Franchising for startups: Should or Shouldn't?

Franchising helps young people starting a business easily establish a business model quickly and save investment capital, have the opportunity to use a proven brand, system and process, helping to minimize business risks; receive support in management, marketing and training from the franchisor, helping to improve operational efficiency; still retain ownership and decision-making on their business operations.

Coffee franchise attracts young entrepreneurs

According to Mr. Dinh Hoai Tam (born in 1988, residing in Tan An City, Long An Province), who has been developing 3 business models (Trung Nguyen E-Coffee, Ma Hai Fish Cake Bread, CP FIVE STAR Fried Chicken) in the form of franchising, said that the advantage of the franchise model is that it does not require time and effort to build a brand and can use the name of a big brand, inherit the prestige, wide brand recognition, and systematic advertising of that brand. Quality products and operating systems are standardized. The franchisor regularly advertises, researches and launches new products to compete with other competitors. When franchising, the business person is well-trained, has a professional working style and receives support from the franchisor; the source of raw materials is stable and the price is reasonable.

“For a small and medium-sized coffee shop franchise, the total cost including formula, products, and brand is 260 million VND, not including the premises. As a franchisee, I see that this model has many options, the opportunity to access many new models and has a stable customer base without spending much time to approach,...” - Mr. Tam said.

“At first, when preparing to open a shop, I also learned about franchised business and realized that the disadvantage is that the franchisor can violate the distance of the franchised stores, arbitrarily adjust the selling price of products, the price of input materials unreasonably,... greatly affecting the revenue and profit of the franchisor, making it difficult to promote creativity due to doing business within the framework of the regulations in the franchise contract, may be imposed with inappropriate technical or management systems, the initial investment can be of great value,...” - Ms. Tran Thi Hanh Dung (owner of a coffee shop in Tan An City) shared the reason why she did not choose franchised business but learned and opened her own shop because of the disadvantages of this model.

Many people choose to start their own business to avoid being tied down by brands, ingredients, etc.

Besides, some young people still want to build their own brand, freely creating business models according to their own ideas. Ms. Thanh Ha (owner of a sandwich cart on Tra Quy Binh Street, Ward 2, Tan An City) confided: "There are also many brands that invite me to develop a sandwich cart franchise, but I want to do it my own way, so I researched the price of the cart, the source of the sandwich, the recipe, etc. I found that opening my own business would be more comfortable, without being bound by the brand or ingredients, etc."

When it comes to KDNQ, many people think of big brands: Highlands coffee, Phuc Long, Passio coffee, Pizza Hut, KFC, Jollibee,... However, for these brands, the initial capital outlay is quite large, not suitable for young people to choose as a startup business model.

Mr. Tran Tuan Hop, with more than 5 years of experience as manager of Highlands Coffee (District 11 branch, Ho Chi Minh City), said: “Highlands Coffee is a highly profitable business model. Although it is a strong brand with a large number of loyal customers, it is still facing many difficulties at this time. For young people who want to start a business, the franchise fee of more than 3 billion VND is quite large, so the number of customers participating in franchising this brand is still limited.”

According to media information, General Director of Jollibee Vietnam - Lam Hong Nguyen said that Jollibee's supply factory is located in Tan Kim Industrial Park Expansion, Can Giuoc District with a total area of over ^10,000m2 and there are over 150 retail stores nationwide. This further affirms the advantage of franchise business, shortening the speed of expansion development.

Head of Student Affairs Department of Long An College, in charge of supporting start-ups for students of the school - Master Le Thi Dung commented: "Business with integrity brings many clear benefits but also comes with risks that need to be considered. Accordingly, business with integrity in popular fields today such as food and beverage, retail, coffee carts, fashion , sandwich chains, fried chicken/snack food,... is suitable for young people who want to start a business but lack experience and business strategy, then business with integrity is a bright choice.

However, to minimize risks, before deciding to franchise, the implementer should gain more experience in restaurants, cafes, etc. or apply to work in that environment to learn more from reality, conduct thorough research, clearly identify benefits and risks, carefully calculate franchise costs, premises, materials, labor, depreciation, warranty, periodic maintenance, etc., thereby making the most appropriate and correct decision”./.

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