Chapter 12

Franchising

McGraw-Hill/Irwin

Copyright 2012 The McGraw-Hill Companies, Inc., All Rights

Reserved.

Franchising

An entrepreneurial alliance between two organizations, the

franchisor and the franchisee

The focus of franchising is the same as entrepreneurship -Franchising offers a systematic and proven process to extract
maximum value from the opportunity.

A large-scale growth opportunity based on a partnership

rather than an individual effort

Example some of franchise in Viet Nam: Pho 24, Coffee Trung

Nguyen, Coop-food, T & T, Ninomax

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TRUNG NGUYEN COFFEE

Coffee Trung Nguyen was

established in 16/06/1996 in
Buon Me Thuot province, the
land of the Coffee.

The fist coffee shop was

opening in 1998 in Ho Chi Minh 2001.

In 2002, Company successes to franchising in Singapore and Japan.
2012, become one of the best brand coffee which the customer favorite
in Viet Nam.
Trung Nguyen coffee is one of the leading brand in Viet Nam and is
available in more than 60 countries around the world.

TRUNG NGUYEN COFFEE

Product:
Trung Nguyen Coffee Premium: Weasel Coffee, Coffee mink
Legendee, Creation 8 ,Coffee Roasters, letter I ( a
combination 4 nuts Arabica, Robusta, Excelsa, Catimor), the
letter S, House Blend

Group of filter products 1, 2, 3, 4, 5 and group of Innovative

product 1, 2, 3, 4, 5.

Coffee beans pure : Arabica coffee beans, Culi Robusta

coffee beans

G7 instant coffee: many kind of products.

Products

Franchise Opportunity Recognition

Primary Target Audience (PTA) identification

Brand name and image

Training and operational support

Field support, supply

Marketing, advertising, and promotion

Product purchase provision

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Assessing a Franchise

Franchise fee and royalties:

Franchise fee about 70 millions VND.

Received 3-5% net income total products sell.

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Training and Operational Support

Trung Nguyen will provide a training program for 3

weeks in Vietnam to purchase franchise partners
and their management staff (both theory and
practice).

This training program will help partners to prepare

before the opening, while the opening and
operating after opening shop.

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Field Support

Two forms:

Franchisors representative visits the franchisees location in

person.

At the first stage of start up, Trung Nguyen will support the
franchisees from 01 to 02 months.

Resident experts available for consultation at the corporate

headquarters. For the franchisees in provices, the staff will be
sent to the Trung Nguyens tranning center to get the training
courses.

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Marketing, Advertising, and Promotion

Funded and implemented at three levels

1. National
Franchisee

contributes a percentage of top-line sales to

the fund
Typically

controlled by the franchisor

2. Regional
Stores

within a set area contribute a percentage of topline sales to the fund

Controlled

by an area of dominant influence (ADI)

advertising cooperative

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Marketing, Advertising, and Promotion

Funded and implemented at three levels

3. Local

Franchisee makes direct expenditures on advertising

Controlled by franchisee but must be within guidelines set by

franchisor

At this time, Trung Nguyen coffee has not applied the advertising
fee. However, Trung Nguyen will request franchisees to contribute
a certain fee for the general advertising and promotion of the Trung
Nguyen coffee system.

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Supply

Establishes quality standards of raw materials or goods used in the operation

Approves

Approves suppliers

Approves specific branded products

Support:
1.

Franchisee is supported to buy machine, ingredient, material to produce

the special products of company.

2.

Franchisee is supplied a list of essential equipment to open a high class

coffee shop.

3.

Franchisee is supported by a team of supervisors to supervised during the

time the shop put into operation especially in new opening period.

4.

Franchisee is supported to train staff.

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12-13

FINANCING TRUNG NGUYEN DEVELOPMENT PLAN:

SOME BASIC OPTIONS

Fix cost

lease the real estate:usd 24.000/year

The franchise fee

:usd 1.000/year

Operation cost

:usd 6.000/year

Labor cost

:usd 52.000/year

Decoration

:usd 10.000/year

Equipment

:usd

TOTAL

8.000/year

:usd 101.000/year

Variable cost
Material cost

:usd

0,6/cup of coffee

:usd

1,1/cup

Sale price
Price

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FINANCING DEVELOPMENT PLAN: SOME BASIC OPTIONS

Break-event point
101.000/ 0,5 = 202.000 cup/year
=

16.800 cup/month

560 cup/day

Turnover at Break-event point

1,1 * 202.000= usd 223.000
Perspective turnover: usd 290.000

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TRUNG NGUYEN COFFEE : A GROWTH PERSPECTIVE

Trung nguyens sales per store = $290,000

Make assumptions regarding

Average ticket price (ATP)

Customer visits per year

Annual sales / APT = annual customer / visits per year

$290,000 / ATP = transactions / visits per year per customer = customer base

$1,1264 K

12 to 24

14.600

$1.5194K

12 to 24

10,800

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WHAT AMOUNT OF CAPITAL IS REQUIRED FOR THIS GROWTH?

$101.000 total capital required per store

/per year

How would you finance this plan???

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FINANCING DEVELOPMENT PLAN: SOME BASIC OPTIONS

Break-event point
101.000/ 0,5 = 202.000 cup/year
=

16.800 cup/month

560 cup/day

Turnover at Break-event point

1,1 * 202.000= usd 223.000 (1)
Perspective turnover:
Perspective profit:
101.000 *0,3= usd 30.300
Quantity of cups need to sale more:
30.300/0.5 = 60.600 cup/year
Turnover need to be profitable :
60.600*1,1 = usd 66.660 (2)
Perspective sale
=(1) + (2) = 223.000 + 66.660 = usd 289.660 =290.000
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Classification franchise.
Business feature:
1.

product distribution franchise

2.

business format franchise

Development activities feature:

3.

Master franchise

4.

Regional franchise

5.

Area development franchise

6.

single-unit franchise

Goods and services are allowed to franchise business as goods and services
are not on the list of goods and services banned from business:
7.

Weapons

8.

Drug

9.

Violate Intellectual Property

THANKS FOR YOUR ATTTENTION

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