How Teo Heng Is “Hanging On” Despite No Income For 7 Mths

Founded in 1989, Teo Heng KTV Studio has been around for over 30 years.

It is very much a family business as the siblings of founder Jackson Teo are all directors of the company, and they have been involved in the business since day one.

Their respective children also spent a lot of time at Teo Heng after school, so they naturally learnt the ropes and often helped out with the business.

In an interview with Vulcan Post, Jean Teo — one of Teo Heng’s directors, who is also the younger sister of Jackson — said that their “core” business is actually the import and export of karaoke sound systems.

Jackson first started selling them at Katong Shopping Centre, before he decided to open his own karaoke studio at another level in the same mall.

Why Teo Heng Charges Such Low Prices

From the start, Teo Heng positioned itself as a family-friendly, budget KTV studio.

Their target customers are students. This is why they charge low rental rates, sell drinks at S$1 per can, as well as ban smoking and drinking at their outlets.

When we think of students, we need to think of budget. We never dreamed that we would turn into such a (big) business.

We simply wanted to provide a safe (entertainment) space for students. We want to (propagate) the thinking that entertainment doesn’t have to (involve vices). You don’t have to smoke or drink to have fun.

– Jean Teo, director of Teo Heng KTV

So exactly how cheap are the rental rates for their rooms?

Unlike other karaoke studios that charge per head — “so you pay more when you have more people”, explained Jean — Teo Heng chose to charge by room sizes instead.

teo heng ktv karaoke room
Image Credit: Teo Heng KTV

They have small, medium and large rooms. For a small room, they charge S$8 per hour and a package price of S$18 for three hours.

All their revenue comes purely from the rental of their rooms. With such low prices, Jean stressed that their store rental itself must be affordable — that’s the only way they can stay afloat.

Even with a (quick turnaround rate), the maximum I can go is four rounds (of three-hour bookings) a day, so how much can I even earn?

We charge low prices to make it affordable for everyone. We breakeven just to pay rental and our workers.

– Jean Teo, director of Teo Heng KTV

They Were Told To Change Their Company Name

Although they started out with just five rooms, customer demand was so good. Business expansion was therefore a natural progression.

Luckily, NTU Alumni Club approached them at that point of time.

“They had a karaoke club, but didn’t know how to manage it,” said Jean, recounting their first meeting.

The club manager told Jean that his students and alumni are all interested in singing. He further noted that there was no club that came without karaoke, which served as another source of income.

“We decided to give it a shot because they offered very cheap rental at S$3 per square foot,” she said.

With careful planning, they maximised the 1,500 square feet space to build 11 rooms. With this second outlet, Teo Heng gained the confidence to spread their wings.

Their third outlet at Sembawang Shopping Centre was the first time they expanded into malls.

To their surprise, their company name turned out to be a roadblock.

When we first started going into malls, branding to them is very important. They want us to be here (as a tenant), but they also want us to change our name.

– Jean Teo, director of Teo Heng KTV

Jean explained to the landlord that ‘Teo Heng’ is very important because it derives from the name of their founder — it is actually a permutation of Jackson’s Chinese name, Teo Ngiang Heng.

teo heng jackson teo founder
Jackson Teo, founder of Teo Heng KTV / Image Credit: Teo Heng KTV

“We Chinese are proud of our name. We can change anything, but not our name,” she said with a hint of pride in her voice.

“As long as we do our business sincerely and in a good manner, I don’t see how our name can affect the mall’s business.”

They refused to change their company name and the landlord eventually caved in, which proved to be a good choice, as Teo Heng helped to revive foot traffic to the mall.

Jean also noted that because they don’t sell food, this actually boosted sales for their neighbouring stores.

“Customers often ‘da bao’ food to eat at our place, so our neighbours still make money. This is why more F&B outlets started choosing their store location at my level.”

“You will also find that our outlets are always near to a bubble tea store. Wherever Teo Heng goes, the bubble tea stores will follow (suit).”

Making Their Mark In The Heart Of S’pore

teo heng rendezvous hotel
Teo Heng’s Rendezvous Hotel outlet / Image Credit: Teo Heng KTV

According to Jean, Teo Heng’s biggest turning point was when they opened an outlet at Rendezvous Hotel.

“We never dreamed that we would go into the central area because the rental is not within our budget. We simply cannot afford it, frankly speaking,” she said.

However, Dorothy Chan, who is the executive director of Far East Organization, loved their concept so much that she helped them secure a rental rate that they can afford.

“She had just bought over Rendezvous Hotel. She didn’t mind us using the ‘Teo Heng’ name and only requested to see our designs because she wanted it to blend in with the hotel, so that’s when we started changing to a ‘zen’ style,” said Jean.

Dorothy had also asked her what they intend to do with the outlet, but Jean simply replied that everything will remain status quo.

Despite the higher rental fees (compared to their other outlets), they still continued charging the same rates. They only increased it by a mere dollar during peak hours.

It’s no surprise then that room bookings at that particular outlet snowballed.

