuant to the MOA. BRoasters agrees to disclose to RAPM all ideas, concepts, methods, techniques and products relating to the development and operation of the KRR restaurants conceived or developed by BRoasters during the term of the MOA, and RAPM shall have a perpetual, non-exclusive and worldwide right, without any payment to BRoasters, to incorporate any such idea, concept, method, technique or product in System for use in all KRR restaurants operated by RAPM, its affiliates and their respective franchisees. BRoasters will not use any concept, method, technique or product developed by itself in the development or operation of a KRR restaurant without obtaining RAPM’s prior written approval. Exclusive Relationship (n) RAPM has entered into the MOA with BRoasters on the express condition that with respect to the operation of businesses engaged in the sale of KRR products, BRoasters, its shareholders and its or their affiliates or spouses will deal exclusively with RAPM. Neither BRoasters nor any shareholders and its or their affiliates or spouses of BRoasters shall anywhere:(i) have any ownership interest in any competing business;
(ii) perform services as a director, officer, manager, employee, consultant, representative, agent or otherwise for any competing business; or
(iii) knOWingly employ or seek to employ any person who is employed by RAPM, its affiliates or by any other licensee or franchise owner of a KRR restaurant, nor induce any such person to leave said employment without the prior written consent of such person’s em ployer. The restrictions of subparagraphs (i) and (ii) above shall not be applicable to the ownership of shares of a Class of securities publicly traded in Malaysia that represent less than five percent (5%) of the number of the shares of that class of securities issued and outstanding. The restrictions of this section also shall not be construed to prohibit BRoasters or any of its shareholders and its or their affiliates and spouses from owning or operating any KRR restaurant, or any entity owning, controlling or operating a KRR restaurant, or from providing services to any KRR restaurant. 48 5. BUSINESS OVERVIEW RAPM and BRoasters agree that in addition to any equitable relief to which RAPM may be entitled pursuant to any violation of this section by BRoasters, BRoasters shall pay RAPM Ringgit Malaysia One Million (RM1,000,OOO) as agreed liquidated damages for any violation of this non-competition agreement. Independent Contractors I Indemnification (0) BRoasters shall indemnify, defend and hold harmless RAPM, its subsidiary and affiliated entities and their shareholders, directors, officers, employees, agents, successors and assignees (collectively, the “Indemnified Parties”) against and to reimburse anyone or more of them for all claims, obligations and damages that may be incurred by them directly or indirectly arising out of the operation of BRoasters’ business under the MDA, whether or not caused by BRoasters’ negligence or wilful action or failure to act, and any and all claims and liabilities directly or indirectly arising out of the use of the Marks in any manner not in accordance with the MDA. This indemnity shall continue in full force and effect subsequent to and notwithstanding the expiration or termination of the MDA. Marks (p) BRoasters acknowledges that its right to use the Marks is derived solely from the MDA and is limited to its conduct of business pursuant to and in compliance with the MDA. Any unauthorized use of the Marks by BRoasters shall constitute a breach of the MDA and an infringement of RAPM’s rights in and to the Marks. BRoasters acknowledges and agrees that its usage of the Marks and any goodwill established thereby shall inure to RAPM’s exclusive benefit and that the MDA does not confer any goodwill or other interests in the Marks upon BRoasters.
(q) In its use of the Marks, BRoasters shall identify itself as being entitled to use the Marks in the manner prescribed by RAPM. BRoasters shall not use any Mark as part of any corporate or trade name or with any prefix, suffix or other modifying words, terms, designs or symbols, or in any modified form, and shall not use any Mark in connection with the performance or sale of any unauthorised services or products or in any other manner not expressly authorised in writing by RAPM. BRoasters shall prominently display the Marks on supplies or materials designed by RAPM and in connection with packaging materials, forms, labels and advertising and marketing materials in the manner prescribed by RAPM.
(r) BRoasters shall immediately notify RAPM of any apparent infringement of or challenge to BRoasters’ use of any Mark, or claim by any person of any rights in any Mark. Promptly upon such notification, RAPM will undertake, at its expense, an action to enjoin such infringement and obtain such other remedies as may be available. BRoasters shall not communicate with any person other than RAPM, its counselor BRoasters’ counsel in connection with any such infringement, challenge or claim, except as may be required by law.
