Phuc Long Franchising Procedure

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- Start-up and exit schedule: The start-up date will be on 12/01/2017. Many steps like presentation materials, marketing communication program, constructions, and hiring staff will take about 7 months. It will be ready for opening in August, 2017. With exit schedule, the exit date will be at the end of 2020. The detailed schedule is at the end of this plan.

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overview of the franchisor – phuc long

- Company name: Phuc Long Co., Ltd.

- Nationality: Vietnam.

- Year of establishment: 1957.

- Address: 42/24-26 Road 643 Ta Quang Buu, Ward 4, District 6, Ho Chi Minh City, Vietnam.

- Phone: +84-8-32630377/32630378, fax: +84-8-32630379.

- Contact person: Mr. Lam Chan Huy – Vice-director – Email: dennischan@hcm.vnn.vn

- Website: http://www.phuclong.com.vn

Phuc Long business field is F&B. Main business activities of the company are producing, processing, and exporting tea, coffee, and related products. Phuc Long has a wide distribution channel all over stores, markets and supermarkets throughout the country. Phuc Long has invested in constructing more factories with well equipment, serving the demand of manufacture and export to the world. Their foreign markets include Japan, the U.K., Asian countries, Australia, and the U.S. Phuc Long Company also has coffee and tea shop chain to promote the brand, and to provide many kinds of beverages with their own material. Phuc Long’s pricing strategies for the store chain are to wider customer targets ranging from the middle to high income segment.

Over the last 2 years, Phuc Long business performs well and keeps growing stably. For the last 2 years, in 2014, Phuc Long had just 10 shops in Ho Chi Minh City and in 2015 it increased to 14. In this year 2016, Phuc Long has 17 shops at this time. The company is going to open their 19th and 20th shops in November, 2016. Revenues in 2015 increased $1,225,440 (49.3%), compared to that in 2014. Earnings before tax also increased $81,140 (about 22.73%) for the last 2 years. (Revenue from exporting tea and coffee is not included).

2014

2015

Revenue

$2,484,000

$3,709,440

Expenses

$2,127,000

$3,271,300

Earnings before tax

$357,000

$438,140

About Phuc Long’s potential franchise business perspective in Vietnam and particularly in Ho Chi Minh City, we can see F&B industry in Vietnam is developing strongly, and it is also one of the most potential markets in Vietnam, with beverage shop chains in specific. However, currently, the first and main distribution channel of Phuc Long is selling products through a direct retail system in company-owned stores traditionally. The potential locations for the business are district 1, 3, 5, 7 within the downtown of Ho Chi Minh City where several stores has been established. In order to broaden the brand, Phuc Long needs to broaden the franchise channel, not only in Ho Chi Minh City but also in many other cities and provinces in Vietnam, such as Ha Noi, Da Nang, and Nha Trang. In Ho Chi Minh City, to be specific, for the following years, Tan Binh, Tan Phu, Go Vap districts and district 2, 10 are likely to be priorities. Presently, there are many middle class people moving to sub-urban areas due to the high cost of living in the downtown. So, those places are becoming crowded. Therefore, operating Phuc Long stores in these areas will likely to settle the brand to be a forerunner in this field. The purpose of this business plan is to provide our strategy, research on the market, analysis and solutions for upcoming impediment. These information details are in the following pages.

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situation analysis

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macro environment

For the past 5 years, Beverage industry was considered a good factor contributing to the economy of Vietnam, through the increasing in the GPD of it’s to the total factor at the present. (Beverage Report 2015, VIRAC JSC)

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1/ Demographic changes that may affect the food and beverage consumption in VN

In Vietnam, there is a change in the population’s structure. Young population especially working ages is increasing. We can assume that as a signal for food and beverage consumption to be increased. Since young people are looking for a better life standard, they agree to pay more to get updated products instead of normal products that just satisfy the basic needs as the past. Thus, the young population is more receptive of convenience and processed foods and it leads the demand for those products to increase. Another factor is the increasing income. The income of Vietnamese gradually increased as well as maintaining stability. Hence, it is the evidence for the investors to consider investment on premium food and beverage market.

In addition, a change in the buying behavior and perception of the consumers toward health is likely to affect the food and beverage consumption. Nowadays, consumers significantly consider about healthy and fresh products. Issues about alcohol that has negative effects on health made the demand of reliable and non-alcohol beverage to grow.

2/ Economic changes that may affect food and beverage consumption

From December 2007 to June 2009 came The Great Recession that has dented the macroeconomic environment as well as the coffee-house industry. The recession hurt the consumer’s purchasing power and halted investments. After the economy has recovered, investors are optimistic when the cost of borrowing and investment can be carried on at acceptable prices. Investors also have a favorable economic environment which makes them to gain benefits from the tariff reductions due to FTAs.

In the past, Vietnam relied primarily on agriculture as a source of output but it has shifted towards a more market-oriented and manufacturing-driven economy