Developing your own Franchise - A framework for Vietnamese Franchisors Nguyễn Quang Tiệp Khoa Quản trị Kinh doanh Luận văn Thạc sĩ ngành: Kinh doanh quản lý; Mã số: 60 34 05 Người hướng dẫn: TS Phạm Quý Long, ThS Hà Nguyên Năm bảo vệ: 2010 Keywords: Quản lý tiếp thị; Thương hiệu; Quản trị kinh doanh Content ACKNOWLEDGEMENT i ABSTRACT ii TOM TAT iv TABLE OF CONTENTS vii LIST OF TABLES x LIST OF FIGURES xi LIST OF ABBREVIATIONS xii CHAPTER 1: FRANCHISING OVERVIEW Franchising definition Types of Franchising 1.2.1 Traditional franchising 1.2.2 Business-format franchising 1.2.3 The differences between traditional franchising & business-format franchising 1.3 Reasons for being a franchisor 10 1.4 Industries suitable for franchising 12 1.1 1.2 i Common success factors for franchising 15 A successful prototype location (or chain of stores) 15 A strong management team 16 Sufficient capitalization 17 A distinctive and protected trade identity 18 Proprietary and proven methods of operation and management 19 A demonstrated market demand for the product and services 20 Comprehensive training programs for franchisees 21 A set of carefully developed uniform site selection criteria and architectural standards 23 1.5.9 A franchisee profile and screening system 24 1.5.10 An effective system of reporting and record keeping 24 1.5.11 Field support staff 25 1.5.12 Research and development capabilities 25 1.5.13 National, regional, and local advertising, marketing, and public relations programs 25 1.6 Success factors applied to Jollibee case 26 1.6.1 Corporate profile: 27 1.6.2 Analyze the success of JFC by key franchising success factors 27 1.6.2.1 Successful prototype: Good 27 1.6.2.2 Management team: Excellent 28 1.6.2.3 Capitalization: Good 28 1.6.2.4 Trade identity: Good 28 1.6.2.5 Methods of operation and management: Good 29 1.6.2.6 Market demand: Excellent 30 1.6.2.7 Training: Good 31 1.6.2.8 Site selection criteria: Good 31 1.6.2.9 Franchisee screening system: Good 31 1.6.2.10 Reporting and record keeping system 32 1.6.2.11 Field support staff: Good 32 1.6.2.12 R&D: Good 33 1.6.2.13 Marketing & Advertising: Good 34 CHAPTER 2: FRANCHISING IN VIETNAM 35 1.5 1.5.1 1.5.2 1.5.3 1.5.4 1.5.5 1.5.6 1.5.7 1.5.8 2.1 An overview of Vietnam franchising market 35 2.2 Franchising environment in Vietnam 39 2.2.1 Political environment 40 2.2.2 Legal environment 42 2.2.3 Economic environment 45 2.2.4 Financial environment 46 2.2.5 Social environment 48 2.3 Challenges to opening a new franchise system in Vietnam 49 2.3.1 Lack of experience 53 ii Insufficient franchising consultancy 54 CHAPTER 3: FRAMEWORK FOR BUILDING A FRANCHISE SYSTEM 56 2.3.2 3.1 Framework introduction 56 3.2 Concept stage 57 3.2.1 Industry assessment 57 3.2.1.1 Production and distribution occur in limited geographic markets 57 3.2.1.2 Physical locations are helpful to serving customers 59 3.2.1.3 Local market knowledge is important to performance 59 3.2.1.4 Brand name reputation is a valuable competitive advantage 3.2.1.5 The level of standardization and codification of the process of creating and delivering the product or service is high 60 3.2.1.6 The operation is labor intensive 61 3.2.1.7 Outlets are not terribly costly to establish 62 3.2.2 Concept assessment 62 3.2.2.1 Valuable system to sell 63 3.2.2.2 Transferable concept 63 3.2.2.3 Large pool ofpotential franchisees 65 3.3 Pilot stage 67 3.3.1 Site selection 67 3.3.1.1 Density of the primary target audience 68 3.3.1.2 Traffic volume 68 3.3.1.3 Traffic patterns 68 3.3.1.4 Site visibility 69 3.3.1.5 Traffic flow to the site 69 3.3.1.6 