UNIVERSITY OF NEW YORK IN PRAGUE
School of Business Bachelor of Business Administration Program
FINAL PROJECT
Analysis of Vapiano from a franchise and brand perspective, and
the ratio between advantages/disadvantages it brings
by
Pavol Benčík
2018 Statutory Declaration / Čestné prohlášení
I, Pavol Benčík, declare that the paper entitled:
Analysis of Vapiano from a franchise and brand perspective, and the ratio between advantages/disadvantages it brings was written by myself independently, using the sources and information listed in the list of references. I am aware that my work will be published in accordance with § 47b of Act No. 111/1998 Coll., On Higher Education Institutions, as amended, and in accordance with the valid publication guidelines for university graduate theses.
Prohlašuji, že jsem tuto práci vypracoval/a samostatně s použitím uvedené literatury a zdrojů informací. Jsem vědom/a, že moje práce bude zveřejněna v souladu s § 47b zákona č. 111/1998 Sb., o vysokých školách ve znění pozdějších předpisů, a v souladu s platnou Směrnicí o zveřejňování vysokoškolských závěrečných prací.
In Prague, 7.12.2018
Acknowledgement
I would like to express my great appreciation and thanks to my mentor Jaroslav Halík who helped me to complete this thesis. Abstract
Bachelor thesis Analysis of Vapiano from a franchise and brand perspective and the ratio between advantages/disadvantages it brings is devoted to analyzing the franchise business concept. Considering whether franchise as a business model is worth investing in is always subjective and many aspects play a role in this decision. An issue is that owning a franchise can cause lots of the frustration to a franchisee because of less independence than expected. On the other hand, a franchisee can find freedom in the financial independence thank to profitability.
In order to answer the main research question: Is franchise as a business model with a focus on
Vapiano franchise worth it, if yes, how to improve it? there are two chapters who are focusing on this issue. In the first chapter, there is a theoretical approach to understand a franchise business concept. In the second chapter, there is a practical case study of Vapiano franchise, its analysis, and evaluation.
Table of Contents
List of figures ...... 7
Introduction ...... 1
1 Franchise business model ...... 5
1.1 Franchise basics ...... 5
1.2 Historical review ...... 8
1.3 Types of Franchise ...... 10
1.3.1 Product distribution franchise ...... 10
1.3.2 Business format franchise ...... 11
1.3.3 Management franchise ...... 12
1.4 Types of franchising arrangements ...... 12
1.4.1 Area Developer ...... 12
1.4.2 Multi-Unit Franchise ...... 14
1.4.3 Master Franchise...... 14
1.4.4 Single-Unit Franchise ...... 15
1.5 Motivation for starting franchising ...... 16
1.6 Advantages and disadvantages of franchising ...... 18
1.6.1 Advantages of franchising ...... 19
1.6.2 Disadvantages of franchising ...... 21
2 Analysis of Vapiano franchise business model ...... 23
2.1 Vapiano´s brief description ...... 23
2.2 Vapiano in figures ...... 26
2.3 Standards and regulations of Vapiano ...... 29
2.4 Controlling in Vapiano ...... 30 2.5 Organizational structure ...... 32
2.6 Risk and its elimination ...... 35
2.7 Licensing process ...... 36
2.8 Advantages of opening Vapiano franchise ...... 37
2.9 Vapiano and technology ...... 38
2.10 Suppliers ...... 39
Conclusion ...... 42
References...... 43
List of figures
Figure 1: Types of franchising...... 10
Figure 2: Types of franchising arragements ...... 12
Figure 3: The schematic view of Area Developer ...... 13
Figure 4: The schematic view of Multi-Unit Franchise ...... 14
Figure 5: The schematic view of Master franchise...... 15
Figure 6: The schematic view of Single-unit franchise ...... 16
Figure 7: Vapiano Logo ...... 23
Figure 8: Key financials I ...... 27
Figure 9: Key financials II ...... 28
Figure 10: Organizational structure model ...... 33
Figure 11: Internal risk matrix ...... 36
Introduction
A current market is a place where demand and supply of rapidly changing generations are meeting, which requires the need to introduce innovation or enhancements to be the top-of-the-line market choice for the customer. However, if the business model of a business is not providing space to change directions it can move, it is rather problematic. These facts can lead to questions for the owner, to ask himself whether the business model really brings him what he wished to do when he founded the business. The issue of sustainability and success in the market also arises. The
Franchising Model is often a subject of discussion as it provides some assurance of the branding and functional endurance concept, but on the other hand, to some extent, it does not allow for freedom, change, improvement. Due to the functioning of this business model, we need to consider whether we can do complacently and well.
Main research question of this thesis is: Is franchise as a business model with focus on Vapiano franchise worth it, if yes, how to improve it?
To accurately and objectively answer the research question of the thesis, it is important to understand franchise as a business model from all aspects and what it offers.
Opinions on this structure of a business vary from person to person, some claim it is valuable and can ultimately be a driving force of business success, others do not agree and try to stay away from it. I believe the truth is somewhere in the middle, but it heavily depends on the type of franchise and the franchise agreement between franchisor and franchisee.
Vapiano franchise is a great example that can be examined and analyzed, as it represents the “new” category of franchises, with more personal approach of the company involved in the individual businesses all around the world with a strongly growing brand with its specific approach to how a restaurant can function. According to this fact, I will
1 focus on Vapiano franchise model in the analytical part of the thesis to give practice- based information of real Franchise business model.
Whether a franchise like Vapiano is worth an investment with a profitable future, it depends also on the local market, which needs to be examined and analyzed carefully.
Prices, type of food, service, practicality, site and many other aspects can be crucial for possible success/failure of this brand. Assimilating to current and local trends and customers should not be taken into consideration casually one of the tasks included in this thesis work.
Different angles of my focus in this work will also include marketing, strategy and core values which Vapiano heavily dependent on, as well as brand image the company is trying to create, and what sort of people it attracts. Standards, values, and quality are what
Vapiano is extremely strict about to keep up the concept according to their mission and vision and it creates a huge part of this brands success worldwide. Principles of functionality are based on its own unique software customized specifically only for
Vapiano restaurants and cannot be found anywhere else. Design of interior, cookware, kitchen, clothes and everything you can find inside the restaurants is not coincident and is made by the supplier to specific needs. This brings me to another topic which is going to be examined in thesis work, who are suppliers. The fact that you have obligatory suppliers for certain things is good on one side, however, can be costlier in a long run, and franchisee cannot do anything about it, which is the disadvantage. (Gutnick, 2017)
Franchisor is very cautious who can own the brand name, it does not simply work like - who is willing to pay for the licence gets it. To be as sure as possible that the new restaurant (new owner of licence to open Vapiano restaurant) will perform and carry the reputation which is expected, licensing process is quite long in compare to some other
2 franchises and requires multiple international conferences and preferably someone who is experienced in gastronomy.
