CHAPTER 1: INTRODUCTION
For the past ten years, Vietnam has been a flourishing franchise market attracting a huge number of foreign brands to enter the country, looking for partners. In 2015, there were 150 external brands counted in different fields. This number has not only constantly changed but also increased over the time. In addition, fast food has become a franchising trend with more new external brands appearing in the recent years. One of the noticeable brand is SUBWAY joining Vietnam since 2010. This paper focuses on what entrepreneurs should know if they intent to buy a SUBWAY franchise, locating it in Vietnam where foods and beverages industry is on the growth. It includes the definition of a franchise, general knowledge about Subway, steps to get a Subway franchise, how much it costs an entrepreneur to open a Sub shop, Subways training and support, and, up and downsides in buying a Subway franchise.
CHAPTER 2: LITURATURE REVIEW
1.What is a franchise?
A franchise is a business run by individuals (franchisees) paying for the right to sell a companys products in a particular, using the name of that company (franchiser).
There are three types of franchises which are business format franchise, product distribution and management franchise.
2.General information about SUBWAY and its products
Started as a sandwich shop in 1974 by a seven- year- old boy named Fred Deluca with the effort to afford college fees, SUBWAY has multiplied itself into more than fifteen thousand branches on all over the world. This is one of the companies that have their retails located in many areas in the U.S. The number of its retails is demonstrated by the figures below.
Diagram 2.1.1. Retails that have the most stores in the U.S. (2016) (source: National Retail Federation)
Additionally, it even has more franchises than McDonald or Starbucks does in the world. Shedd K. (The most franchised company in the world is not McDonalds, 2018) reported that in 2017, Subway had 43,912 stores around the world, beating second-place McDonald’s at 37,241 and third-place Starbucks at 27,339 locations. (para.1)
SUBWAY now has 6 franchises in Vietnam. All of them are located in Ho Chi Minh City, the most populated one in Vietnam.
SUBWAY provides fast- food, foods and drinks. It is renowned by various types of sandwiches. The brand features food hygiene and diet- balanced meals concerned by regular customers of fast- food. The ages of these customers vary between 18 and 49.
3.Getting a SUBWAY franchise
To get a SUBWAY franchise and run it successfully, a franchisee is suggested to follow these steps below.
3.1. Research the franchise market
Regardless of what types of business an entrepreneur is aiming at, he or she has to conduct some researches on the targeted market. The results or outcomes of these researches play a key role in making a business plan and building effective strategies. In this part, Vietnam fast- food franchise market is the one brought into discussion.
There are more and more fast- food restaurants appearing in Vietnam. Among those ones, it would be a mistake if we skipped mentioning the10 widely recognized American brand names of fast- food franchises; whereas their number of retails in this country are still moderate. They are Burger King, KFC, Pizza Hut, McDonalds, Dunkins Donuts, Dominos Pizza, Dairy Queen, Coffee Bean & Tea Leaf, Starbucks and SUBWAY.
Let KFC be examined first. According to Brands Vietnams report (2016), KFC, belonging to Yum! Group, had its presence and reputation in 118 different countries on all over the world. However, it encountered difficulties when the first KFC appeared in Saigon Super Bowl Mall in Vietnam at the end of 1997. As fast- food was still new to Vietnamese, KFC suffered losses for the first seven years. However, thanks to rational and logical strategies, it has opened more than 130 restaurants in 21 cities in 2018.
Besides, Pizza Hut, another subsidiary company of Yum!, also made its way into Vietnam in 2007. Although its market share was smaller than KFCs, this brand has been considerably renowned in Vietnam.
The two brands above exemplify foreign fast- food restaurants run in Vietnam.
Despite the fact that fast- food is on the increase, some fast- food franchises have been struggling in Vietnam market so far. Burger King and Mc Donalds are most likely good examples. These chains are on the top of the world fast- food industry. Nonetheless, Turner A. (Why Mc Donalds and Burger King flopped in Vietnam, 13 sept, 2018) reported their flop in this Asian market:
In Vietnam, however, the brands have failed to take off. McDonald’s and Burger King have more than 36,000 and 16,000 locations across the globe, respectively. But in Vietnam, McDonald’s has 17 stores and Burger King has 13.
Back to the topic, buying a SUBWAY franchise, it is recommended that the entrepreneur analyse the market carefully. Factors needing analyzing or researching are customers wants and needs and, as mentioned, the competitiveness which is among not only direct rivals but also the local ones. After researching, come to the next step discussed as following.
3.2. Investigate and gather more information about SUBWAY
General information about SUBWAY was collected in part 2.1. Nevertheless, it was not enough to jump to the decision of opening a SUBWAY shop. So were the market researches. These criteria only help entrepreneurs envisage their future business, anticipating what they are going to deal with. Further investigation should be opened.
3.2.1. Previous franchisees experience
Both positive and negative issues are recorded from previous franchisees. Some found advantages when doing this type of business. Others reported difficulties encountered during the time they operated their shops, but most responses are positive.
Subways franchise case study shows that in UK, many young entrepreneurs have succeeded in opening their own businesses. 25- year- old Luke Kendall is an example. He showed good performance on his business, holding an ambition to hold more SUBWAY outlets. Also, KATIE FLANNERY, another franchisee who is 27 years old, said that buying SUBWAY franchise was her clever option bringing her the achievements beyond her expectations.