5. BUSINESS OVERVIEW
(s) RAPM agrees to indemnify BRoasters, its affiliates and their successors and assignees against and to reimburse anyone or more of them for all claims for which it is held liable in any proceeding arising out of BRoasters’ authorised use of any Mark pursuant to and in compliance with the MDA and for all costs it reasonably incurs in defending any such claim brought against it or any proceeding in which it is named as a party whether or not it is held liable in such proceeding, provided that BRoasters has timely notified RAPM of such claim or proceeding. RAPM, at its sole discretion, shall be entitled to defend any proceeding arising out of BRoasters’ use of any Mark pursuant to the MDA, and if RAPM undertakes the defence of such proceeding, RAPM shall not have any obligation to indemnify or reimburse BRoasters, its affiliates and their successors and assignees with respect to any fees or disbursements of any counsel retained by BRoasters unless there is a conflict of interest requiring separate counsel. This indemnity shall continue in full force and effect notwithstanding the expiration or termination of the MDA. Transfer and Assignment (t) RAPM shall have the right to sell, assign, or transfer all or any part of its rights or obligations in the MDA to any third party provided, however, the rights, duties, and obligations of RAPM under the MDA shall be assumed by the purchaser or assignee.
(u) BRoasters shall not sell, assign, transfer, pledge, donate, mortgage, or encumber in any manner whatsoever, the MDA or the rights granted thereunder or a controlling interest in BRoasters without the express written approval of RAPM, which cannot be unreasonably withheld.
(v) Notwithstanding any other provisions of the MDA, BRoasters shall not, without RAPM’s prior written consent, which can be arbitrarily withheld, sell or offer to sell any security of BRoasters if such sale or offer would be required to be registered pursuant to the provisions of the securities laws of Malaysia or any other jurisdiction.
Relocation of Restaurant (w) Upon RAPM’s approval, BRoasters may relocate a KRR restaurant to another ,location within the same city, municipality or province, not to exceed a distance of three (3) kilometres, subject to the terms and conditions set forth in the MDA and provided that BRoasters is in full compliance with the MDA, and all other agreements with RAPM at the date of request for approval. A KRR restaurant relocated will not be credited as a new restaurant for purposes of compliance with the development schedule in the MDA. Termination of MDA (x) The MDA shall terminate on the happening of any of the following events:(i) BRoasters fails or refuses to meet the development schedule set forth in paragraph (k) above and such default continues for a period of sixty (60) days after RAPM has sent BRoasters written notice of such default. Provided, however, that BRoasters may avoid this default and the resulting termination by paying RAPM a “deemed royalty” in the amount of the royalty fee then in effect for gross sales for each KRR restaurant that is then required to be opened until such KRR restaurant is opened. If after six (6) months, BRoasters has not complied with the development schedule, RAPM, may at its option, terminate the MDA by giving written notice of termination to BRoasters. 5. BUSINESS OVERVIEW (ii) upon BRoasters’ failure to cure a breach of the MDA before the expiration of any period of time within which such breach may be cured in accordance with the provisions set forth in the MDA, or if:• BRoasters makes an unauthorised assignment or transfer of the MDA in violation of paragraph (u) above;
• BRoasters or its shareholders has made a material misrepresentation or omission to RAPM in obtaining the rights under the MDA or is convicted by a trial court (and no further right to appeal exists) of, or pleads guilty to, a serious crime or offense that RAPM reasonably believes may adversely affect the goodwill associated with the Marks or the reputation of KRR restaurants;
• either RAPM or BRoasters (1) is or acknowledges that it is unable to pay its debts when they fall due, commences negotiations with any one or more of its creditors with a view to the general readjustment or rescheduling of its indebtedness or makes a general assignment for the benefit of or a composition with its creditors; (2) takes any corporate action or other steps are taken or legal proceedings are started by third parties for its winding up, dissolution, administration or reorganization or for the appointment of a receiver, receiver and manager, official manager, liquidator, provisional liquidator, trustee or similar officer of it or of any or all of its revenues and assets and such proceedings have not been set aside within one hundred twenty
(120) days; (3) commits an act of bankruptcy or assigns its estate for the benefit of creditors, or a petition for an order of bankruptcy or sequestration of its estate is presented by a receiver or a trustee in bankruptcy is appointed to any part of its property or estate; (4) takes any step to obtain protection or is granted protection from its creditors under any Legal Requirements; or (5) has current liabilities in excess of current assets and such action adversely affects the party’s ability to perform under the MDA;
• either party breaches any provision of the MDA and does not cure such breach within thirty (30) days after written notice of such failure to comply is delivered to the party in default; or
• BRoasters habitually and materially breaches the MDA and RAPM, in good faith, has given formal written notice of default on eight (8) or more separate occasions within any twelve (12) month period, whether or not such breaches are cured, after notice thereof is delivered to BRoasters.
