INTRODUCTION

Franchising is a commercial activity in which the franchisor permits and

requires the franchisee to purchase and sell goods and provide services
according to conditions. As a new form of business, there are many
opportunities for businesses to succeed and earn profits as well as assert their
brands. Therefore, franchising is developing quite strongly and is interested by
many businesses.

Trung Nguyen Coffee is a typical enterprise in building a franchise model in

Vietnam. With a long development process and many results in the business
process, so Trung Nguyen coffee is considered a pioneer in successfully
applying the franchise business method. Trung Nguyen's products not only
develop throughout the country but also spread to the world, contributing to
widely introduce Trung Nguyen coffee flavor to everyone. Therefore, our group
chose the topic: Research on Trung Nguyen coffee franchise model, with the
aim of analyzing the target market and business environment in the host country
to implement a business project with high efficiency.

In the process of researching the topic with limited resources, incomplete

knowledge about franchising, so the project cannot avoid errors. I look forward
to receiving your comments and suggestions to improve our work.

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 CHAPTER 1: OVERVIEW OF TRUNG NGUYEN COFFEE

1.1. Introduction to Trung Nguyen.

Full name: Trung Nguyen Coffee Joint Stock Company belongs to Trung
Nguyen Group

Short name: Trung Nguyen Coffee Company

Head office: Building 03, Phan Van Dat, Ben Nghe Ward, District 1, Ho
Chi Minh City

Established: June 16, 1996

Type of business: Joint stock company

Tel: 024 3822 1508 – 024 3822 1581

Website: www.trungnguyen.com.vn

Trung Nguyen Group Joint Stock Company was formerly a small coffee
shop established by Chairman Dang Le Nguyen Vu in Buon Ma Thuot - the
coffee capital of Vietnam.

On April 12, 2006, Trung Nguyen Group Joint Stock Company was
officially established under the business license number 0304324665 issued by
the Department of Planning and Investment of Ho Chi Minh City. Ho Chi Minh.
Trung Nguyen Group Joint Stock Company mainly operates in the fields of:

Coffee production, processing, trading and franchising Trung Nguyen

coffee brand. Trung Nguyen Coffee is one of the leading famous brands in
Vietnam and is present in more than 60 countries around the world
(vietnamreport.net.vn, 2019).

1.2. History of formation and development of Trung Nguyen.

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 The first period (1996-2001): Chairman Dang Le Nguyen Vu founded
Trung Nguyen in Buon Ma Thuot - the coffee capital of Vietnam, with the first
capital being a bicycle. In 1998, he established his first coffee shop in Ho Chi
Minh City. And 3 years later, Trung Nguyen has successfully franchised in
Japan and Singapore (trungnguyenlegend.com, 2020).

The first brand development period (2003-2012): G7 instant coffee

product was born, and was chosen as the most popular product, bringing Trung
Nguyen coffee to more than 60 countries around the world. . Trung Nguyen
Coffee is the most favorite brand among Vietnamese consumers
(trungnguyenlegend.com, 2020).

The second brand development period (2013-2017): G7 coffee marks the

10th anniversary of its birth. Launched the largest coffee shop chain in
Southeast Asia, Trung Nguyen Legend Café and the E-Coffee model. Trung
Nguyen Legend officially opened a representative office in Shanghai (China),
one of the world's leading commercial and financial centers
(trungnguyenlegend.com, 2020).

A period of sustainability and reaching the world (2018-present):

Inaugurating the World Coffee Museum at the "Global Coffee Capital" Buon
Ma Thuot. Launched Trung Nguyen Legend and Trung Nguyen Legend
Capsule energy coffee masterpieces (trungnguyenlegend.com, 2020).

1.3. The organizational structure of Trung Nguyen corporation.

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 a) Administration - Human Resources Department.

Research and draft internal rules and regulations on labor organization within
the company:

- Settlement of procedures for labor contract, recruitment, transfer,

appointment, dismissal and dismissal of employees.
- Advise the Director in settling policies and regimes for employees.
Monitor and resolve policies on social insurance, health insurance,
unemployment insurance, occupational accident and retirement.
- Develop plans on planning staff, technical workforce of the
enterprise.
- Planning, annual staff training program and distributing with
professional departments to implement.
- Formulating unit price norms for labor.
- Organize annual health check.

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 - Management of facilities and equipment of the enterprise. Make a
plan to purchase equipment and submit it to the Director. Perform property
inspection and inventory.
b) Finance-Accounting Department

The Finance - Accounting Department is the advisory and assisting the

General Director in organizing accounting work, the accounting apparatus
ensures compliance with the provisions of law on accounting work. Perform the
work of synthesizing internal management reports and external reports for
competent state agencies according to their assigned functions and tasks. Take
responsibility before the law, the Board of Directors, the General Director for
such activities in accordance with the provisions of law.

c) Sales Department.

As an advisory department, assisting the General Director in selling

products and services of the company (lending, guaranteeing, other forms of
credit granting, raising capital in the market, consulting services). finance,
capital contribution, joint venture), research and product development, market
development, customer relationship building.

