Financial model for F&B franchise chain

F&B franchise: "Double-edged sword" with potential risks

The trend of franchising in the F&B industry is not new but has become more popular after the pandemic. Mr. Tran Quoc Tu commented that franchising is a two-sided strategy. The positive side is to help develop the market, enhance brand value and share profits with investors.

However, this trend also brings risks, especially when models do not ensure sustainability. Choosing a franchise requires careful evaluation to ensure long-term success.

To be successful in franchising, investors need to consider many factors:

1. The effectiveness of the current business model
2. Business location and target customer file
3. Desired payback period
4. Legal nature and legal documents of the franchise

In franchising, payback period is an important factor in investment decisions. An attractive business model needs a reasonable payback period, for example about 2 years for a milk tea shop. However, this also depends on the brand and existing customer base. The franchise model helps investors save time building their brand and customer base, thereby speeding up the payback process.

Franchising not only brings benefits to both parties but also creates solidarity in terms of responsibilities and rights. Investors must pay a percentage of revenue as a brand fee, usually from 4-6%. Franchise companies need to maintain ongoing supervision and support to ensure quality and brand reputation. This requires a strict and effective management system from both sides.

Methodical financial management: The foundation for sustainable success

Financial management in the F&B sector requires meticulousness and high expertise. For experienced investors, financial management may not be too different from other industries. However, for newcomers, this can be difficult due to the complexity of cash flow, costs and inventory. Using technology is an effective solution to help make financial management more transparent and effective.

Applying technology and fintech in financial management helps optimize processes, reduce labor costs and better control cash flows and costs. Mr. Tran Quoc Tu shared that a good technology system can replace many repetitive tasks, help make cash flows and costs transparent, thereby improving business efficiency.

Therefore, whether you are a seasoned investor or a new investor participating in franchising, methodical financial management is extremely important, make sure you understand:

• Distinguish financial management
• Technology supports financial management
• Transparent reporting

Key costs to monitor closely: Optimize profits

Effectively tracking and managing key costs plays an important role in optimizing profits for F&B businesses. In F&B, there are 3 types of costs that need to be closely monitored:

• Cost price: Cost prices include costs of raw materials, food, and beverages, which account for a large proportion in the cost structure of F&B businesses. Choosing a reputable supplier, negotiating reasonable prices, controlling material wastage and optimizing production processes helps businesses reduce cost of goods and increase profits.
• Labor costs: Labor costs including salaries, bonuses, and employee benefits are a significant cost that affects the performance of the business. Enterprises need to develop effective recruitment, training and human resource management policies to optimize labor costs, while improving labor productivity and service quality.
• Space costs: Premises costs include rent, electricity and water, and facility maintenance, affecting the profits of the business. Choosing a suitable location, negotiating a reasonable rental price and effectively using the space helps businesses optimize this cost.

How to "catch trends" sustainably with the market

Keeping up with trends is the key to keeping F&B businesses fresh and attracting customers. However, "catching the trend" needs to go hand in hand with creativity and a methodical strategy to create a difference and sustainable success.

To keep up with and maintain market trends, businesses need to be flexible in changing products and services. Re-evaluating the menu and changing products every 3-6 months is necessary to meet market demand. At the same time, adding sales channels such as online and customer loyalty programs also helps businesses maintain revenue.

Simply copying trends is not enough to make a difference. Businesses need to combine new trends with the uniqueness of their brand, creativity in products, services and customer experience to attract and retain customers.

Along with keeping up with trends, businesses need to maintain their brand's identity and core values. Building a consistent brand and building trust with customers is the foundation for sustainable development.

The importance of the model and profit rate: Smart choice, effective investment

Choosing the right business model is a key factor affecting the success of an F&B business. The business model needs to match customers' interests, capital resources, management capabilities and tastes.

Profitability ratio is an important factor, but it depends on the specific business model. Mr. Tu said, each model has a different profit rate, from the drinking water industry to the food industry. It is important that investors must determine the correct model and target customer file to ensure a reasonable profit rate.

Avoid hasty "copy & paste": The secret to building a brand

Mechanically copying a successful business model does not guarantee success for an F&B business.

Copying a business model without careful adjustment and research can lead to failure. Each market has its own characteristics, so a suitable strategy is needed to succeed.

Businesses should refer to successful business models in the F&B industry, learn management and operation experience from reputable brands. However, it is necessary to be creative and adjust the model to suit the reality and tastes of the target market.

Advice for beginners: The journey to conquer F&B

To succeed in the F&B industry, investors need to prepare carefully from market research, choosing a business model, to financial and operational management. Technology and market trends also play an important role in determining the success or failure of a business.

• Market research

Understanding the target market and consumer trends is the first and most important step. Investors need to research carefully to make the right decisions about business models and customer outreach strategies.

• Choose a business model

Choosing a business model that suits your target customer base and market is the deciding factor for success. Each model has its own advantages and disadvantages, so consider carefully before investing.

• Financial and operational management

Strict and effective financial management is an important factor in maintaining business operations and achieving desired profitability rates. Technology and fintech solutions can help automate processes and optimize costs.

• Technology and market trends

Technology plays an increasingly important role in the F&B industry, from financial management to optimizing operational processes. Grasping market trends and applying new technology will help businesses maintain and develop sustainably.

Epilogue

The F&B industry is full of potential but also contains many challenges. To be successful, investors need to grasp trends, manage finances effectively, and be flexible in adjusting their business models. Franchising can be a good opportunity, but careful consideration and adequate preparation are required before deciding to invest. Understanding the market, choosing the right business model and applying effective technology will help F&B businesses develop sustainably and achieve success.