Rights and Obligations upon Termination (y) All obligations of RAPM and BRoasters which expressly or by their nature survive the termination of the MDA or the expiration of the term of the MDA shall continue in full force and effect subsequent to and notwithstanding its expiration or termination and until they are satisfied in full or by their nature expire. 5. BUSINESS OVERVIEW Appended in the IVIDA as Exhibit A, is the template franchise agreement which was agreed to be entered into between RAPM and BRoasters for the operation of each KRR restaurant. Pursuant to the letter dated 13 September 2010 exchanged between BRoasters and RAPM, the parties confirmed their mutual understanding that such requirement had been and shall continue to be waived with effect from 1 January 2004, and that all franchise agreements executed prior to the letter based on such template shall cease to be valid and binding and the operation of all its KRR restaurants by BRoasters shall be subject to the terms and conditions of the MDA. 5.14 PRODUCT DEVELOPMENT The Group appreciates the importance of offering new menu items from time to time in order to attract frequent visits by its customers. In doing so, the Group has a product development team which works hand-in-hand with the suppliers to roll out new menu items in response to the changing taste of customers. The management considers market trends and feedback from customers and suppliers· as the basis for regular review of its menus. Prior to the implementation of new products/offerings, the Group will run a series of quality control procedures to ensure consistent quality offerings to its customers. The management is responsible for the approval/introduction of any new dish and pricing. The Group does not segregate its product development expenses for new menu items in its books as such expenses are absorbed into the respective overhead accounts.
5.15 INTERRUPTION IN BUSINESS FOR THE PAST TWELVE (12) MONTHS There has not been any interruption in the Group’s business that had a significant effect on the Grou p’s operations during the past twelve (12) months. [THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK] 5. BUSINESS OVERVIEW
5.16 PROPERTY, PLANT AND EQUIPMENT The Group’s fixed assets include motor vehicles, office equipment, dining wares, furniture and fittings, plant and machinery, kitchen equipment as well as renovations carried out on its restaurants, all of which are incurred and held in the ordinary course of business. As at the LPD, save for the above, the Group does not have any material tangible fixed assets. A summary of the rented premises of the Group as at the LPD is set out below:No; 1 2 3 4 5
I···· , ‘Iii’1’\ DescriptionTenant and postal address ….. Retail lot located within shopping mall KRR Subang Parade Lot 10G, Lower Ground Floor for the operation of Subang Parade KRR restaurant No.5, Jalan SS 16/1 47500 Subang Jaya Selangor Retail lot located within shopping mall KRR Cheras Leisure Mall L1-24, Cheras Leisure Mall for the operation ofJalan Manis 2 KRR restaurant Taman Segar 56100 Cheras Kuala Lumpur KRR Setapak Individual retail lot for the operation of KRR126-01,02, Sri Pelangi Shop and Apartment restaurantJalan Genting Kelang Setapak 53300 Kuala Lumpur