It was hard to find a karaoke place that is so cheap, especially at a central area.

And as we changed our branding, we also started catching the eyes of (more) people. That’s when Suntec City mall approached us.

– Jean Teo, director of Teo Heng KTV

The mall manager knew nothing about Teo Heng KTV and even confused them with a Teochew porridge place.

She went down to their Rendezvous Hotel outlet one afternoon to check on their business operations, and was surprised to find that all their rooms were fully booked despite it being a non-peak period.

That’s when she started seeing the “potential” in Teo Heng, and the rest was history.

teo heng ktv karaoke
Image Credit: Teo Heng KTV

Teo Heng continued expanding and at its peak (before the onset of COVID-19), they had 14 outlets across Singapore.

According to Jean, they typically spend half a million dollars when opening one outlet.

For one, renovation and application of licenses are not cheap.

“For the equipments, no doubt we are the distributor, but it’s not cheap too. One system amplifier and wireless microphones for only one room cost about $4,000 to $5,000,” said Jean, adding that they had a total of 312 rooms.

COVID-19 Is Their Biggest Crisis So Far

teo heng ktv
Image Credit: Teo Heng KTV

For the past three decades, Teo Heng has gone through many highs and lows but Jean cited COVID-19 as their biggest crisis to date.

We even overcame the SARS period, but SARS wasn’t as bad as COVID-19. There was no lockdown during SARS, and businesses weren’t forced to close.

However, SARS helped us change our (standard of) cleanliness. We started implementing hygiene practices such as using disposable microphone covers.

– Jean Teo, director of Teo Heng KTV

Teo Heng has effectively been closed for seven months now, since the government released the advisory in March for karaoke outlets and other entertainment venues to close as part of COVID-19 safety measures.

However, this also meant seven months of zero income for the business.

Jackson previously shared with Lianhe Wanbao that Teo Heng is expected to incur losses of $500,000 for a month-long closure. Therefore, it’s safe to assume that their losses have racked up to S$3.5 million so far.

Jean did not comment on this calculated figure, and simply expressed her gratitude towards the government for helping them tide over this crisis with initiatives like the wage support scheme and rental grants.

Rental is always one of the biggest headaches. If you have one or two outlets, it may not be so bad. We had 14 outlets though, so it was a really huge sum.

But come August (when the support ended), we started having headaches again.

– Jean Teo, director of Teo Heng KTV

Jean explained that the rental fee is typically split into different portions.

Some landlords charge 60 per cent base rental fee, and the remaining 40 per cent goes to A&P (advertising and promotion) and other service charges. Some charge vice versa.

The government is only subsidising the base rental fee, so they still have to bear A&P and other charges, which they currently owe seven months’ worth.

Thankfully, they have “good landlords” who are kind enough to not collect rent from them for the time being.

However, she is aware that the tolerance level of their landlords is hitting the threshold soon.

“I mean, they can always rent out to other tenants to earn some income rather than holding on for us. The uncertainty (of not knowing when we can reopen) is killing us.”

No Choice But To Cut Half Of Workers’ Salaries

teo heng ktv workers
Image Credit: Teo Heng KTV

During this period of business closure, Teo Heng employees have been put out of work.

“We sent them for SkillsFuture courses to upgrade themselves and (hone) their customer service (skills),” said Jean.

“Before COVID-19, we have always wanted to send them for such courses but we simply don’t have the time. Moreover, we can only afford to pay for three to four workers from one outlet.”

She added that it has been very difficult to get the whole company to go for such courses, so they see this downtime as an opportunity for their workers to upskill.

However, SkillsFuture is only applicable for locals so they resorted to hiring a coach to teach their foreign workers.

“We want them to learn as much as our local workers to make it fair.”

Teo Heng currently has 120 employees, who are all paid full salaries for the first six months of closure.

From October onwards however, Teo Heng will only be paying them half their salaries.

According to Jean, their workers have been very understanding about their situation. In fact, it was their employees who approached them to suggest this pay cut.

They understand that it is a difficult time for Teo Heng, which is already struggling with the rental. The employees said they are grateful that they have been paid in full so far, and wanted to help alleviate their financial burden.

Even if they are paid 50 per cent, they can still afford to support their household, one employee reasoned to Jean.

Since they are helping us to save money, we don’t have to retrench anyone. We need to take care of our workers.

We promised them that once we reopen, we will pay them back the 50 per cent that we ‘owe’ them. And if we do better in the new year, we will give them a bonus too.

– Jean Teo, director of Teo Heng KTV

They Might Have To Close Down More Outlets

Back in July, Teo Heng announced that it will be closing down half of its 14 outlets in Singapore due to COVID-19.

So far, Teo Heng has reinstated and returned only two outlets — Katong and Sembawang — in August.

“We closed these two outlets first. If the (COVID-19) situation does not improve, we might have to close more outlets.”

While the timeline of business reopening is still uncertain, Jean simply wants to know if the possibility is there — “it’s a yes or no question”, she asserted.

