ASSSIGNMENT 1: CASE STUDYTABLE OF CONTENTSCompany Overview............................................................................................................................................ 2

Company Profile............................................................................................................................................. 2

Nature of the business............................................................................................................................ 2

Vision Statement....................................................................................................................................... 3

Mission........................................................................................................................................................... 3

Objectives..................................................................................................................................................... 3

Franchising............................................................................................................................................................ 3

What is Franchising................................................................................................................................. 4

Why is Franchising?................................................................................................................................. 4

Benefits............................................................................................................................................................... 5

Challenges......................................................................................................................................................... 7

Conclusion.............................................................................................................................................................. 7

References.............................................................................................................................................................. 8

COMPANY OVERVIEWCOMPANY PROFILE

Startup Coffee

Address: 64 Nguyen Dinh Chieu, Da Kao Ward, District 1, Ho Chi Minh City

Telephone: +84 8 3910 4443

Website: http://www.startupcoffee.vn/

E-mail: chewyjuniorvn@gmail.com

Founder: Mr. Mai Truong Giang

Nature of the businessMr. Mai Truong Giang – Founder and CEO of Startup Coffee Vietnam – has had

the ambition in providing a coffee chain stores in Vietnam that offers the professional

business environment to help inspiring the new and creative startup ideas from the

young people who come to the coffee shops everyday. Therefore, in order to attract

young customers who still do not have optimistic financial status, Startup Coffee

Vietnam has diversified range of high standard products but charged half price in

comparison with other direct competitors in the same position (Startup Coffee Vietnam,

2014). Moreover, Startup Coffee Vietnam wants to create space for young people in

Vietnam not only to enjoy the hygiene and tasty coffee but also a place to discuss

business and initiate new startup ideas. The products of Startup Coffee Vietnam are

various in food and beverage from the traditional Vietnam black coffee to sandwiches,

rice burger, cakes and so on. The company was established with the registered name of

Khuong Viet Jsc Ltd which focuses in developing the business in franchise models.

Startup Coffee Vietnam is the brandnam for the product of coffee shops.

Vision StatementBecoming the leading company in offering the modern coffee chain stores for

creating space to develop innovative startup business ideas in Vietnam. According to

Startup Coffee Vietnam (2014), in order to achieve such vision, Startup Coffee Vietnam

needs to achieve the three main aspects:

1. The staffs are trained carefully with high standard in order to directly deliver

the best service.

2. The food and beverage materials are controlled strictly from the value chain

to ensure the standard of food hygiene.

3. Startup Coffee offers high standard products with affordable price for

students and young people, who always come up with new creative startup

ideas.

Mission Startup Coffee – as the name states the mission of this brand – was born in order

to bring a new concept of coffee shop into Vietnam (Startup Coffee Vietnam, 2014).

Startup Coffee wants to share the knowledge in business experience to young people

who are looking for startup opportunities through franchising method. Startup Coffee,

therefore, wishes to create more spaces for young people to come and share their

business ideas as well as efficient social networking.

ObjectivesThe objectives of Startup Coffee include:

Franchised 15 shops in the next three years – a mean of 05 shops per year.

After three years, the franchising ratio is hoped to increase 40% per year into

an average of 07 shops being franchised per year.

Increasing the number of loyalty customers of 8% per quarter per year. After

five years, loyalty customers ratio increases 10% per quarter.

Increasing the sale revenue to 9% per year in the next five years.

Ensuring 100% of food and beverage materials are ethically and hygienically

managed after five years.

FRANCHISINGWhat is Franchising?According to Robbins & Coulter (2012), franchising is defined as an approach

involving one organisation giving another organisation the rights to use its brand name,

technology or product specification in return for a lump sum payment or a fee usually

based on sale. Franchise holders will take account into specific activities such as

manufacturing, distribution and selling while the franchiser is responsible for the brand

name, marketing and conducts appropriate training to ensure the franchise holders can

deliver the similar quality with the franchiser (Johnson et al., 2007). There are three

types of franchising (Gale, 2009):

Business Format Franchising: franchisors allows someone to market

products or services and using their business name or trademark, in return

for fess and royalties (e.g. McDonald’s, Subway, KFC, and so on).