KRR Kota Raya Retail lot located within shopping mall Lot G05, G06 &Lot 1.07 for the operation of Kompleks Kota Raya KRR restaurant Jalan Cheng Lock 50000 Kuala Lumpur KRRThe Mall Retail lot located Lot 1.34, 1st Floor, The Mall within shopping mall for the operation of100, Jalan Putra KRR restaurant 50350 Kuala Lumpur KRR Mahkota Parade Retail lot located within shopping mall F17, Mahkota Parade for the operation of No.1, Jalan Merdeka KRR restaurant 75000 Melaka Tenure of tenancy 01/01/2010 to 31/12/2012 16/02/2010 to 15/02/2013 01/11/2009 to 31/10/2012 (Lot 126-01) 01/11/2009 to 31/10/2012 (Lot 126-02) 01/11/2010 to 31/10/2013 (Lot G05 & G06) 01/04/2008 to 31/07/2011 (Lot 1.07) Monthly basis 15/07/2008 to 14/07/2011
5. BUSINESS OVERVIEW
No. 7 8 9 10 11 12 13
I. Tenant arid postal addre~s . KRR \01 Mall, Puchong Lot G13A, G15 & G16, 101 Mall Batu 9, Jalan Puchong Bandar Puchong Jaya 47100 Selangor KRR Seremban Parade Lot G28, New Alfresco Seremban Parade Jalan Dato Bandar Tunggal 70000 Seremban KRR The Mines Lot L1-87 & 88, The Mines Shopping Fair Jalan Dulang Off Jalan Balakong 43300 Seri Kembangan Selangor KRR Kinta City Lot G01 & G45, Ground Floor Kinta City Shopping Centre Jalan Teh Lean Swee Ipoh Garden 31400 Perak KRR Sunway Pyramid LL2.96, Lower Level 2 Sunway Pyramid Mall 46150 Petaling Jaya Selangor KRR AmCorp Mall L3-53 & L3-54, Third Floor AmCorp Mall Jalan Timur 47400 Petaling Jaya Selangor KRR Be~aya Megamall, Kuantan G83, Berjaya Megamall Kuantan Jalan Tun Ismail Sri Dagangan, Kuantan 25000 Pahang » >;> >PElscription > > ,.> >»»» “> 1,’\.;> Tenure of tenancy Retail lot located 31/05/2008 to within shopping mall 30105/2011 for the operation of KRR restaurant Retail lot located 01/01/2010 to within shopping mall 31/12/2012 for the operation of KRR restaurant Retail lot located within shopping mall for the operation of KRR restaurant 01/07/2008 to 30106/2011 (L1-87) 01/01/2009 to 31/12/2011 (L1-88) 15/04/2009 to 31/12/2011 (External sitting area -walkway) Retail lot located 16/08/2010 to within shopping mall 15/08/2013 for the operation of KRR restaurant Retail lot located 01/10/2010 to within shopping mall 30109/2013 for the operation of KRR restaurant Retail lot located 27/11/2009 to within shopping mall 26/11/2012 for the operation of (L3-53) KRR restaurant
27/11/2009 to 26/11/2012 (L3-54) Retail lot located 01/06/2008 to within shopping mall 31/05/2011 for the operation of KRR restaurant
5. BUSINESS OVERVIEW ” No. 14 15 16 17 18 19 20
,’ Tenant and postal addres~ ,\.. ,. KRR Mid Valley Megamall Lot LG 063, Mukim Kuala Lumpur Batu 2 % Jalan Kelang Lama 58000 Kuala Lumpur KRR Carrefour Subang Lot F3.01, Tingkat 3 Carrefour Hypermarket Jalan SS 16/1, Seksyen 16 Subang Jaya 46500 Selangor KRR Genting Walk Lot F/L 2.11A, Level 2 First World Plaza Genting Highlands Resort 69000 Pahang KRR KL Sentral ERL Unit 1, Arrival Hall KL City Air Terminal KL Sentral Station 50470 Kuala Lumpur KRR Berjaya Times Square Lot 03-85, P.O. Box 03.98 3’d Floor, Be~aya Times Square No.1, Jalan Imbi 55100 Kuala Lumpur KRR KL Convention Centre Lot C8, Concourse Level Food Court Kuala Lumpur Convention Centre Kuala Lumpur City Centre 50088 Kuala Lumpur KRR AEON Seremban 2 Lot G46, Ground Floor Jusco Seremban 2 Shopping Centre Persiaran S2BI, Seremban 2 70300 Seremban 2 Negeri SembiIan ” Description , . ‘. “. , .. ‘ ,:’,’ , “,,’, , <Tenure of ,:’ c,’:’ ~~n~ncy ‘+:, Retail lot located 23/11/2008 to within shopping mall 22/11/2011 for the operation of KRR restaurant 01/01/2010 to Retail lot located within shopping mall 31/12/2012 for the operation of KRR restaurant 01/12/2010 to Retail lot located within shopping mall 30/11/2011 for the operation of KRR restaurant 01/01/2009 to Retail lot located within the vicinity of a 31/12/2011 transportation hub for the operation of KRR restaurant 27/08/2009 to Retail lot located within shopping mall 26/08/2012 for the operation of KRR restaurant 02/06/2010 to Retail lot located within the food court 01/06/2013 of a shopping mall for the operation of KRR restaurant 29/09/2008 to Retail lot located within shopping mall 28/09/2011 for the operation of KRR restaurant