Sharing of the profits is huge part of franchise business model, and it is not any other way when it comes to Vapiano franchise. This German franchise takes certain percentage from the revenue of the restaurant based on licence/contract like most franchises do. However, I would like to break this down as much as possible in my thesis and analyse if Vapiano is only a restaurant business as it presents its brand, or whether they have some other activities to boost their stream of profits besides minor sum from revenues. (Norton, 1988)
To conclude, goal of this thesis work is to first analyse franchise as a business model, objectively look at its advantages and disadvantages. This analysis will be later used and applied to a specific franchised brand Vapiano, what makes it so unique and successful, and carefully look at this company from various angels of functionality, goals, vision, mission, software, profit sharing, licencing, marketing, employee hierarchy and other key elements which would help demystify whether this brand is worth investing in, and if yes, what could be done differently or in better more effective and efficient way.
Personal interest in topic is based on experience with gastronomy. I grew up in the gastronomy business, as our family owns chain of restaurants (different sort of restaurants) in Slovakia, and last year also entered Czech market with the brand Vapiano which makes it our first restaurant not made by us. After nearly a year of working in/with
Vapiano, I am little sceptical whether this was a right move to let someone dictate and regulate us in many ways of managing the flow of the restaurant. Reason why I choose this topic for my thesis work is to find out more about this business model and look objectively if starting a cooperation with mentioned German brand was a clever idea or
3 we made a mistake. Another reason is to analyse the perks and good aspects of its functionality, and possibly apply some of them in our restaurants to boost effectiveness.
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1 Franchise business model
Franchise business model is not that well known generally to the details even in the current society. However, almost every human beeing has been lately in touch with this kind of business model on the market. This chapter is dedicated to show the franchise business model as it is, how it was developed and what could be the main motivation to set it up.
The franchise system is a system whose main activity is development through franchising or whose development is based on a network of independent operators grouped under a common brand name, and which operates based on uniform standards.
Franchisee invests in opening a franchise branch operation, and often branches in equipment goods. It is a legally, financially and organizationally independent entrepreneurs. Franchise network is a network of franchise and own branches created within a franchise system. Franchise business concept is formalized in the form of a franchise packet elaborated business plan.
1.1 Franchise basics
Franchising is not a typical private business that entrepreneurs are setting up. It requires a bit more. Nowadays, it is studied a lot by business academics, so it is becoming more common that the entrepreneurs are aware of the term and ith key concepts. I will provide some definitions of the franchise from different perspectives.
As Investopidia.com put it so succinnctly:
A franchise is a type of license that a party (franchisee) acquires to allow them to have access to a business's (the franchiser) proprietary knowledge, processes, and trademarks in order to allow the party to sell a product or provide a service under the business's name. In exchange for gaining the franchise, the franchisee usually pays the franchisor an initial start-up and annual licensing fees. (Staff, 2015)
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Another definition which concretely define the realtioships of parties can be made as:
“The business format franchise is the grant of a licence by one person (the franchisor) to another (the franchisee) which permits (and usually requires) the franchisee to carry on business (having made ivestment in its establishment) under the trade mark/trade name (the brand) of the franchisor and in doing so to make use of of an entire package (know-how) comprising al the alaments necessary to establish person previously inexperienced and untrained in the conduct of a businessdeveloped by the franchisor under the brand and after training to run it on a predetermined basis with continuing assistance from its franchisor, for all of the which the frenchisee pays fees to the franchisor.” (Mendelsohn, 2005)
Franchise business model is very interesting for people who have their capital and searching for investment which can be highly worthy but also for the other party, the owner of the license who can develop the network and the business itself by providing the brand. International Franchise Association sees franchising from this kind of perspective and uses it in the definition as well. The definition is more complex in comparison to the authors who are usually focusing on the franchisee´s perspective.
“Franchising is simply a method for expanding a business and distributing goods and services through a licensing relationship. In franchising, franchisors (a person or company that grants the license to a third party for the conducting of a business under their marks) not only specify the products and services that will be offered by the franchisees (a person or company who is granted the license to do business under the trademark and trade name by the franchisor), but also provide them with an operating system, brand and support.” (IFA, 2018a)
Franchising can be described as a systematical approach to growing up business without such an investment. The reason is a possibility to organize business concept development and strategy formulation carried out by one single legal entity with the execution by many legal entities who are paying to use it. From point of view for franchisor is convenient to use this possibility because there is no need to stop your current branch, it is possible to set the rules and conditions or even select the areas where
6 the business can be run. So, for example, if the franchisor would like to have business in origin country, he can put into the condition’s possibility of operating in just certain regions or countries. (Shane, 2005)
The relationship between franchisor and franchisee could be seen as some kind of less strict employment or partnership. While franchising saves upon monitoring costs, franchisors have less control over franchisees as opposed to the level of control in a traditional employer-employee relationship. Franchisors, therefore, need to assure that the business model is not altered by franchisees. To accomplish this kind of system, there is a need to create rigid policies and procedures written down in contracts which are to be signed by franchisees and franchisors. Generally, contracts may vary, but one franchisor has regularly the same contract to every franchisee and set of rules to chose him as well.
(Neonakis et al., 2013)
The franchising model allows the potential entrepreneur to do business without initial knowledge, without long experience and practice which mean the reduction of risk.