Product Distribution Franchising: a limited franchise where a manufacturer

grants another party a license to sell goods or products being produced by its

factory (Shell, BP, Coca-Cola, etc.).

Conversion Franchising: a small business independent business is brought

with the chance to affiliate with a franchise organisation. For example, a

successful independent hairdresser joins with Tony & Guy brand name.

Why is Franchising?According to Bygrave & Zacharakis (2011), franchising is a very strong growth

strategy if business owners have a replicable business model. Therefore, a small startup

business with simple operation details can help augmenting in replicating the business

model. Therefore, in order to enhancing the franchising process, the business model

should be well established and proven in which the franchisor – Startup Coffee Vietnam

– have to work out the process of how to open and operate business unit (Bygrave &

Zacharakis, 2011). The business model helps to describe the rational of how an

organisation or firm creates, delivers and captures values (Ostawalder & Pigneur,

2010). Also, according to Ostawalder & Pigneur (2010), a business model canvas can be

used in order to generate an appropriate model for an entrepreneur through the

analysis of nine fields: customer segments, value proposition, customer relationship,

channels, key activities, key partners, key resources, cost structure and revenue stream.

Figure 1. Business Model Canvas (Ostawalder & Pigneur, 2010)

Apart from the proper business model generation, the control process also plays

an essential role in franchising. Well-monitored process will help Startup Coffee to

make sure that franchisees are reporting exactly the revenues from franchising

royalties (Bygrave & Zacharakis, 2011).

Additionally, beside the fact that franchising is a strong growth strategy, it is also

very effective if an organisation competes in an industry that is growing and is expected

to grow significantly (David, 2012). The coffee consumption of Vietnamese people

increased more than 60% between 2008 and 2011 (Bloomberg, 2013). Moreover,

according to Canada International Market Bureau (2013), the potential significant

development of coffee shops in Vietnam in 2015 likely reaches US$ 3,053.3 millions and

this value in delivery/takeaway coffee is US$ 34.5 millions. Regarding to customer

segmentation, Business Monitor International (2014) stated that Vietnam has growing

lucrative young population in large cities and those customers are willing to spend

more money for higher standard quality of food and beverage services. Therefore, this

industry in Vietnam is still growing tremendously and creating profitable opportunity

for Startup Coffee to operate the franchising business model.

BENEFITS

According to Gale (2009), one of the most important benefits from franchising is

that it allows the business to expand rapidly beyond its original owners since it offers

mutual advantages to both franchisor – in this case, Startup Coffee Vietnam – and

franchisees. Startup Coffee can gain fast and well-monitored distribution of company’s

products without incurring the high expenses for building, constructing and operating

its own outlets because those costs will be originated from the franchisees’ capital.

Hence, Startup Coffee may save available capital to spend for products expansion or

enhance the advertising and marketing campaigns (Pride et al., 2012). Moreover, with

the more franchises are being established from the rapid expansion, Startup Coffee can

reach the economies of scale (Gale, 2009). Economies of scale is the property whereby

long-run average total cost falls as the quantity of output increases (Mankiw, 2012).

This is very helpful for Startup Coffee Vietnam to diversify their products range after

years of operation. Not only products diversity, with the franchising model, Startup

Coffee Vietnam can also diversify the revenue from business operation. Two added new

revenue streams would be (Bygrave & Zacharakis, 2011):

1. Royalty fee/franchising fee

2. Additional revenue comes from the materials and supplies purchasing of

franchisees originated from franchisors.