5. BUSINESS OVERVIEW 5. BUSINESS OVERVIEW 5. BUSINESS OVERVIEW .” No~ Tenant and po~tal addr~ss Description …. … ” …….. ‘ Tenure of tenancy 21 KRR Equine Park Lot LG07, Lower Ground Floor AEON Taman Equine Shopping Centre No.2, Jalan Equine Taman Equine Bandar Putra Permai 43300 Sen Kembangan Selangor Retail lot located within shopping mall for the operation of KRR restaurant 03/08/2010 to 02/08/2013 22 KRR AEON Tebrau City Lot S29, 2nd Floor No.1, Jalan Oesa Tebrau 81100 Johor Bahru Johor Retail lot located within shopping mall for the operation of KRR restaurant 03/08/2009 to 02/08/2012 23 KRR Langkawi Jetty Point Lot No. SB-1 N, Satellite Building Jetty Point Complex 07000 Kuah Langkawi, Kedah Retail lot located within shopping mall for the operation of KRR restaurant 03/06/2010 to 02/06/2013 24 KRR Sunway Camival, Seberang Jaya LG-09, Lower Ground Floor Sunway Carnival Mall 3068, Jalan Todak Pusat Bandar Seberang Jaya 13700 Seberang Jaya Pulau Pinang Retail lot located within shopping mall for the operation of KRR restaurant 22/06/2010 to 21/06/2013 25 KRR Langkawi International Airport Zone C, Sky Mall Langkawi International Airport 07100 Padang Matsirat Langkawi, Kedah Retail lot located within the vicinity of an airport for the operation of KRR restaurant Monthly basis* 26 KRR Metro Point, Kajang Lot G-06, Ground Floor Metro Point Complex Jalan Semenyih 43000 Kajang Selangor Retail lot located within shopping mall for the operation of KRR restaurant 13/03/2010 to 12/03/2013
No; ” ::”:’ ….,.. Teilar\.t~n~ postaladdre!;;~ . . ..<…….. ‘.’ .y·RC:l§«ription “. “..•. Tenure of ·tenancy·· .’…. 27 KRR Boulevard, Kuching Lot G-B-3B & 4, Ground Floor Boulevard Shopping Mall Jalan Datuk Tawi Sli 93250 Kuching Sarawak Retail lot located within shopping mall for the operation of KRR restaurant ‘ 12/01/2011 to 11/01/2014 28 KRR The Spring, Kuching Lot G-38 & G-39, Ground Floor The Spring Shopping Mall Jalan Simpang 3 93350 Kuching Sarawak Retail lot located within shopping mall for the operation of KRR restaurant 10/01/2011 to 09/01/2014 29 KRR Penang International Airport Lot No. AL 02, Arrival Level Penang International Airport 11900 Bayan Lepas Pulau Pinang Retail lot located within the vicinity of an airport for the operation of KRR restaurant 01/02/2008 to 31/01/2011 30 KRR Ipoh Parade Lot G27 & G28, Ground Floor Ipoh Parade Shopping Centre 105, Jalan Sultan Abdul Jalil Greentown 30450 Ipoh Perak Retail lot located within shopping mall for the operation of KRR restaurant 16/03/2008 to 15/03/2011 31 KRR One Borneo Lot No. C315 Concourse Floor 1 Borneo Hypermall 88000 Kota Kinabalu Sabah Retail lot located within shopping mall for the operation of KRR restaurant 31/05/2008 to 30/05/2011 32 KRR Tesco, Plentong, Lot G-07, Ground Floor Tesco Extra Johor Bahru No. 34, Jalan Masai Batu 10 81750 Johor Bahru Retail lot located within shopping mall for the operation of KRR restaurant 03/07/2008 to 02/07/2011