It permits to use the business name of the franchise and its trademarks, operating system and procedures, protected prescriptions and marketing strategy. For example, if the franchisee is having a contract to franchisor who is providing a contract to set up a bar or some similar business, the franchisor will usually provide by contract:
• use of custom recipes and method of production,
• special equipment if needed,
• market research and marketing,
• training and staff training,
• operation and management support. (Seid, Thomas, 2006)
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To conclude the basics of franchising from the point of view of stakeholders, there is franchisor and franchisee who are signing the contract. Typically, the franchisor is the one who created the business offering to franchisees. If the franchisor is successful in the business, he can provide or „rent“ rights to do business under the same name to another business owner – franchisee, using the original method and/or trademark for a predetermined period of time set in a contract. The franchisee is the receiver of the right to conduct business invented by the franchisor. Franchisee can also be called a franchise owner. (Barringer et al., 2010)
1.2 Historical review
The model of how franchising works is something we can find in the Middle Ages as well. In those time, the feudal lords were giving the rights to the craftsmen and other professions to do business such as operate ferries or hold markets. This principle is very similar to what we call franchise nowadays. Bennett is also mentioning the model like franchising in 1845 in Germany when the brewers and tavern owners started conducting business relations in a way of exclusive distribution rights of beer. (Bennett et al., 2008)
Another, more recent historical example of franchising model is dated to the mid -
19th century, realizing the potential and spreading across North America. The US to this date is represented as the world leader in franchising business, with some of the strongest, most famous and most profitable franchises. The famous example from past is Isaac
Singer who after developing his first sewing machine in 1858, created franchise to successfully spread and distribute the trademark to a wider number of customers. Before being able to Singer operate the business of Singer Sewing Center, Singer did not have enough capital for production and manuals for sewing with the machines. The idea Singer
8 came with was to sell not the product, but the right to it and training the new users. After successful establishment of the model, he was able to finance the manufacturing and he did not have to figure out the cost or time of hiring. (Dugan 1998)
In the 1930s, Howard Johnson Restaurants skyrocketed in popularity, paving the way for restaurant chains and the subsequent franchises that would define the unprecedented rise of the American fast-food industry. This type of organizational structure brings a lot of advantages, however also various disadvantages which will be specifically discussed in the final thesis paper. (Staff, 2015)
The early 1940s were years where lots of the areas of life were developing and a lot of business started rising such as automobile dealers, travel lodges, oil Companies, stores, or restaurants which clearly started development of franchise business model in the way we know it nowadays. Back to 1940s, the agreements between franchisee and franchisor were not the same as we know them. They were very short, not dealing with complicated details, there were not so strict or demanding. The change came a few years later when
Ray Kroc introduced the „cloning method“ to franchising which literally meant to make another branch of franchisor as the main one or according to the given rules and conditions. Kroc is the founder of the world’s most well-known business and the franchise as well – previously MacDonald’s. Kroc was sure about the need to control everything and using the well-running concept to the details than trying to make some unnecessary changes. We can say, he was right to some point, because before, some of the franchises started failing and by changing the system of franchising they succeded. In the 1960s already existing franchise businesses started adapting to the cloning method by wearing the same uniform and standardizing their businesses. (Dugan, 1998)
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1.3 Types of Franchise
Operating franchise can be divided into three types according to the system it works
(Fig.1).
Figure 1: Types of franchising
Product distribution franchise
Business format franchise
Management franchise
Source: Massetti, 2013
1.3.1 Product distribution franchise Product distribution franchises are the one we know really well on the market such as Coca-Cola with the beverages, the Ford Motor Company with cars, Exxon with natural sources or Osim which is electrical and household appliance company. Product and trade name franchising is franchising as it was in the early days. The franchisor has a product that is distributed to the end-users by the franchisees. The example from the early stage of franchising worldwide is Singer sewing machines. (Barringer et al., 2010)
Product distribution franchise model type is comparable to the supplier-dealer relationship with several differences such as uniqueness of brand franchise is distributed and manufacturing or so. For example, a boutique may agree to sell only certain products in its store at the exclusion of some other products. Typically, the franchise merely sells the franchisor’s products. However, this type of franchise will also include some form of integration of business activities. Product distribution franchises are focusing on large products such as cars or machines, but on the well-known products on the market with a huge history and potentially sustainable market position. (Massetti, 2013)
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1.3.2 Business format franchise Business format franchise is similar to the previous one, but it is wider in what it offers to the franchisee. According to IFA:
„This type of franchise includes not only a product, service and trademark, but also the complete method to conduct the business itself, such as the marketing plan and operations manuals. “(IFA, 2018b)
Generally, business format franchising is the most popular type of franchising.
Famous examples of Business Format Franchise are McDonald's, KFC, Famous Amos,
Starbucks Coffee or Dunkin’ Donuts. (Massetti, 2013)
Shane sees choosing business model franchising as convenient because it is bringing an operating systém with the license. Moreover, it is a bit easier to run the franchise system in the retail industry than the manufacturing industry. There are several reasons why it´s more convenient in comparison to product distribution franchise:
• customers are dispersed over geographic locations,
• the distribution of product and services cannot be handled from one centralized
location,
• the brand name is an important competitive advantage,
• external capital is needed for rapid growth to reach economies of scale and gain
quick access to desirable outlet locations. (Shane, 2005)
Business format franchise is a more complex license. Basically, by using the manuals, procedure plan, standards, support and so on, there is easier integration provided. The arrangement is formalized through a legally binding contract. Business format franchise is more like buying „puzzle“ product with the strict instruction on how to make it and how it should look like after setting up. (Massetti, 2013)
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1.3.3 Management franchise Management franchise is the type of franchise which is not mentioned so much as the previous two types but well known on the market as well thank TV shows such as
American Idol. Massetti is describing the management franchise as:
„It is a form of service agreement whereby the franchisee provides the management expertise, format and/or procedure for conducting the business. Some examples of Management Franchise are Hilton, American Idol and UPS Store. “ (Massetti, 2013)
This kind of franchise requires usually a lot more experience in management than in the other types of the franchise.
1.4 Types of franchising arrangements
There are four types of franchising arrangement the franchisee can usually chose to conduct the cooperation. (Fig.2)
Figure 2: Types of franchising arragements
Area Developer
Multi-Unit Franchise
Master Franchise
Single-Unit Franchise
Source: Francity, 2015
1.4.1 Area Developer Area developer franchises is a kind of arrangement that allows a business owner to own all franchises within one location, region, area. City, neighborhood, the region can be considered as possible area depending on the rules. One of the usual rules or conditions is that the franchisee must open a concrete number of the franchise in the selected area in
12 a specific time or follow other stipulations set by the parent company or franchisor.
Typically, the time period for the realization of the condition is five years. Many established franchise systems have an Area Developer structure in place. The Area
Developer is responsible for carrying out the franchisor’s plan in their assigned territory.
This includes recruiting franchisees, locating franchises in the territory, negotiating for locations, and ensuring that franchisees are in compliance with franchisor rules and policies. (Kelly, 2018)
One of the disadvantages of having Area Developer license is that the franchise is not only subject to all the governmental laws, rules, and policies governing the business, but is also subjected to the franchisor and Area Developer rules, agreements, policies, and procedures. It basically means that the franchisor can arbitrarily choose to grant or deny requests by the franchisee to buy another franchise location or to sell or relocate their business, and many other critical areas. There lot of control in the hands of the franchisor.