Complementary versus contracdictory neighbors 69 3.3.2 Trade identity development & protection 72 3.3.3 Operations manual 72 3.3.3.1 Guidelines for preparation of the manual 72 3.3.3.2 Suggested outline for the operations manual of a franchisor 74 3.4 Expansion stage 77 3.4.1 Pricing franchise 77 3.4.1.1 Franchise fee 77 References 60 Andrew J Sherman, “Franchising & Licensing - Two powerful ways to grow your business in any economy”, American Management Association (AMACOM), 2004 Adapted from data contained in R Bond, “Bond’s Franchise Guide”, 15th Annual Edition, CA: Sourcebook Publications, Oakland 2004 Jane R Plitt, “Martha Mathilda Harper and the American dream”, Syracuse Scott A Shane, “From Ice cream to the Internet - Using franchising to drive the growth and profits of your business”, Pearson Education, Inc 2005 D Williams, “Why Do Entrepreneurs Become Franchisees? An Empirical Analysis of Organizational Choice”, Journal of Business Venturing, 1998 Khanna, Tarun, and Krishna G Palepu, “Emerging Giants: Building World- Class Companies in Developing Countries”, Harvard Business Review, 2006 Kleinfelder Philipp, “American Influence on Filipino Food Culture - A Case Study”, 2004 Philip M Parker, “2003-2008 World outlook for franchising”, copyright ICON group Ltd., 2003 Stephen Spinelli, Jr., Robert M Rosenberg, Sue Birley, “Franchising - pathway to wealth creation”, Prentice Hall, 2004 Thomas S Dicke, “Franchising in the America: The development of a business method, 1840 - 1980”, Chapel Hill, NC: University of North Carolina Press, 1992 10 An introduction to Franchising, IFA Educational Foundation 2001 11 American Heritage Dictionary of the English Language, Fourth Edition, Houghton Mifflin Company, Boston 2000 12 Franchising in the Economy, United States Department of Commerce (USDOC), 1988 13 “Opportunities for Malaysian franchises in Vietnam” seminar, Malaysian Franchising Association, Kuala Lumpur, Oct 2010 14 The Profile of Franchising, International Franchise Association 3/2007 15 Vietnam Civil law, clause 755, 2005 16 Vietnam Commercial law 2005 17 Circular 1254/BKHCN/1998 guiding for Decree 45/CP/1998 on technology transferring, was franchising mentioned in session 4.1.1 18 Decree 11/2005/NB-CP on transferring of technology 19 Decree 35/2006/NB-CP giving detail explanations for Commercial Law regarding franchising 20 Circular 09/2006/TT-BTM (dated 25/5/2006) 21 University Press, New York 22 Economic development magazine, issue 219, January 2009 23 General Statistics Office 24 Saigon Economic Times Magazine 25 The CIA World Fact Book 2010 26 Centre for Corporate information, Ministry for Planning and Investment 27 FIA - MPI Vietnam: http://fia.mpi.gov.vn 28 Federal Trade Commission: http://www.ftc.gov 29 JFC official website: www.jollibee.com.ph 30 Nguoi dai bieu nhan dan newspaper: http://www.nguoidaibieu.com.vn 31 Tuoi Tre newspaper: http://tuoitre.vn 32 VOV news: http://vovnews.vn 33 http://www.vietnamfranchise.wordpress.com ... 15th Annual Edition, CA: Sourcebook Publications, Oakland 2004 Jane R Plitt, “Martha Mathilda Harper and the American dream”, Syracuse Scott A Shane, “From Ice cream to the Internet - Using franchising... Sherman, “Franchising & Licensing - Two powerful ways to grow your business in any economy”, American Management Association (AMACOM), 2004 Adapted from data contained in R Bond, “Bond’s Franchise. .. United States Department of Commerce (USDOC), 1988 13 “Opportunities for Malaysian franchises in Vietnam” seminar, Malaysian Franchising Association, Kuala Lumpur, Oct 2010 14 The Profile of Franchising,