” , L,<, ” DescriptionNo;” Tenant and postal address ‘,i” ‘”””” 33 34 35 36 37 38 KRR AEON Seberang Perai City Shopping Centre Lot G-83, Ground Floor AEON Seberang Prai City Shopping Centre Perdana Mall Jalan Perda Timur Seberang Prai Tengah 14000 Bukit Mertajam Pulau Pinang KRR Setia Alam Lot G-12, Ground Floor Tesco Setia Alam No.2, Jalan Setia Prima SU13/S Bandar Setia Alam Seksyen U13 40170 Shah Alam Selangor KRR Taiping Sentral Lot G-36 & G-37, Ground Floor Taiping Sentral No. 36, Jalan Istana Larut 34000 Taiping Perak KRR Tesco, Kota Bahru Lot G-13, Ground Floor Tesco Kota Bahru Lot 1828, Seksyen 17 Bandar Baru Kota Bahru 15050 Kelantan KRR Tesco, Tebrau City Lot G-6, Ground Floor Tesco Desa Tebrau No.1, Persiaran Desa Tebrau Taman Desa Tebrau 81100 Johor Bahru KRR Giant Kota Damansara Lot G-01, Giant Hypermarket Kota Damansara No. 16, Jalan PJU 5/1 Kota Damansara, PJU 5 47810 Petaling Jaya Selangor 58
Retail lot located within shopping mall for the operation of KRR restaurant Retail lot located within shopping mall for the operation of KRR restaurant Retail lot located within shopping mall for the operation of KRR restaurant Retail lot located within shopping mall for the operation of KRR restaurant Retail lot located within shopping mall for the operation of KRR restaurant Retail lot located within shopping mall for the operation of KRR restaurant Tenure of tenancy 22/08/2008 to 21/08/2011 28/08/2008 to 27108/2011 31/08/2008 to 30108/2011 23/10/2008 to 22/10/2011 20/11/2008 to 19/11/2011 27/11/2008 to 26/11/2011 5. BUSINESS OVERVIEW
No. Tenant and postal address Oescription . Tenure of tenancy 39 KRR AEON AU2, Ampang Lot G-69, Ground Floor AEON AU2 Shopping Centre No.6, Jalan Taman Setiawangsa 37/56 Mukim Ulu Kelang 54200 Kuala Lumpur Retail lot located within shopping mall for the operation of KRR restaurant 05/12/2008 to 04/12/2011 40 KRR Tropicana City Mall Lot G-15, Ground Floor Tropicana City Mall No.3, Jalan SS 20/27 47400 Petaling Jaya Selangor Retail lot located within shopping mall for the operation of KRR restaurant 18/12/2008 to 17/1212011 41 KRR AEON Bukit Indah Lot G-6, Ground Floor AEON Bukit Indah Shopping Centre No.8, Jalan Indah 15/2 Bukit Indah 81200 Johor Bahru Retail lot located within shopping mall for the operation of KRR restaurant 19/12/2008 to 18/12/2011 42 KRR AEON Bukit Raja Lot G-24, Jusco Bukit Raja Shopping Centre Persiaran Bukit Raja 2 Bandar Baru Klang 41150 Klang Retail lot located within shopping mall for the operation of KRR restaurant 01/01/2011 to 30106/2011 43 KRR Queensbay Mall LG-72 & LG-82, Queensbay Mall 100, Persiaran Bayan Indah 11900 Bayan Lepas Pulau Pinang Retail lot located within shopping mall for the operation of KRR restaurant 01/09/2009 to 31/05/2013 44 KRR AEON Bukit Tinggi, Klang Lot G-21 , No.1 Persiaran Batu Nilam 1/KS 6 Bandar Bukit Tinggi 2 41200 Klang Selangor Retail lot located within shopping mall for the operation of KRR restaurant 29/11/2010 to 28/11/2013
5. BUSINESS OVERVIEW No. , ” Tenant and postal address De~crjption Tellure of tenancy 45 KRR Suria Sabah, Kota Kinabalu Lot B-73, Lower Ground Floor Suria Sabah Shopping Mall Jalan Tun Fuad Stephen 88000 Kota Kinabalu Sabah Retail lot located within shopping mall for the operation of KRR restaurant 03/12/2009 to 02/12/2012 46 KRR Prima Kepong Lot F-16, Jusco Metro Prima Shopping Centre No.1, Jalan Metro Prima 52100 Kepong Kuala Lumpur Retail lot located within shopping mall for the operation of KRR restaurant 13/12/2009 to 12/12/2012 47 KRR AEON Bandaraya Melaka G92, Ground Floor AEON Bandaraya Melaka Shopping Centre No.2, Jalan Lagenda Taman 1, Lagenda 75400 Melaka Retail lot located within shopping mall for the operation of KRR restaurant 05/02/2010 to 04/02/2013 48 KRR Empire Shopping Gallery, Subang LG-33A, Lower Ground Floor Empire Shopping Gallery Jalan 16/1, SS16 47500 Subang Jaya Selangor Retail lot located within shopping mall for the operation of KRR restaurant 22/04/2010 to 21/04/2013 49 KRR AEON Mahkota Cheras Lot G-13, Ground Floor AEON Mahkota Chera’s Shopping Centre Jalan Temenggung 21/9 Persiaran Mahkota Cheras 43200 Kajang Selangor Retail lot located within shopping mall for the operation of KRR restaurant 28/04/2010 to 27/04/2013 50 KRR Klang Parade Lot G-43A, Ground Floor Klang Parade No. 2112, KM2, Jalan Meru 41050 Klang Selangor Retail lot located within shopping mall for the operation of KRR restaurant 15/10/2010 to 14/10/2013
