And yet there is no copyright for recipes (Singapore markets in everything)

by on May 4, 2012 at 3:07 am in Uncategorized | Permalink

How much is a recipe worth?

About $1.8 million, according to the owner of Kay Lee Roast Meat Joint, who boosted the sale price of her Singapore eatery by that amount when she put it on the market this year.

Betty Kong and her husband want S$3.5 million ($2.8 million) for their 60-plastic-stool establishment, a premium over the S$1.25 million assessed value of the site. The price includes the property, their recipe for roasting duck, pork ribs and crispy pig skin as well as other Cantonese-style classics, plus three months of cooking lessons — and, presumably, the loyal clientele that lines up outside, sometimes for more than an hour.

The article is interesting throughout.  How about this bit?:

The Roast Meat Joint generates sales of around S$2,000 a day, she said, or S$620,000 annually, assuming it’s shut one day a week and three days for Lunar New Year holidays. Profit margin is 60 percent, according to her broker Raymond Lo at Knight Frank LLP. The asking price is 5.6 times annual sales, compared with the 1.1 multiple for the Singapore benchmark Straits Times Index. (FSSTI) It would take six years to recoup the recipe premium.

How about this paragraph, from a critic:

“Two million dollars for a recipe? Too much,” said Leong, known by patrons as Grandma or ‘Poh Poh,’ shaking her head in disbelief and counseling against giving up a line of work she herself has been doing for 53 years. “You will start developing dementia if you stop working.”

And this, from the woman selling the recipe:

Her knees are giving out, she said, and she can’t have replacement surgery because it takes four months to recover. Instead, she plans to start closing for two days a week, Mondays and Tuesdays. And to keep dreaming of an easy retirement — visiting her son in Australia, and eating someone else’s food for a change.

“Fish and chips in London, Kentucky Fried Chicken in America,” she mused, insisting on maintaining the fortitude that has helped her build her business. “I won’t haggle over the price. I will stick to it.”

The full article is here, and for the pointer I thank Alex Kowalski.

1 revver May 4, 2012 at 3:36 am

Makes sense when you think about it. A recipe can be likened to a process, making it difficult to reverse engineer by someone who doesn’t know what they’re doing. Often hinging on some “secret ingredient” in what would otherwise be a standard recipe.

This got me thinking: how difficult would it be to do some good ol’ fashioned industrial espionage? (hidden cameras in the kitchen, bribe workers etc.)

I’d hire bodyguards, Triads can be a nasty bunch.

2 rk4 May 6, 2012 at 1:20 pm

what, triads?

are we living in hong kong cinema?

3 david May 4, 2012 at 5:08 am

Less the recipe itself than a public testimonial from the former owner that the new owner is using the same recipe, I daresay.

The part which stretches plausibility is not so much that a hypothetical buyer wouldn’t benefit from the recipe, but that anyone in Singapore would shell out that much to labour in a hawker center. The next generation won’t want to join the family-owner-cook model, they’ll want to be able to employ immigrant cooks and such. The recipe alone is valuable – there are already Singaporean businesses which do nothing but sell prepared meats to younger hawkers, on the basis of a name someone’s grandfather may have made decades ago as a street hawker – but who’d shell out for both the recipe and the site? The business model is dead.

4 Brent Wheeler May 4, 2012 at 5:09 am

Is a recipe an example of an incomplete contract – and thus the value is tough to specify but the residual rights to control might be of enormous value… so the value of the site and the more typical valuation parameters are largely irrelevant?

5 londenio May 4, 2012 at 6:00 am

Recipes are like IP. IP that cannot be protected. The valuation seems high, because we have to assume that the next best thing is the best publicly available recipe, rather than no recipe at all.

6 joshua May 4, 2012 at 7:14 am

“And yet there is no copyright for recipes”

Don’t give them ideas.

7 Slocum May 4, 2012 at 7:46 am

This seems almost like a successful copyright enforcement of a ‘recipe’. The images are obviously not even close to identical, but the ‘ingredients’ (bus, Big Ben) and the ‘process’ (convert everything but the bus to B&W) are the same:

This seems like a very bad decision and, unfortunately, not very far from a possible similar bad decision about food recipes.

8 Cliff May 4, 2012 at 10:12 am

That is in the UK and has nothing to do with a recipe

9 Doc Merlin May 4, 2012 at 4:51 pm

no, but you can patent them.

10 Peter H May 4, 2012 at 6:23 pm

Yeah, but you have to show novelty, and a combination of standard cooking ingredients with standard cooking methods to produce food whose only new benefit is tasting better will not get around a rejection under 35 USC 103 for obviousness.

11 Ted May 4, 2012 at 7:52 am

Copyright is not the only way to protect intellectual property.

What I found most fascinating is that the proprietor dreams of eating KFC, an establishment absent from the Tyler Cowen’s Ethnic Dining Guide.

12 Urso May 4, 2012 at 10:16 am

Is Kentucky an ethnicity? I would think yes, but whether KFC is an accurate representation of mid-Appalachian ethnic food is dubious, to say the least.

13 Doc Merlin May 4, 2012 at 4:57 pm

The original recipe? Sure its Kentuckian not, but not mid-Appalachian. Louisville isn’t exactly Appalachia. Also, there is evidence that some of the recipe has changed to make it a lot cheaper. (The colonel himself is said to have gotten very angry about this after the buyout, wrt his gravy recipie)

14 affenkopf May 4, 2012 at 12:33 pm

I think the dream was not about eating at KFC (there are more than enough of these in Singapore) but of traveling.

15 careless May 4, 2012 at 3:02 pm

Not to mention the fact that a singaporean would be very unlikely to rate American KFC favorably to the ones back home.

I can’t speak for local tastes on fish and chips in Singapore and London, but that’s another thing Singapore has plenty of, IiRC, so I’d say affenkopf is right.

16 Lou May 4, 2012 at 9:34 am

I can’t believe no one has pointed this out yet on an economics site, but the business, including the property, recipes, and all other assets, is worth the present value of the cash flow it generates. Separating the value of the facility, recipe, oven, light fixtures etc. is pointless.

If the margin is as high as they say it is, and that approximates their cash flow in perpetuity, then the asking price is high (implies about 10.5% discount rate, close to the historic average return for US large cap stocks), but that’s to be expected in a negotiation.

17 Inspector Fu May 4, 2012 at 9:47 am

Auntie wants too much. These recipes are common in Singapore. Cannot make it lah!

18 Loweeel May 4, 2012 at 10:59 am

Not copyright, true, but it seems like it would be protectable as a trade secret under the various state laws (most of which are based on the Uniform Trade Secrets Act).

That’s the tradeoff — in most instances, patent/copyright vs trade secret, not patent/copyright vs. public domain. At least, for innovations that aren’t disclosed in what’s sold or can’t be easily reverse-engineered, people will choose something that offers protection, and financial rewards (trade secret) over nothing (the public domain). The problem with pushing people towards trade secret, however, is that unlike the patent system which incentivizes disclosure (with publication, and the written description/best mode/enablement requirements), trade secret prevents others from “standing on the shoulders of giants”.

I’m not saying that this sort of thing should be copyrightable (and you’d have a serious enforcement problem even if it were), but it pretty convincingly illustrates how people resort to trade secrets to protect their IP in the absence of viable alternatives.

19 Cliff May 4, 2012 at 9:23 pm

If it really can be kept secret, a lot of people would choose trade secret protection anyway because it lasts forever and is “self-enforcing” for the most part.

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