For franchisor, franchising provides “an opportunity for a firm to establish a

presence in countries where the population or per capita spending is not sufficient for a

major expansion effort” (Wheelen & Hunger, 2012). Startup Coffee Vietnam may find it

would be totally difficult for penetrating developed country such as United States with

the appearance of McDonald’s and SUBWAY – those organisations have a total of more

than 33,000 stores (Bygrave & Zacharakis, 2011). However, with a developing and

newly-opening country such as Myanmar, Cambodia, Laos; Startup Coffee can be able to

find a potential local franchisee to gain knowledge about those markets.

In another hand, the franchisees will have opportunities to gain the proven

business. In particular, concerning to business format franchising, the franchisees can

get particular technology and business transfer. Moreover, franchisees may gain advice,

solutions and guidances from franchisors for any arising problem. According to Pride et

al. (2012), franchisees are sole proprietorship in most cases; therefore, with such

proper and proven business transfer and guidance, they are highly motivated to do the

business and to succeed. As a result, the franchisor can gain significant benefit from

such high motivation.

Another advantage from business format franchising for franchisees is that

franchisees do not have to spend for advertising and promotional programs since they

are usually sponsored by franchisors.

CHALLENGESThe franchisees cannot have complete independence from franchisors although

they can operate their business on their own (Czinkotta & Ronkainen, 2007).

Franchisees are restricted to the common business procedures which are set forth by

the franchise holder concerning to the contract and agreement. The procedures and

restriction would limit the franchisee to a range of offered products or services with

certain pricing and geographic strategy. Particularly, this can seriously put a

tremendous effect toward the innovation of franchisees and the products cannot be

diversified to adapt with different markets. For franchisor, this could be also a big

disadvantage since they cannot make prompt implementation toward particular market

if franchisees cannot conduct products’ experiment to research the customers’ taste.

Beside the brand purchasing fee, franchisees also have to pay the royalties fees

and other advertising or promotional fees if needed. Therefore, this could cause

franchisees a big problem in a very first day of operation if they cannot balance between

the expenses and the generated revenues.

Another significant risk could be originated from communication crisis of the

brand. Since the franchise is used globally; therefore, if there is a bad conduct of other

store in some place around the world and it becomes a communication scandal or crisis,

other franchisees would be affected as well.

CONCLUSIONIn conclusion, although there may be some minor disadvantages existed, the

business format franchising is still the best approach for Startup Coffee Vietnam in

planning and implementing growth strategy. The organisation can have the rapid

expansion because franchisees’ capital help to fund new business development. From

that point, it is undoubtedly that business owner can gain the economies of scale. The

franchising is also a good business approach in case Startup Coffee Vietnam may want

to go oversea for penetrating international market. In another hand, franchisees also

have mutual benefits from the appropriate growth of franchisor to be highly motivated

in pursuing business success.

REFERENCES1. Bloomberg, 2013. Starbucks Vietnam Debut Challenged by Light Coffee Image.

[Online] Available at:

http://www.bloomberg.com/news/2013-01-13/starbucks-vietnam-debut-

challenged-by-light-coffee-image.html [Accessed 18 October 2014].

2. Bygrave, W.D. & Zacharakis, A., 2011. Entrepreneurship 2nd Edition. New Jersey:

John Wiley & Sons, Inc.

3. Canada International Market Bureau, 2013. Market Analysis Report 2012 -

Foodservice: Vietnam. Agriculture and Agri-Food Canada.

4. Czinkotta, M.R. & Ronkainen, I.A., 2007. International Marketing. 8th ed.

Thomson South-Western.

5. Daft, R.L., 2010. Management. 9th ed. Mason: South-Western Cengage Learning.

6. David, F.R., 2012. Strategic Management: Concepts and Cases (13th Edition). New

Jersey: Pearson Prentice Hall.

7. Gale, 2009. Encyclopedia of Management. 6th ed. Cengage Learning.

8. Johnson, G., Scholes, K. & Whittington, R., 2007. Exploring Corporate Strategy. 8th

ed. Prentice Hall.

