Franchise Business Model Case of Taiwan Takeout Beverage

SUMMARY:

At the present, the model of franchise business is doing very well in Vietnam, especially in beverage field. Within few years there are hundreds of Taiwan Takeout Beverage outlets spreading in two big city (Hanoi and Ho Chi Minh city) in Vietnam. The famous brands are Gong Cha, Bobabop, Ding Tea, TocoToco, Azteen, Bumba, Tien Huong, etc. According to Mr. Xuan Trung (Representative of Ipos.vn) the number of Taiwanese milk tea shops have increased 60% the first 6 months in 2017 and there is no sign of slowing down. In this article, author discusses the pros and cons of doing franchise business in Vietnam.

Keywords: Franchise business model, Franchisee, Franchisor, Takeout Beverage, outlets, Milk Tea.

a) What is Franchise?

A franchise typically involves the granting by one party (a franchiser) to another party (a franchisee) the right to carry on a particular name or trade mark, according to an identified system, usually within a territory or at a location, for an agreed upon term. The franchisee is granted a franchise license to use the franchise companys trademarks, systems, signage, software, and other proprietary tools and systems in accordance with the guidelines in the franchise contract.

Not only must you run the business according to the operations manual and the franchise contract, but you must pay them an upfront franchise fee (license fee), and ongoing royalties.

As in the case of Gong Cha (Taiwan Takeout Beverage) Basic fees include: Franchise fee: $30,000; Royalty fee: 6% sales; Marketing fee: 2% sales. Total initial investment is approximately $220K to $450K. For the less famous brand like TocoToco, Frachise fee: 7,000$, Royal fee: 6%, Consultant fee: 1,250$.

b) Benefits of joining franchise

Advantages of franchise business model: Both seller and buyer enjoy benefits of franchising. For franchiser, the primary benefit is the ability to raise capital in the fastest manner by getting franchise fees to expand the brand rapidly. Franchiser cannot do it if they raise capital from bank loans or from investors. The initial franchise fee and ongoing royalties help franchisers to develop their brand that they do not have to bear the burden of paying bank loans or interest. All of the money collected from franchisees is spent for operations at corporate headquarters, train and support franchisees, market and advertise the brand, improve the quality of goods or services, and build the brand in the marketplace.

For franchisees, they enjoy these below benefits: a higher chance of success than in a sole proprietorship; shorter time to opening; initial training and ongoing support; assistance in finding an optimal site; the selling power of a known brand; lower costs through group purchasing; use of an established business model; national and regional advertising campaigns; customer lead generation through websites and centralized call centers; and a network of peers (fellow franchisees) to provide advice and moral support through a company intranet, annual conferences, and franchisee associations; and, increasingly, assistance with securing funding.

II. Popular Franchise Business in Vietnam – Taiwan Takeout Beverage

In recent years, there is an increasing demand from consumers for natural products. Beverage manufacturers usually highlight “natural extracts” in the product ingredients to distinguish their new products to others. And in the non-alcoholic beverage sector, the most common positioning used by producers to launch their new products in 2009 was “free from artificial additives”.

Capturing the demand of customers for healthy drinking, Taiwanese Milk Tea Brands such as Sunflowers, BoBapop…, enters Vietnam in 2000 and created a trend and habit of drinking milk tea in young consumers in Vietnam. However, the favorite of drinking Taiwanese milk tea was fading soon because of the bad quality of tea, milk and toppings causing health concerns of consuming the drink.

It took several years for Taiwan Milk Tea Brands entered Vietnam again, this time, most of them have good reputation in their hometown. These are Gong Cha, Royalty, Uncle Tea… They have spent a lot for promotion, advertisement, shop decorations to promote their brand. Especially, they take advantage of social networks to promote their brand and their new outlets so successfully that whenever each new outlet coming out, customers queue in a long line in front of the outlet to buy their drink.

These brands allow customers make their own tea by mixing of many kind of tea with variety of topping flavors. So, young customers can experience many kinds of take with many flavors.

Here is data of outlet number in Vietnam.

Ding Tea can be considered the early comer or the oldest guy in this market, entered Vietnam in 2013, it has now more than 80 outlets. It attracts more investors because of its low franchise fees and low set up fees.

Gong Cha, Hong Kong-based Taiwanese milk tea chain, plans to boost franchise this year, after building a strong foothold in Ho Chi Minh City with 10 outlets. Now, Gong Cha is opening two stores in Hanoi and one in Danang, with more to come in other cities, including Haiphong.

Bobapop is considered Vietnam brand, but 100% ingredients imported from Taiwan. It is also very popular thank to it low franchise fees.

And more big names have just joined the segment – Khoi thé, Royalty, Queeny, Chachago, Sharetea and Goky.