Just as in most boss/worker relationships, the Area Developer can make a franchisee’s life pleasant or difficult. So, from one perspective is owning a franchise more about political forces than about having an independent business. (Karpman, 2014)
Figure 3: The schematic view of Area Developer
Source: Francity, 2015
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1.4.2 Multi-Unit Franchise A multi-unit franchise is the type of franchise where franchisee set up and operated then one unit/franchise/branch. Multi-unit franchising is usually set up in the same general region. The franchisor, the owner of the brand is selling in the kind of contract right to set up more than one franchise. In the contract, there are written certain rules of a specific number of branches which can be open. The franchisee of the multi-level franchise needs to agree in the contract on opening a specific number of locations during a specific time. The franchisee of the multi-unit franchise has to be financially and managerially capable to develop several business units of the franchise. (Francity, 2015)
Figure 4: The schematic view of Multi-Unit Franchise
Source: Francity, 2015
1.4.3 Master Franchise The master franchise is a popular way to spread American businesses to international territories. This method allows one entity to find many franchisees in an overseas area. The master franchisor is responsible for training and providing support to the new franchisees within the large area, which can include an entire country. Master franchisers often establish training centers for new franchisees. (Kelly, 2018)
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The master franchise is model, which is also called subfranchising. Subfranchising can work in two different ways. Master franchise works in the way that the franchisor sells the franchisee the right to become a franchisor in a specific geographic area in exchange for royalty payments or a portion of the franchise fees collected from these additional franchisees. This process can happen in the way that the franchisee must operate at least one unit themselves and at the same time act as franchisors for the others in the area. The other way of executing this is that the franchisee becomes a franchisor and only takes care of the franchisor’s job in the area. In the next figure, there is shown the principals how it works. (Barringer et al., 2018)
Figure 5: The schematic view of Master franchise
Source: Francity, 2015
1.4.4 Single-Unit Franchise Single-Unit system is based on a contract where franchisee agrees on establishing only single-unit franchise which will bet he main and operates according to the franchisor´s rules. Operating single-unit franchise is good solutions for newcomers to the
15 business field. If the owner is successful, the franchisee can decide to buy a wider license and become a multi-unit franchisee. (Kelly, 2018)
The single-unit franchise is usually called direct unit franchise as well. It is one of the most traditional or common types of franchise. The franchisee is not buying just the right but an obligation as well to set up the franchise and operate it. The franchise needs to invest time and capital to set up a business but there is also need to invest in education in management skills learning because, from the beginning, the franchisee is typically handling the management of whole franchise which requires having those skills.
(Francity, 2015)
Figure 6: The schematic view of Single-unit franchise
Source: Francity, 2015
1.5 Motivation for starting franchising
Starting a business requires some skills and characteristics that the person needs to have. When entering the franchising, an applicant for becoming franchisee can be already well-established entrepreneur or newcomer to the business field.
The advantage of a candidate with a business or specialization experience is that the franchisor does not have to spend time on putting franchisee into the business process
16 and in terms of getting knowledge about products and how to provide customer service and so on. For such a person it is simply a daily routine. The question than whether the desired quality of an experienced entrepreneur has the same meaning as for the franchisor.
In this case, the franchisor needs to synchronize these rules and standards if they are different then expected. On the other hand, the franchisee may also bring bad business habits from previous work. For example, a bookseller who has been conducting a local bookstore for several years may be guided by the rules of his own habit, for example, not requiring the need to raise the level of customer service. In the end, there is a need to find it out and work on it. The main this is to be conscious of that. It can be a big mistake if the franchisor is taking the experiences entrepreneur without analyzing his experience.
Sometimes, it is considered even easier to take newcomer and build the standards and vision. An applicant without experience will need more attention and training, but it will be easier to adapt to the established network standards. The fact that he does not have a business routine yet does not bother, because at least he will not repeat possible mistakes in business. It can eventually become a disciplined franchisee. However, a newcomer with previous even low-level business experience is much better options, because it might mean that the start for that person will be easier. Fredman (2018) prepared the elements of an ideal franchisee:
• good corporate communication,
• effective compliance guidelines,
• solid financial and market opportunity,
• a popular brand. (Fredman, 2018)
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Using a franchising model can protect brand and company by spreading some of the risks to the franchisees. Choosing the right franchisee is difficult because it should be the person who fully understands the business and is capable to operate it. Franchisees go along with it because of the profit potential, as they stand to share in the profits. However, it takes a lot for a franchise to succeed. Whether the franchisor chose the experienced entrepreneur or newcomer to the business, he needs to verify the assumptions and skills of the new franchisee and discover if the motivation of franchisee is based just on money or in operating the brand and business with highest possible quality and care.
1.6 Advantages and disadvantages of franchising
Bennett et. al is saying about franchising, that the beautiful part of it is that franchising is giving the opportunity to win to both parties involved in it. The franchisor who seeks to grow the existing business with little financial input and franchisees who are ready to spend the money in order to do a business without having to start from scratch. (Bennett, et al. 2008)
Bennett is providing one perspective to franchising cause he is more focus on the business side of the entrepreneurship. Nowadays, some entrepreneurs are seeking for more than just ultimate profit, but also for the recognition, self-realization, building something innovative or more. In that case, franchising has lots of disadvantages for them.
Two-sided perspective is necessary to objectively describe the sufficiency of using a franchising business model. Franchising is from one side of view very open for partners, franchisees, but from another side, it can be frustrating for the franchisee who would like to be more creative and try to make a change in business strategy, for example for seasonal strategy.
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1.6.1 Advantages of franchising Operating a franchise is assocciated with advantages and disadvatages for the franchisees as well for the franchisors. Advantage of franchising for franchisor, the owner of the brand, the rights:
• Franchising allows the franchisor to expand its distribution channels and, as a
result, strengthen its own position on the market without the need for greater
investment.
• For the franchisor, it is very important to obtain an additional source of income in
the form of a reward, the payment of which is one of the franchisant's basic duties.
It is not only the entry fee for the contract (initial franchise fee) – the expense paid
simultaneously with the signing of the contract, but also the ongoing remuneration
(ongoing franchise fee) that represent payment for various services, which the
franchisor provides the Franchisee at the time of the contract.
• The franchisor will reduce the costs of promotion and advertising, as participants
are generally required to contribute to common advertising and promotional fund.
• Significant importance is the preferred position of the franchisor in terms of
division of powers and responsibilities to third parties, as this is the franchisee
who still operates independently and which has full responsibility for the results
of their business.
• Franchising for the franchisor also means eliminating problems with employing
and managing staff, as they are franchisees who deal with employment issues.
(Bennett, et al. 2008; Kelly, 2018; Shane, 2013)
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Advantage of franchising for franchisee, the buyer of the rights:
• Franchise is going to the business for yourself, but no by yourself which basically
mean that the business model allows franchisee set up a company but with a
certain guarantee of busienss model from existing company.
• Franchisee can operate business with usually a well know brand, products,
services and moreover will know business rules. Customers usually know the
brand, the systém how it works to use the products and sometims they have even
the experience with the brand so the company has automatically potential
customers.
• Franchisee has hight potential to be successfull because it has proven methods,
design, manual ho to work and train the employees.
• Franchisor often provide sustainable support such as training, national and
regional advertising, operating procedures, operational assistance, ongoing
supervision and management support, increased spending power or access to bulk
purchasing.
• Franchisee has a certain level of business independence and is more motivated in
comparison with the employees.