9. Kotler, P. & Keller, K.L., 2012. Marketing Management. 14th ed. New Jersey:

Pearson Education Inc.

10. Mankiw, N.G., 2012. Principles of Microeconomics. Mason: South-Western

Cengage Learning.

11. Ostawalder, A. & Pigneur, Y., 2010. Business Model Generation. John Wiley & Sons

Inc.

12. Pride, W.M., Hughes, R.J. & Kapoor, J.R., 2012. Foundations of Business. 3rd ed.

Cengage Learning.

13. Robbins, S.P. & Coulter, M., 2012. Management. 11th ed. New Jersey: Prentice

Hall.

14. Startup Coffee Vietnam, 2014. Startup Coffee Vietnam: An Introduction. [Online]

Available at: http://www.startupcoffee.vn/ [Accessed 19 October 2014].

15. Wheelen, T.L. & Hunger, J.D., 2012. Strategic Management and Business Policy:

Toward Global Sustainability. 13th ed. New Jersey: Prentice Hall.

BIBLIOGRAPHY1. Bloomberg, 2013. Starbucks Vietnam Debut Challenged by Light Coffee Image.

[Online] Available at:

http://www.bloomberg.com/news/2013-01-13/starbucks-vietnam-debut-

challenged-by-light-coffee-image.html [Accessed 18 October 2014].

2. Bygrave, W.D. & Zacharakis, A., 2011. Entrepreneurship 2nd Edition. New Jersey:

John Wiley & Sons, Inc.

3. Canada International Market Bureau, 2013. Market Analysis Report 2012 -

Foodservice: Vietnam. Agriculture and Agri-Food Canada.

4. Cateora, P.R., Gilly, M.C. & Graham, J.L., 2011. International Marketing. 15th ed.

New York: The McGraw-Hill.

5. Czinkotta, M.R. & Ronkainen, I.A., 2007. International Marketing. 8th ed.

Thomson South-Western.

6. Czinkotta, M.R., Ronkainen, I.A. & Moffett, M.H., 2011. International Business. 8th

ed. John Wiley & Sons, Inc.

7. Daft, R.L., 2010. Management. 9th ed. Mason: South-Western Cengage Learning.

8. David, F.R., 2012. Strategic Management: Concepts and Cases (13th Edition). New

Jersey: Pearson Prentice Hall.

9. Gale, 2009. Encyclopedia of Management. 6th ed. Cengage Learning.

10. Johnson, G., Scholes, K. & Whittington, R., 2007. Exploring Corporate Strategy. 8th

ed. Prentice Hall.

11. Kotler, P. & Keller, K.L., 2012. Marketing Management. 14th ed. New Jersey:

Pearson Education Inc.

12. Mankiw, N.G., 2012. Principles of Microeconomics. Mason: South-Western

Cengage Learning.

13. Meyer, K.E., Tran, Y.T.T. & Nguyen, H.V., 2005. Doing Business in Vietnam. Center

for East European Studies.

14. Ostawalder, A. & Pigneur, Y., 2010. Business Model Generation. John Wiley & Sons

Inc.

15. Pride, W.M., Hughes, R.J. & Kapoor, J.R., 2012. Foundations of Business. 3rd ed.

Cengage Learning.

16. Robbins, S.P. & Coulter, M., 2012. Management. 11th ed. New Jersey: Prentice

Hall.

17. Startup Coffee Vietnam, 2014. Startup Coffee Vietnam: An Introduction. [Online]

Available at: http://www.startupcoffee.vn/ [Accessed 19 October 2014].

18. Ward, M. & Huong, N.T., 2014. Vietnam Coffeee Annual - May 2014. USDA Foreign

Agricultural Service.

19. Wheelen, T.L. & Hunger, J.D., 2012. Strategic Management and Business Policy:

Toward Global Sustainability. 13th ed. New Jersey: Prentice Hall.