Why Do Farang Businesses Need More Money Than Thai Business?

[Big Boy]

There are plenty of Thai establishments surviving charging a lot less than 99 Baht.

you said it thai establishments , they dont need the same profits a farang buisiness needs ,and even they are feeling the pinch ,food costs here are climbing steadily and that will mean higher prices for the custumer

The above was said on the 'Cafe on Soi 102' thread.

I must admit, I find myself struggling to understand the thinking behind this. Surely, a restaurant is a restaurant. They all buy food, prepare food, cook food, sell food. Are the costs really that different?

If there are 2 similar businesses, one owned by a Thai and one owned by a Farang, the only differential reflected in the price should reflect the owner's required profit margins. I agree that many Farang probably desire a more lavish lifestyle, so will demand higher profit margins. Outside of that desire, I really don't understand why a business's prices should be determined by the owners nationality.

[buksida]

Off the top of my head try these for starters ...

Work permit costs
Usually higher rent (Thais often own their premises)
Income tax is higher
National insurance costs
Employing four staff
Company costs (accounting etc)
Company taxes
Licenses and permits (Thais seldom bother with, farangs have no choice)
General overpricing of goods when purchased by farang
Additional costs (pool table police, music police, tourist police, labour dept, immigration, inspectors, anyone else that strolls in and wants a bung to leave you alone)

[ste860]

i think the above post answers your question , it costs quite a bit more just to get started it not cheap to start a legal buisiness here

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[Big Boy]

Off the top of my head try these for starters ...

Work permit costs
Usually higher rent (Thais often own their premises)
Income tax is higher
National insurance costs
Employing four staff
Company costs (accounting etc)
Company taxes
Licenses and permits (Thais seldom bother with, farangs have no choice)
General overpricing of goods when purchased by farang
Additional costs (pool table police, music police, tourist police, labour dept, immigration, inspectors, anyone else that strolls in and wants a bung to leave you alone)

There are a lot of things that I wouldn't have thought about. Being a retiree, of course I wouldn't have to consider them.

If you're going to get stung for all of the above, I'm actually amazed that anybody bothers. It is certainly not a level playing field, and significantly tilts in favour of the Thai (no surprise there then).

I guess the Farang is paying dearly to feed his/her desire to remain in Thailand, and many need that work permit to stay here. If it wasn't the need for the work permit, I guess life could be a lot easier having a Thai front the business.

I'd never really looked at Farang business here in that light before, and it's a bit of an eye opener - no wonder that so many fail.

[Roel]

Farang
Monthly rent: THB 50,000
Staff: THB 40,000
Total: THB 90,000

Thai
Monthly rent: THB 0 (often they own the building for generations)
Staff: THB 0 (man and wife with their children and if necessary a few relatives do the job)
Possibly a few thousand Baht mortgage (if for instance they bought their Fortuner with a new mortgage based on increased market value of the property esp. the land)
And then maybe a few thousand Baht a month pocket money for the relatives.
Let's leave that out of the equation.

This is a quite common scenario where the farang needs THB 3,000 NET PROFIT A DAY just to catch up. After that the farang can start dealing with buksida's list.

[hhfarang]

I'd say most of the western restaurants you think are owned by foreigners here are not. The ones I know of (and that is many, even some of the very big ones) are financed by the westerner in the background but owned and run by the Thai wife, girlfriend, or other family member. Western ingredients cost way more than typical Thai food ingredients. That is a good part of the difference in pricing as well. Ever see cheese in Thai food? Cheese or cheese sauces are in a lot of western dishes and that alone could double the price of the dish here. We can go out and just by ingredients for my wife to cook three or four thai meals (for 2 people) for about 1k baht. A trip to Villa Market for me to cook three or four western meals (for 2) usually runs around 4k baht.

Comparing Thai (food) restaurants to Western (food) restaurants is apples to oranges no matter what the nationality of the owner is.

[Roel]

Of course you can compare. (And it should be obvious that farang owned in Thailand in general means financed by a farang).
The questions is: Why do farang businesses need more money than Thai businesses?
The answer has been given earlier.
A farang restaurant does not need more money because farang food is more expensive than Thai food. In the end the customers pay for the difference. Higher costs for ingredients is cancelled out by likewise higher revenues.

You can substitute restaurant with another business like a souvenir shop if that makes comparison more clear.

[hhfarang]

^ Yes, my comment only applies to restaurants (Thai food vs Western food). Other businesses owned by foreigners cost more because of the reasons Buksida mentioned. The origin of this thread came from another thread about why Thai restaurants are so much cheaper that foreign owned restaurants and I was just pointing out that there are other reasons why the food costs more in Western food restaurants and therefore, the startup costs and risks are much higher than opening a Thai food only restaurant, not to mention that the customer base for a cheap Thai restaurant is much much larger than for a (even reasonably priced) Western food place.

[STEVE G]

I agree that many Farang probably desire a more lavish lifestyle, so will demand higher profit margins.

I think you hit the nail on the head there BB, If you look at the many smaller businesses like bars and restaurants that Farangs open in Thailand, seeing as they can't legally work in them selling drinks or cooking food, they're just going to be a financial millstone to the project.
Obviously if they're professionally managing a larger business like a hotel resort or factory then they would be making a valuable contribution to the economics of the business but on a smaller scale the numbers don't add up.
I've looked into the economics of starting a business in Asia for the best part of twenty years and I'm still coming back to Europe fixing airplanes for a living!

[ste860]

steve i cant see how they can be a millstone , the business simply would not be there if the farang/husband /boyfriend did not put up the cash in the first place .
so then its a matter of getting a return on your investment ,which is very hard here
and thats the problem

how many businesses go to the wall here because its imposible for the real owner/financer to have a real say in how its run , due to work permit and other issues here , greedy landlords ,etc ,i bet its thousands you only have to look a carlsberg and pepsi for two major investers,even if things are run legaly with a work permit and everything else ,the farang which is ussually the major invester can only own 49% of it

its many peoples dream to move here and open a bar,restaraunt or even guesthouse
for it to only end in tears due to reasons they can not control ,due to laws and regulations

[MrPlum]

its many peoples dream to move here and open a bar,restaraunt or even guesthouse
for it to only end in tears due to reasons they can not control ,due to laws and regulations

This gentleman doesn't seem to be doing too badly... http://www.forbes.com/profile/william-heinecke/

[buksida]

For every one Heinecke there are probably a thousand that fail as ste860 says.

I know very few farang business owners in Hua Hin that are 100% legal, subscribing to all the items mentioned in my list. Despite this they are usually top targets for handouts when the "police" and government departments are feeling hungry.

Damned if you do, damned if you don't.

[STEVE G]

steve i cant see how they can be a millstone , the business simply would not be there if the farang/husband /boyfriend did not put up the cash in the first place .
so then its a matter of getting a return on your investment ,which is very hard here
and thats the problem

What I meant was that if the farang isn't able to do any work, then he is merely in effect just loaning money to the business and if they then take out more than what a bank would charge for a business loan, under 10% probably, then they would be a hindrance to the economics of the whole enterprise.
Believe me, if the economics worked I would be sat in a bar in Thailand right now!

[hhfarang]

Believe me, if the economics worked I would be sat in a bar in Thailand right now!

Steve, an intelligent guy like you would be bored silly in 3 months. The bar business here is for desperate people who have no skills other than drinking and socializing and that will ruin your health and your attitude about it in a very short time. Sorry bar owners... no offense meant.

[lomuamart]

An intelligent person might just give it a go first.
Yes, some outlay but heaven forbid sell it all back home. Now that isn't sensible.
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