• If the franchisee operate according the master franchise arragement, he mostly has
the right to further expand its network, he can become the franchisor for the
country/region – which, of course, results in additional profits.
• If franchisee operate according the master franchise arrangement, he is treated
with more respect from the franchisor (more units, more revenue, more
importance) (IFA, 2018c, Bennet, et al. 2008; Malý, 2014)
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1.6.2 Disadvantages of franchising Every type of business brings disadvantages as well, the same goes with franchising. From the point of view of franchisor, there are several possible disadvantages:
• Franchisees who succeed within the system established by the franchisor want to
have certain level of independence. Therefore, it is also possible that one day the
franchisee will become the franchisor´s prior competitor, who is perfectly familiar
with the market and the strengths and weaknesses of the franchisor and business
itself. Precisely for this reason, most franchise arragements contain a clause
prohibiting competitive behavior against franchisor or other partners in the
system. However, it should be noted that this clause will be assessed also in terms
of antitrust legislation and in addition, it can end up in refusing the agreements.
• In the case of franchise fees paid by a franchisee, which does not depend on the
amount of the sale but on the profits made, the franchisor can expect that
franchisee will try to reduce the amount of that profit and, as a result, reduce the
franchisor's remuneration.
• It is not possible to omit the question of the franchisor's requirement for the
franchisee's quality of franchise. It has a fundamental influence on the image of
the franchise system. Franchisee can possibly damage the brand.
• Franchisee is not an employee and therefore it is more difficult to control his
activities.
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• Over promising by the franchisor and unrealistic assumptions about high return
may cause dissatisfaction among franchisees and lowering the level of services in
franchise. (Podnikajte.sk, 2010; Bennet, et al. 2008; Siebert, 2015)
Disadvantage of franchising for franchisee, the buyer of the rights:
• Franchisee must pay all fees included in the contract (entry fee, royalty – monthly
payments, advertising payments etc.).
• Fracnhisee must have regular franchise checks if he operates the business
according the standards and rules of franchisor. Franchisor has certain level of
control of the business from the point of view of agreement.
• Franchisee proceeds also the risk that the franchisor fails to comply with terms of
training and support (technical or marketing).
• Franchisee is not fully independent which might result in dissatisfaction. For some
people, this is the most serious disadvantage to becoming a franchisee.
• Franchisees must be careful to balance restrictions and support provided by the
franchisor with their own ability to manage their business. The usual problem is
that franchise does not have really right to change something even during the
discussing the contract because of his position of applicant.
• If franchisee operates under master franchise arrangement, he has to really let the
control to managers, so he can not longer devote fully himself into every unit.
(IFA, 2018c; Siebert, 2015)
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2 Analysis of Vapiano franchise business model
Analysis of Vapiano franchise business model is devoted to present Vapiano franchise, analyze its key financial statements, explain the basics of the system, the advantages and the obvious disadvantages, standards, and regulations of Vapiano etc. and moreover, personal experience.
2.1 Vapiano´s brief description
Vapiano is the German concept with Italian cuisine, charming its customers all around the world with a unique self-service system of the live kitchen with a combination of fresh ingredients and appealing and relaxed atmosphere. Vapiano has a simple logo which represents a whole offer of the restaurant.
Figure 7: Vapiano Logo
Source: TRG, 2018
Through the day, a usual Vapiano restaurant changes from a restaurant with a busy lunchtime into a chill coffee lounge in the afternoon, followed by dining restaurant with an attractive ambiance and later into a night bar. It is one of the most successful European restaurant chains according to market share in the Fast Casual Dining (FCD) segment in a gastronomy industry. First Vapiano restaurant opened its doors on 22nd of October 2002 in Hamburg, but it did not take a long before founders decided to enter international level
23 as franchise concept in 2004. Up to this date, there are 204 restaurants in 33 countries on
5 continents, with many international openings planned. The individual restaurants are operated as corporate restaurants, joint venture restaurants or franchise restaurants. These three operational models offer the strategic flexibility to enter new markets and to appropriately develop current existing markets. Since 2011, Vapianos’ largest shareholder is privet equity firm Mayfair Vermögensverwaltung, owning around 1/3 of the shares, however, the majority is run by franchise partners and joint ventures. Last year
Vapiano had an IPO (Initial Public Offering) and is now publicly traded company on
German stock exchange. (Schuetze, 2016)
Vapiano belonged many years among the fastest-growing companies in industry.
It offers its guests a large variety of quality meals made freshly in front of the guests with bi-monthly seasonal themes and special menus. Pizza, pasta, salad or dolci (desserts) are the “gro” products in this concept, of course good wine cannot be missed. A lot of techniques and systems are well-thought through and crafted exactly for Vapinao unique needs. Vapiano‘s core markets are Germany, Austria, France, Sweden, the Netherlands and also the UK. In previous year, internal system recorded more than unbelievable 42 million guest visits all around the world. Vapiano is also mainly active in the USA and
China. Denmark, Czech Republic and Spain were newly added in 2017. According to a study commissioned from OC&C Strategy Consultants GmbH in January 2017, Vapiano holds a top position in the fast-casual dining (FCD) business segment in Germany,
Austria, and Sweden. In Germany, the company ranked 12th by sales among system gastronomy companies in 2017. Vapiano has numerously confirmed its position among the top ten providers in the Quick Service restaurant segment, behind worldwide phenomenon’s with names such as McDonald’s, Burger King, Nordsee, Yum!, Subway and Edeka. In the Netherlands, France and the UK, Vapiano is one of the leading
24 restaurant groups in the FCD segment. According to the OC&C study, this segment will grow by approximately 10% in the most important Vapiano markets between 2015 and
2020. Moreover, OC&C projects an average growth of Italian cuisine of 9% in the same period. (Vapiano Se Im Zollhafen, 2018)
System which customer experience when visiting Vapiano differs from other restaurants in general. Combination of fresh ingrediencies and good food, nice ambiance and technology makes Vapiano shine in terms of uniqueness and leave people with a feeling of coming back in the future. The whole experience starts on cash desk upon entering a restaurant. Cashier asks you whether you have been in Vapiano before, and if not, explains the system by which this concept operates. Next, one receives a chipcard which serves as a paying tool for all transactions made inside the restaurant. Restaurant typically consists of seating area, bar and kitchen, which is divided into three stations.
Pizza station, pasta station and salad station. Depending on your taste, you aim for the station of choice. There are no waiters in Vapiano, therefore you must simply wait in the line for the food which is freshly made in front of your eyes. Because of this, one can exactly see what goes into his meal, and can ultimately change some ingrediencies, or even add some extras to satisfy his/hers tastes to the fullest. During a preparation process of your food, chef requests you to place your Vapiano chip card on a reader and charges your order on that card. Card readers are located on each station where you can order any type of products including drinks on a bar or dolci (deserts). This card serves a simple purpose, and that is cashless experience when you are inside the restaurant. It would be annoying to pay on each station separately every time you would like to order something.