III. Pros and cons of doing franchise business in Vietnam – Taiwan Takeout Beverage

Pros: Many trends indicate that the Vietnam market is prospect market for franchises.

Drink tea is good for health. Many people nowadays care more about their health and about their food intake. Taiwan products are considered good and healthy, especially tea – Tea from Taiwan is not only well known in Asian countries but also all over the world. In addition, the benefits of drinking tea are proven by many scientists for decades. Therefore, it is easy to launch Tea business - not only in Vietnam but also anywhere else in the world.

Its look cool when walking around with a bottle of tea. The large group of young and upper-class consumers ready spend for tasty foods or drinks and for better services. They also want to show their fashionable styles by joining the community of drinking high class and brand name tea. For example, its look fashionable and stylish by holding a bottle of expensive Taiwan-branded tea like KOI thé and walking around with it.

Taiwan franchises bring new and modern business systems. Successful Taiwan franchises bring a complete business system, management processes, job training, and the potential for healthy and reproducible bottom line margins. Takeaway Beverage franchises in Vietnam thus have high potential to succeed.

Cons: Foreign franchises in general, and Taiwan takeaway beverage in specific, must also overcome problems that are specific to the Vietnam market.

Intellectual property protection is uneven. Weak intellectual property enforcement and an inadequate legal framework are key reasons early foreign brands opened as company-owned stores. For example, there are many fake names like Gong Cha Tea, Koi Thé, Royal Tea… already appeared in Vietnam.

Local managers lack strong management skills. Franchises in Vietnam often experience difficulties finding local managers who understand how to run a business. Training costs are high and so is the rate at which good employees quit to take higher paying jobs after they receive business training.

It is hard to find and evaluate candidates. The most important part of franchising a brand is finding, evaluating, and signing a qualified company as the local, regional, or country franchisee. Due diligence resources to fully check on a local company are improving, but it is still difficult to find companies with the management skills, business track record, and capital to acquire and properly develop a franchise business.

Unclear and complex of business regulations. Unclear and changing regulations have created uncertainty for foreign franchisers that want to enter Vietnam. There are many requirements relating to food and beverage business such as Certificate of Food Safety Conditions, Documents acknowledging satisfaction of fire prevention, Commitment on environment protection; Construction or Renovation License; License for Advertisement Band… It takes a lot of time for franchisors or franchisees to have business license.

Product adaptation in new market. Some franchises face difficulties in Vietnam when they do not adapt-or are slow to adapt-to the needs and tastes of Vietnam consumers. For example, locations, designs, tastes and flavor etc... should be researched in advance before deciding in location, designation and menu.

IV. Conclusion

Even though there are many challenges in establishing franchise business in Vietnam, but with a large number of young and wealthy consumers, especially most of them use social network to look for new products and services that will be a good base to set up business. Furthermore, Vietnamese government always support and encourage foreign investors to invest in Vietnam. Therefore, Vietnam definitely a good market not only for Western companies but also for any companies interested in Vietnam market.

REFERENCES:

1. A Study of Taiwan Takeout Beverage Franchise Chain Business Performance Model - Jiung-Bin Chin.

2. Department of Planning and Investment - HoChiMinh city Vietnam.

3. http://tratoco.com/hinh-thuc-dieu-kien-va-bieu-phi-chuyen-nhuong-thuong-hieu-tocotoco-franchise-toco-toco/

4. http://gongcha.com.vn/

MÔ HÌNH KINH DOANH NHƯỢNG QUYỀN:

TRƯỜNG HỢP NƯỚC GIẢI KHÁT MANG ĐI CỦA ĐÀI LOAN

TS. NGUYỄN HỒNG ANH

Trường Đại học Quốc tế - Đại học Quốc gia TP. Hồ Chí Minh

TÓM TẮT:

Hiện nay, mô hình kinh doanh nhượng quyền đang phát triển rất mạnh ở Việt Nam, đặc biệt là trong lĩnh vực đồ uống. Chỉ trong vài năm, số lượng cửa hàng Trà sữa Đài Loan mọc lên ngày càng nhiều ở hai thành phố lớn là Hà Nội và TP. Hồ Chí Minh, với các thương hiệu nổi tiếng như Gong Cha, Bobubop, Ding Tea, TocoToco... Theo một đại diện của website Ipos.vn, số lượng cửa hàng trà sữa đầu năm 2017 tăng 60% so với cùng kỳ năm 2016 và không có dấu hiệu chững lại. Trong bài viết này, tác giả phân tích những cơ hội và khó khăn khi kinh doanh mô hình nhượng quyền trong lĩnh vực đồ uống tại Việt Nam.

Từ khóa: Mô hình kinh doanh nhượng quyền, bên nhận nhượng quyền, bên nhượng quyền, đồ uống mang đi, các cửa hàng, trà sữa.