If yes, then let us know under what kind of conditions are required to reopen, so we can at least be prepared. But if we feel that we cannot survive under these kind of conditions, then at least we can opt to exit. This lightens our load, and it’s also fair for the landlords.

At least we can still reserve some of our balance resources. Right now, even if we want to close, the reinstatement is very costly. For one outlet, it costs S$50,000. So when we reinstated our Katong and Sembawang outlets, we have already lost S$100,000.

– Jean Teo, director of Teo Heng KTV

Previously, Jackson told Shin Min Daily News that he plans to raise S$1 million and put up a last fight to overcome this crisis. With the remaining outlets, he hopes to recoup the losses when they reopen.

When asked about this plan, Jean said that they are currently relying on their reserves of “hard-earned money” to survive.

“We didn’t know that COVID-19 is going to be so serious, but we learnt from SARS that there must be some reserves in a company. We don’t (wilfully) spend it, and every year, we will put in some funds,” she added.

Currently, Teo Heng has about S$1.5 million in reserves.

We really underestimated this time, and so far we have spent over S$1 million. So if COVID-19 drags on, I don’t know if we can survive for another few months.

Once our reserves are empty, it really means that we have to close everything.

– Jean Teo, director of Teo Heng KTV

bmb showroom jackson teo teo heng
BMB showroom / Image Credit: Teo Heng KTV

Thankfully, they are still earning some income from their core business of selling sound systems, but sales have unfortunately dipped “at least 50 per cent” due to the pandemic.

“But we are not discouraged. It pushes us harder to (close) more sales so we can (earn) more money to help our KTV business,” said Jean, brimming with optimism.

When asked if they plan on pivoting — much like Zouk which converted their dance floor into a venue for spin classes and a cinema club — Jean said that it is simply not feasible because of their existing structure.

Even if they do choose to pivot, they would have to apply to the Urban Redevelopment Authority (URA) for a change of use and there’s no guarantee that they can acquire the license if the quota has been filled up.

“I’ve already surrendered my Katong outlet but if I want to reopen in that same area, I cannot do that because no more license will be issued. So this is the risky part,” she elaborated.

Despite the steep financial losses, Teo Heng has been giving back to the community and recently donated 40 to 50 sets of couches to elderly in need.

Jean explained that they were approached by volunteers to help out, so they readily agreed to donate their new sets of customised furniture from their Katong and Sembawang outlets.

When asked why she did not choose to sell off the furnitures to recoup some of their losses instead, she simply quipped: “Why not do something good?”

“I cannot donate money at the moment because I need money to save my business, but I can at least donate our furnitures.”

If Other Countries Can Operate Karaoke Bizs, Why Can’t We?

Minister Lawrence Wong recently announced that that Singapore could enter Phase 3 by end of the year if community cases remain low.

However, nightlife settings deemed as higher-risk such as bars, karaoke lounges and nightclubs are likely to remain closed at the start of Phase 3.

Mr Wong reasoned that people are in close proximity to one another within an enclosed space in these locations so large clusters may break out, as seen in other countries.

When asked about her thoughts on this announcement, Jean let out one word: “Doomsday.”

However, in contrast with Mr Wong’s view, Jean is of the opinion that karaoke lounges can still operate safely without risking the emergence of a new cluster.

She went on to share report findings from BMB, which detailed how karaoke lounges in Japan, Malaysia and Taiwan implemented safety measures.

“Unlike bars or clubs, karaoke is limited to just one room so it’s easy to do (contact) tracing and sanitise the area,” noted Jean.

teo heng ktv
Image Credit: Teo Heng KTV

She also suggested a couple of safety measures that they can adopt once they are allowed to reopen.

For one, they can limit the number of customers to two persons in a room while still maintaining the 1-metre safe-distancing rule.

Secondly, they can also make it mandatory for customers to sing with their masks on.

This particular practice is already taking place in Japan, and Jean assures that their microphone system is “good enough” that it will not affect the singing experience.

Customers can also opt to bring their own personal microphones if they wish to do so.

Lastly, they can also limit the room booking to just two hours, much like the regulations in movie theatres.

Additionally, Teo Heng has also invested in anti-virus fogging machines, which they imported from Korea for a hefty S$4,500 per unit. This machine will be placed in every outlet.

After a customer leaves a room, Teo Heng employees will use the machine to sanitise the surface areas, which will keep it virus-free for at least four hours.

Is There A Light At The End Of The Tunnel?

The authorities are currently planning on rolling out limited pilot programmes to help the nightlife industry reopen safely.

While the details are still unclear, Jean is hopeful that Teo Heng would be allowed to participate in the trial.

“Just give us a chance and let us try, so we will have no regrets.”

She added that the future of Teo Heng is dependent on the final decision of the government.

The government has helped us a lot, but we hope that they can come up with a slightly earlier decision so we can prepare for the necessary.

Right now, we are still hanging on. We understand that the government’s hands are also tied — no one has handled this pandemic before, but the soonest answer will really save us a lot.

– Jean Teo, director of Teo Heng KTV

Featured Image Credit: Teo Heng KTV

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