Every order is charged to the card and upon leaving you simply walk to the cash desk and pay once for everything that is charged on a chip card.
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System of functionality might suit some, but not other. Like almost everything else on this plant, it has its advantages and disadvantages. Some are obvious and some need to be experienced and might be more subjective. Looking at the process of preparation of the meal might be great for some, however others prefer the old school more traditional way of eating, where service is done by waiter. The truth is, that queues in Vapiano might take a while in the busy lunch time and prime evening hours. This may discourage some of the visitors or people who are not familiar with this concept. People seeking high gastronomy might dislike the fact, that even thought, people who work in Vapiano are trained by the franchise trainers or managers, almost all of them are even certified for their position of work, they do not need to attend cooking school or even have experience with gastronomy work whatsoever. On the other hand, this concept holds all the advantages what makes it famous all over the world and why people love it. To what extend this is a good or bad is up to everyone to decide, however it is clear, that no matter how your concept is going to excel and prosper, you will never satisfy all customers. To provide best possible service and never stop adapting to new trends, along maintaining the same or even better quality is what can keep the reputation and guest count grow higher and higher.
2.2 Vapiano in figures
The financial statements of Vapiano look positive, as majority of goals and forecasts for year 2017 were executed and some even exceeded the expectations.
Company prospered nicely due to IPO, as well as opening of 27 new restaurants and closing only one, which was within the limits of forecast.
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From the last month of 2017, total assets climbed to kEUR 350,317 (year 2016: kEUR 299,368). The increase in total assets by 17.0 % was particularly due to the IPO and the expansion of the restaurant network.
Figure 8: Key financials I
Source: Vapiano Se Im Zollhafen, 2018
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As we can see in the fig. 9, the adjusted EBITDA developed positively and increased from kEUR 28,587 to kEUR 38,820. This corresponds to an increase of 35.8%.
(Vapiano Se Im Zollhafen, 2018)
Figure 9: Key financials II
Source: Vapiano Se Im Zollhafen, 2018
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2.3 Standards and regulations of Vapiano
To retain required quality level of all aspects of a restaurant, Vapiano has plenty of standards which are strictly controlled. This is quite common practice in franchise segment, however Vapiano separates certain things that need to be fulfilled to perfection among all restaurants around the world, and some which are less strict and can be customized and adapted to specific markets. Starting with most important part of standards, food and hygiene. Menus core remains the same, this includes around 60 to
70% of meals that are sold most in global scope. The rest can be selected or assimilated to local customers and needs, which is a good benefit to have. However, all meals have to be approved by Vapiano commission and procedure has to be exactly according to
Vapiano standards, whether it is amount and type of ingrediencies, decoration, cooking technique or process. In terms of hygiene, this is almost universally same for whole franchise and it is taken very seriously. Not only storage of raw materials, but also cleanness of the restaurant, kitchen, toilets, manipulation with food and a drink, which chemicals use for what and many other obligations that need to be kept and fulfilled.
Employees have standards which they need to keep as well, this includes attitude, standards associated with work position, how to act, what to say or offer, what is allowed and on the other hand what is forbidden. Clothing of employees is as expected standardized as well. For example, each Vapiano employee – Vapianista is required to have two pens, a name tag, no earrings, bracelets, watches or pricing if cooking or does anything in the kitchen. Black trousers and black shoes are of course must have.
Restaurant itself has regulations too. Typically, owner of the restaurant – franchisee has an option of few interior and exterior designs, which carry same core with strong Vapiano characteristics, and differentiate only in few cosmetic changes or upgrades that are available as a company evolves and grow.
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These standards limit franchisee from doing something that could ultimately change people’s perspective about Vapiano brand, stay within the borders of what can and what cant be done and maintain the image, as well as quality of concept. On the other hand, even if you are the owner of the restaurant and license, you still have someone watching over your steps, telling you what to do and breathing on your neck with high number of requirements. This may reflect a disadvantage in a scenario, where not all standards and regulations are applicable to all parts of the world and some of them should be assimilated to it. Bound to the license contract, you are not allowed to change it what so ever, even if it would be eventually better for the prosperity of restaurant no matter from what perspective – quality, profit, better services for customers. This is considered as a tax for having a famous brand on your restaurant door.
2.4 Controlling in Vapiano
As mentioned before, franchise has heavy quality standards which are supervised with vast quality management which forms the Operative Quality Assurance (OQS) team, in cooperation also with external organizations. The quality assurance measures are set up and done with the help of an internal auditing software which was custom built in
2015. (Vapiano Se Im Zollhafen, 2018).
Control can be done by different ways, by different organizations or parties, and often specifies in different areas. One of the most common regular type of control is unannounced, external quality inspections which is independent, administrated by
Vapiano international. These inspections are usually focused on quality of food and hygiene standards. It serves the purpose to be prepared every day, having everything according to obligations. Another common type of control is mystery shopper visits.
Mystery shopper catches mistakes done during regular operation of restaurant, acting like
30 normal customer. Vapiano has mystery shoppers, who have a checklist of duties of restaurant, attitude of employees and agreed standards that should be kept. Occasionally, building where restaurant is located can have their mystery shoppers (usually business centres or shopping centres), their responsibility is to ensure, that owner of the restaurant is acting within the limits of contract and is fulfilling terms and conditions of leasing or rent contract. They can often control quality as well, depending on the agreed conditions.
Another step of supervision was launch of a concept for hazard analysis and defining critical control points (HACCP), which is required by law in Czech Republic and in many other countries (QSL, HACAP), as well as for implementing relevant controls – these include, among others, two daily tests regarding best-before dates, HACCP calendars and detailed cleaning plans.
External parties which are doing controls or inspections are state hygiene, if the work environment is acceptable according to law, this has nothing to do with Vapiano or
Vapiano international and applies to all franchises, restaurants and other gastronomy concepts. The same goes with tax and fiscal controls, which are done usually by state institutions.
Controls done by government and law regulations are inevitable, they can hurt the owner as a law changes in terms of fees and employment charges, but prevents illegal action, cover employees from employer and their abuse, and should divide what if goods and serves are approved to sell to general public and in accordance with law. In terms of internal Vapiano control, controlling system is very well thought through. The firm put a lot of effort into this, therefore from franchisees´ perspective it can be annoying and even costly if they don’t follow contract rules properly. It means that all current and future franchisees have to be sure they are content with all the regulations firm requires in order
31 to be comfortable with the flow of the restaurant and prosper. If not, one should consider another business model.