5. BUSINESS OVERVIEW ‘No; 51 52
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Tenant and postal ~ddres~ . . .:’. ,’.~.,. .. . KRR 1st Avenue Mall Lot 4-13A, 1st Avenue Mall 182, Jalan Magazine 10300 Georgetown Pulau Pinang Head Office Lots 09-06 to 09-13 9th Floor, Be~aya Times Square No.1 Jalan Imbi 55100 Kuala Lumpur
“, Description ” ,Tenure of “.’ tenancy
Retail lot located 25/11/2010 to within shopping mall 24/11/2013 for the operation of KRR restaurant Retail lot located 01/12/2008 to within shopping mall 30/11/2011 for the head office’s operation
Note:* Tenancy is currently on a monthly basis pending execution of new tenancy agreement with the new landlord All the abovementioned rented premises by BRoasters have obtained the necessary certificates of fitness. The ‘Group believes that it is in compliance in respect to all relevant land rules and building regulations. The total retail space rented by the Group amounts to approximately 115,000 square feet averaging 2,300 square feet for each rented premises with an average seating capacity of approximately 90 seats per KRR restaurant. For the month of December 2010, the Group’s total rental payable in respect of the abovementioned premises amounts to approximately RM1 million. 5.17 REGULATORY REQUIREMENT AND ENVIRONMENTAL ISSUE To the best of the Group’s knowledge, the Group is in compliance in respect of all material regulatory requirements and environmental issues which may materially affect the Group’s operations and/or utilisation of assets. As at the LPD, the Group is not aware of any environmental proceedings or investigations which it is or might become a party to. 5.18 MAJOR CUSTOMERS The Group does not have any major customer who had contributed 10% or more to the Group’s revenue for each of the past three (3) years from FYE 2008 to FYE 2010 and the four (4)-month FPE 31 August 2010 as the Group’s customers consist primarily of the mass retail market. In view thereof, the Group is not significantly dependent on any major customer. 5. BUSINESS OVERVIEW 5.19 MAJOR SUPPLIERS The Group does not have any major supplier who had contributed 10% or more to the Group’s total purchases for each of the past three (3) years from FYE 2008 to FYE 2010 and the four (4)-month FPE 31 August 2010. In view thereof, the Group is not significantly dependent on any major supplier. Notwithstanding the above, the Group’s main suppliers for the past three (3) years from FYE 2008 to FYE 2010 and the four (4)-month FPE 31 August 2010 are Farm’s Best Food Industries Sdn Bhd and Dindings Poultry Processing Sdn Bhd for poultry products; English Hotbreads (SEL) Sdn Bhd for muffin and sauces; Unilever (M) Holdings Sdn Bhd for dressing and sauces; SK Dynamic Construction Sdn Bhd and Homedec Renovation Works for fittings and repair services; and F&B Facilities Sdn Bhd for kitchen equipment. The Group has cultivated a strong and good working relationship with the Group’s pool of suppliers. The Group has been dealing with a majority of these main suppliers for more than ten (10) years. rrHE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]