3.2.2. Subways recent business activities and operating situation
Vn Express (2015) reported that according to Forbes, in 2013, Subways revenue was over $12 billion. In 2012, this company spent an amount of money up to $516 million on marketing.
On the other hand, this company has been recently reported a decline in sales because of its former spokesman Jared Fogles scandal. Taylor K. (Subway is closing another 500 stores- heres why, 2018) wrote in her article:
The sandwich chain told Bloomberg on Wednesday that it planned to close about 500 of its US locations this year, based on projections. Subway’s US store count fell by 909 last year; it lost almost three times as many locations as it did the year before. (para.1)
Whats more, when it first came to Vietnam, Subway held an ambition to open 20 stores by 2018, but until now there are still only 6 stores locating in Ho Chi Minh City.
3.3. Apply for buying a SUBWAY franchise
Commonly, franchisees submit their application online by reaching SUBWAY website at and following the instructions. Before submitting application, they need to request a franchise brochure by the same way. For further information, they are advised to contact SUBWAY through the website. Go to the its website, click contact us, and choose out one option between the two ones which are restaurant feedback and general inquiry.
3.4. Join SUBWAY
Having finished researching markets, collecting information, submitting application for owning a Subway franchise, and gaining approval from the franchiser, think about locations. Carefully consider which place is best ideal to set up an outlet. Then submit it to Subway. If you have no idea of where to build your store, contact the local Development Agent Offices. They will work with you to locate suitable places. After that calculate the essential amount of capital needed to open a Subway shop.
4.Costs and fees required to open a SUBWAY shop
As SUBWAY has its reputation spread in many countries around the world, it costs franchisees a considerable amount of capital. In spite of that, securing finance is very important. The back up money should be included in the business plan in case of derived expenses.
Table 4.1. Franchise Capital Requirements (source:
The above table comprises only the initially required expenses. Owning a SUBWAY outlet means you agree to pay more. Franchisees are committed to paying a monthly royalty fee which is equal to 8% of after sales tax, and 4.5% advertising fee annually (Start a Subway Franchise- What Franchise, How much will I have to invest?, para. 3).
5.Training and support from SUBWAY
Opening a SUBWAY shop can be challenging for the inexperienced, but thankfully, franchisees are provided with training and support from SUBWAY. It has a broad support network through which beginners and experienced owners are connected to give and receive advice in order to make setting up outlets easier.
New franchisees will attend a training course for two weeks at the Subway Support Center in Cambridge. To pass this course, trainees have to score 80% in the final assessment. Whats more, newcomers are offered over 400 online training courses provide by The University of Subway. Moreover, Start a Subway Franchise- What Franchise also gets people considering joining Subway to be aware that [they] will also be offered advice from a group of 20 experienced regional Business Development Agents who know all the details of setting up a franchise. (How can I start a subway franchise?, para. 5)
6.Advantages of buying a SUBWAY franchise rather than starting a business from scratch
Buying a SUBWAY franchise brings about many advantages. The first upside to be mentioned is saving time. If a totally new brand takes the owner several years to get it familiar with customers, a SUBWAY franchise is already known by lots of people because of its reputation, which means the owner has a certain number of customers. Moreover, carrying out marketing campaigns is quite not a problem, for the responsibility belongs to SUBWAY, but of course, it is not free. Another advantage worth noticing is that franchise owners are provided with training and support from SUBWAY. For these advantages, we can say that it is a good choice for those who are new to entrepreneurship.
7.Disadvantages of a SUBWAY franchise
Although it a favorite brand in America, SUBWAY finds difficulties in penetrating Asian markets, especially Vietnamese market. Most of its Vietnamese customers are short- term. In other words, Vietnamese go there because it is foreign; it is new, and they want to try food but not to be regular customer. Another disadvantage is the wide range of choices, as mention in part 1.1., there are plenty of restaurants and food stalls in Vietnam. Not to mention the prices, Vietnamese food gain more priorities from customers due to diverse tastes. Otherwise, the cost for one SUBWAY sandwich is as many times as a Vietnamese dish. Look at the average price of an bowl of pho and average the price of a SUBWAY sandwich. They are the same. So which one do you expect a Vietnamese to choose? He or she would most likely to choose pho unless he or she want to taste external food.
CHAPTER 3: CASE SOLUTION
Learning about things that people, who want to run a Subway franchise, should know prior to opening it indicates some problems that they have to deal with. And, the question concerned by not only Subway but also many other American fast- food companies is why does fast food grow slowly in Vietnam?
The answer could be that foreign fast- food is less competitive than local food. This can be clarified by comparing the aspects such as Vietnamese customers habits, vast choices of cuisine and, certainly, prices most concerned by customers. First, Vietnamese are used to sharing during meals, which is difficult to do when they are eating a burger. Second, most fast- food usually fail to satisfy Vietnameses taste, whereas plenty of small restaurant and stalls offer local food tasting as they expect. Finally, often time, foreign food cost much more than most Vietnamese can afford while with the same amount of money spent on a meal for one person in a fast- food restaurant they can buy a meal for even four people. The reason for high prices is that Subways ingredients are partially imported, except for vegetables which are from Da Lat, Vietnam. Suggestions for these problems could be:
– Adjusting the menu (adding more dishes)
– Adjusting tastes to satisfy Vietnameses taste
– Cooperating with more local suppliers to lower the products price
Of course these suggestions need approval of the company. Franchisees are not permitted to do that on their own.