2.5 Organizational structure
When it comes to organizational structure, Vapiano has it managed to suit their needs with respect to almost everything. Tailored carefully to motivate employees to work and grow, but at the same time be as effective as possible and not wasting resources.
Working positions in Vapiano are not so different in comparison with other gastronomy or restaurant´s concepts, however Vapiano looks at these positions equally important for success and functionality of the restaurant. Starting with “basic” positions such as cleaners, dishwashers, service which takes care of plates, cutlery, cleanness of restaurant, as well as re-filling up different things in restaurant. Bartenders and order-mans are there for alcoholic and non-alcoholic drinks, along with serving dolci (sweets and deserts) to customers. They are also responsible for clean bar and occasionally help with service.
Cashier is the first person you meet when you enter the restaurant, people on this position create first impression and therefore, it is important piece of puzzle in every Vapiano.
Besides greeting people when they enter and cash them on the way out, cashier’s responsibility is to explain to customers who enter the concept for a first time what they can expect and what Vapiano is, how it works so they are all set before entering the restaurant. From rational thinking, one would guess what the core position of this franchise is – chef. Majority of revenue is earned from this position, as chef is the one who cooks in front of the customer, communicate with him and can influence him with his attitude, leaving almost half of the experience within first few minutes of the visit.
Chef plays a critical role, as he is not only a simple chef that cooks the ordered meal, but also a sales man who can dramatically change the order in terms of price with up-sale,
32 offers, suggestions. If he or she does it well, many people will follow their advice, as often people “eat” with their eyes. Administrative work, flow of the restaurant, employees, suppliers, money, salaries and similar responsibilities are handled by general manager (GM) or line managers, who are one hierarchical step lower as GM. They split to work, line managers substitute GM in his absence, however all major or executive decisions are made by general manager himself. Above this position are only executives from Vapiano international and owners of the franchise license/owners of the restaurant who have the final say what goes in the restaurant.
Figure 10: Organizational structure model
Source: Own work
What makes Vapiano unique and attractive for many part-time but also full-time job applicants is the minimum of requirements and experience you need to have in order to start working in this franchise. However, to maintain the quality of food and services
33 around the world, the training program is strict and precise. Each employee selected to a certain (chosen) position should complete training consisting of theoretical and practical parts. Theoretical part includes basic information about functionality of restaurant and core values of Vapiano concept, as well as needed knowledge about position he/she is hired for. Practical part includes illustration of performed job in front of a qualified person to evaluate whether the person is suitable for the job. This technique is used in many famous franchises, making sure the quality, standards and expectations are met all around the world.
In todays society, what company pay to their employees is not the only main factor why they work for them anymore. Vapiano is aware of this and try to encourage more in this line of work then only money perspective. Whole atmosphere around this franchise is giving you the sense that you are part of one friendly family and not just another working tool of multinational corporation. Another great future which can be motivating driving force for employees are certifications which all employees have an option to complete. There are nine positions in Vapianno for which you can certify yourself. Each employee should be certified at least for one position (typically the one he/she is currently working on). For first successful certification, employee earns a bronze badge in a shape of “V” (which stands for Vapiano). As employees progress, silver badge is for three different certifications completion, gold badge for six certification and black diamond badge for completion of all nine. It is brilliant how was Vapiano able to include gamification in their business model in order to motivate employees, giving them special sense of pride. People who earn all nine certificates can also apply to Vapiano international to be trainers and help with openings of new restaurants or other positions and move in their careers, which can be another motivation appealing for certain people.
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2.6 Risk and its elimination
A proper handling of risks is important piece of the corporate governance strategy of Vapiano. A core aspect of the strategy is a continuous and systematic management of entrepreneurial risks along opportunities that comes along the way. Management of risks and opportunities helps to detect and eliminate risks at an early stage and to take advantage of opportunities that present themselves to the firm. At the time of development and implementation of the risk management system, the basics of the COSO enterprise risk management framework (COSO: Committee of Sponsoring Organizations of the
Treadway Commission) were taken into consideration and used as a ground rule.
The internal risk report implies the identification, evaluation, management and monitoring of major risks. Every major and minor risk that can ultimately cause a significant threat to the firm’s success factors and that may affect its profit or liquidity situation are included in the report. The individual risks are divided into the categories -
“low”, “moderate”, “major” or “severe” based on potential of probability to cause harm.
The potential to cause harm is uniformly evaluated throughout the Group with the support of a control process in accordance with the dimensions “expected loss on income
(EBITDA)” and “probability of occurrence”. The table below shows the scales of these two dimensions (expected loss potential and probability of occurrence) as well as the risk matrix derived therefrom. (Vapiano Se Im Zollhafen, 2018)
An overall evaluation of the risk is derived and allocated to the categories “minor”,
„moderate “, „high“ or “critical” in line with the combination of the expected loss potential and probability of occurrence. The risk management is reviewed at regular intervals for its effectiveness and adapted and improved where necessary. (Vapiano Se
Im Zollhafen, 2018)
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Figure 11: Internal risk matrix
Souce: Vapiano Se Im Zollhafen, 2018
2.7 Licensing process
To relatively big extend, whether the franchise is worth an investment depends on a license contract between franchisor and franchisee. Every franchise differs in terms and conditions, as well as process how the license is obtained. When it comes to Vapiano, there is no specific process of how franchisee is chosen, it rather depends on different factors. The very first step if one is interested in owning a license to open Vapiano restaurant/restaurants is to fill out the form on the official Vapiano website. One is expected to know about the concept and what it takes to own a restaurant, ideally have some experience with gastronomy business from the past. Companies license managers and board choose franchisees carefully, as they furthered shape the reputation of Vapiano and can ultimately both hurt or increase the image of this brand. There is no specific time
36 limit how long the process takes and in fact it can take several years until one get the chance own the license. Every case is different, and it has individual aspects that are taken into consideration when choosing a new partner. Vapiano however prefers it on personal level as much as possible. Meetings with other franchise partners, conferences or internet calls are basic procedures of knowing the franchise better and being sure for both potential franchisee and franchisor that this work cooperation will be beneficial. One must not forget that like all franchises and corporations, they want to make a profit and contract determines how you profit sharing is going to look like for the rest of your cooperation with certain franchise, therefore consider all scenarios, do research on demographic factors specific for picked location. This helps with risk elimination and approximate forecast, and ultimately helps to create terms and conditions that is suitable for everyone involved.
2.8 Advantages of opening Vapiano franchise
Main difference in terms of opening restaurant and franchise restaurant is the know-how you get with the license and the brand. Because you must retain the quality, design, services offered and values that brand stands for, unified formula for many things is given. This serves as a guideline which you simply follow, which one does not have when opening his own project. It is not easy to have the courage, get a loan for a lot of money and open your own restaurant from scratch, the lack of experience can cost you a lot if you don’t have everything planned. In franchise like Vapiano you feel the support on a personal level from the company, people working in Vapiano care about the prosperity of each restaurant because this means their success too. When opening a new restaurant, company is going to offer you training for your employees, set up of restaurant, principles and standards of functionality and how are things done in practice. They even
37 send a team of Vapiano trainers to help you with the opening and stay 2 weeks after opening to help you walk on your own. This makes the tough start way more acceptable and more confident. This does not apply only for opening of the restaurant but also when problem occurs, retraining or lack of quality, firm seeks to help you progress and you don’t get this kind of support when going on your own.
2.9 Vapiano and technology
Technology is benefiting businesses more and more in 21st century, which
Vapiano took advantage of. Besides already mentioned chipcards that are basically the paying tool during the whole visit of the restaurant, firm is trying to use technology also for other futures such as “order man” or internal use in communication and control. Order man serves the purpose of increasing the comfort of customers. One of the employees carry a small ordering device with the chipcard reader, usually during the evening hours, from which he can order beverages or dolci (deserts) near table and customer does not have to walk there by himself. This is done not only to increase comfort of the customers, but also to increase up-sale and ultimately profit. In terms of internal control Vapiano monitors in the kitchen and bar not only serves for marking people’s meals on the chipcards, but also marking them into system, seeing comprehensive reports of each meal sold, extra item sold, drink or desert. This is great for evaluation of what meals are more popular and what meals should be replaced, what people like more, how effective employees work and what time does it take to serve one customer, see average bill for one person or how many guests visited Vapiano in a specific hour, day, month, period or year. Because of this, one can see the increase or decrease in progress and take a stand for upcoming decisions based on real past evidence. Another useful technology tool in this franchise are checklists. Checklist are used by the managers and owners of the
38 restaurant for real time identification of prosperity and effectivity of restaurant. It compares revenue / costs ratio. Managers on daily basis write all the food, overhead and labor costs which is compared to daily revenue. Because of this, owners see how efficiently managers manage money and whether they do not waste. Inventories done monthly is not as effective anymore, because it is hard to identify when or how the problem arises. By doing this daily, it is clear when the costs exceeded limit and why this happened, if it was because of labor costs or goods. This is far better than majority of restaurants do to this date and should take example from Vapiano. Our family business with more than 20 restaurants switched to this internal control model and had better more clear results and problems solved than before using the classic inventory system.
(Lutrario,2013)
2.10 Suppliers
Having the right suppliers is one of the key factors in having a profitable business in any type of restaurant, not only with the franchise business model. The ability to choose the right suppliers is little limited with Vapiano. In order to have same ingredients, franchises all over the world had various fixed, not negotiable suppliers which were good for maintaining same products and services in different restaurants on different continents of the world, however for owners of the restaurant, this might be inefficient, as goods are overcharged in compare with local suppliers. This is, fortunately, becoming less and less valid in 2018, as today's trend is more focused on local suppliers, fresh ingredients from domestic markets. Even if Vapiano is relatively open to this as its core concept is based on fresh food, some suppliers stay fixed for the whole franchise.
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When opening a new Vapiano restaurant, first fixed supplier you get in touch with is interior designer, which projects and makes all furniture custom made for each Vapiano.
Milan‘s world famous designer and architect Matteo Thunon whose main focus is on wooden products such as tables, chairs, bars, table boards etc. Bound to the license contract, you are obliged to work with his company, even though local furniture firms would do the same job, use the same materials for relatively lower price. (Gutnick, 2017)
Next fixed supplier that import goods into Vapianos all around the world is German firm, which offers variety of Italian products such as cheese, pancetta, bread or flour.
Coincidently, this same German firm makes and supply Vapiano with branded plates, cutlery, glasses, GNs for storage of the food, branded baskets, pasta bags or take-away boxes. The first disadvantage is that it can be ordered only once a month, meaning if managers forecast is not precise, restaurant suffers from lack of goods for certain period.
Another disadvantage is against the whole concept of the brand – freshness. As the goods can be ordered only once a month (mainly speaking about food), it must have long expiration date, which does not hurt some products, but some people can argue whether they are still considered as fresh.
Vapiano is benevolent when it comes to goods with short expiration date such as vegetables or meat, but my suspicion is that because they are trying to support local suppliers, but because it is impossible to ship everyday goods on global scale in such a low amount. Nevertheless, if this is true, restaurant can choose some of the local suppliers which is a good perk. These suppliers however must be approved by Vapiano quality control management.
Looking at fixed suppliers, I am skeptical whether their only purpose is to maintain standards and quality among different restaurants. It may be next business
40 opportunity inside the business for making more money, as the fixed suppliers can be firms closely associated with Vapiano and make nice extra revenues for themselves. As long as Vapiano will be functioning and opening new restaurants, fixed stream of money goes to supplier companies too, and it is hard to believe that Vapiano international does not have get some reward or percentage of sales out of this. (Gutnick, 2017)
From one point of view, you have already picked suppliers that will do the job exactly as needed, but for a not negotiable price, which can be a problem especially in countries as the Czech Republic, where prices are different than in Austria or Germany.
Everything has its pro and cons, but fixed suppliers are one of the most arguable aspects of the franchise business model, and Vapiano is not an exception.
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Conclusion
Main research question of this thesis was: Is franchise as a business model with focus on Vapiano franchise worth it, if yes, how to improve it?
The first part of the thesis was dedicated to discovering the theoretical basis of the chosen topic. The franchise is a concept which can be considered a huge opportunity, but the franchisee must face also some disadvantages along the owning franchise. To show a more practical example of handling the decision-making of positive and negative parts of owning a franchise, we worked on a real example of Vapiano franchise.
Considering whether franchise as a business model is worth investing in is always subjective and many aspects play a role in this decision. Vapiano as a franchise seems to be profitable and rentable business according to yearly increasing profit, however, it is also a question of what you consider to be a good investment and what do you expect in return. Our ideology of a successful restaurant is to take monthly revenue, subtract tax, roughly 33% of labor cost, roughly 33% of the cost of goods. Out of the rest subtract energy costs, leasing, rent, and other smaller monthly costs. If you can do all this and not be in red numbers, you are doing good. Now it is the question of whether what’s left out of revenue when you exclude all the costs is enough for you as a monthly salary. If yes and you think you can keep the revenues same or higher, then probably investing in the franchise is not a bad idea. It, however, isn’t always as easy, and you must consider also the worst-case scenario and count with the consequences.
Therefore, knowledge about the brand, license, and contracts, sharing of the profit, regulations, and suppliers must be taken into consideration with extreme care. I feel confident that greatest effort was put into the decision-making process of opening this
German brand with Italian cuisine, and Vapiano concept was a good and profitable investment on the Czech market.
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