1.4. Partners and Competitors.

1.4.1. Partners.
a) Domestic partners.
 Trung Nguyen has built a coffee farm in Buon Ma Thuot to supply
raw materials.
 Trung Nguyen coffee products have been distributed at BigC
supermarkets, Aeon Mall, Vinmart and a series of other convenience stores.
 Phuong Nam Packaging Production Trading Co., Ltd.
 Vietnam Packaging and Printing Ink Company Vinapackink.
b) Foreign partners.

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  Neuhaus Neotec Company - the world's leading manufacturer of
coffee processing equipment in Hoykenkamp - Germany.
 Trung Nguyen's products have been exported to more than 60
countries around the world, typically: USA, Canada, Russia, UK, Germany,
Japan...
 Trung Nguyen coffee products are sold on big supermarkets such
as Walmart, Carrefour, mini supermarket chains, convenience stores in the US
and France.
 Trung Nguyen's coffee is also widely available on China's leading
e-commerce sites such as Alibaba, Taobao.com, Tmall.com, Yihaodian.com,
JD.com....
1.4.2. Competitors.
a) Domestic competitors.

Vinacafe of Bien Hoa Coffee Joint Stock Company: Vinacafe has grown
in size dozens of times. The instant coffee factory with a capacity of 3000
tons/year, Vinacafe has become the largest enterprise in terms of production
capacity and leading in instant coffee production technology... Thus, together
with Nescafe Vinacafe can be considered as the most formidable competitor
that Trung Nguyen has to face.

Nestle's Nestcafe: is Nestle's instant coffee brand, it is also the second

largest beverage brand in the world after coca-cola. In the Vietnamese market,
this brand has become familiar to most people and is one of the brands with a
high market share in Vietnam. Currently, Nescafe has an instant coffee factory
with a capacity of 1000 tons/year allowing the company the ability to best meet
the needs of consumers.

Maccoffee is the first 3-in-1 coffee brand to appear in Vietnam, with a

unique recipe combining premium coffee beans, Maccoffee has brought
convenience to coffee lovers. Over the years, consumers have chosen
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Maccoffee for its rich taste, excellent quality and voted for Maccoffee as the
number one instant coffee in Vietnam.

b) International competitors.

Starbucks Corporation is an American multinational coffee restaurant

chain headquartered in Seattle, Washington. This is the largest coffee shop
chain in the world. As of November 2021, the company had 33,833 stores in 80
countries, 15,444 of which are located in the United States. Of Starbucks' US-
based stores, more than 8,900 are operated by the company, while the rest are
franchised.

The Coffee Bean & Tea Leaf is the oldest coffee, tea and specialty
retailer in the US, founded in 1963 by Herbert Hyman. By the 80s of the last
century, The Coffee Bean & Tea Leaf had grown to become a chain of high-end
coffee shops covering all parts of the United States. The Coffee Bean & Tea
Leaf is famous for its special recipe, along with the strictness in the selection of
input ingredients.

1.5. Oriented development.

Trung Nguyen will become a group of 10 member companies operating

in the fields of coffee growing, processing, exporting, real estate trading, animal
husbandry and communication in 2007. Currently the group has include
companies: Joint Stock Company Trade & Service G7 (G7Mart), Vietnam
Global Gateway Company (VGG) and coffee production companies…

The Group has the goal of developing a smooth domestic distribution

channel network, including about 100 leading domestic distributors in 64
provinces from now to 2010, but Trung Nguyen Group's main business is still
coffee items.

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 Trung Nguyen Joint Stock Company and G7 Trading & Service Joint
Stock Company (G7Mart) are actively preparing a roadmap to be listed on the
stock exchanges in Vietnam and Singapore.

In addition, Trung Nguyen will build a world coffee center as a world

coffee paradise in Buon Ma Thuot, a project that started in 2007.

1.6. The first franchise system in Vietnam.

Trung Nguyen Coffee is the first Vietnamese company to apply the

franchise business model. With dynamism and creativity, Trung Nguyen has
built a wide franchise system in the country and in Japan, Singapore, Thailand
and Cambodia, with a very unique style of enjoying coffee.

With the form of franchise business, Trung Nguyen coffee products are
produced from the best coffee beans of the highlands of Buon Ma Thuot,
combined with modern technology and own know-how introduced to the world.
all consumers in the country and around the world.

Today, with about 1,000 franchised coffee shops, Trung Nguyen always
brings people to enjoy the top cups of Vietnamese coffee at any franchise
location.

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 CHAPTER 2: TARGET MARKET RESEARCH

The Trung Nguyen Group is a company that deals in the production,

processing, and trading of coffee as well as the rights to trademarks, distribution
services, contemporary retail, and tourism. One of the most well-known brands
in Vietnam and one that is available in more than 60 other nations is Trung
Nguyen Coffee.

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2.1. Product introduce.
2.1.1. Trung Nguyen coffee.

Types of products: Trung Nguyen Coffee is divided into 3 product lines:

popular products, high-end and intermediate products.

 Popular products:
 G7 3 in 1 instant coffee
 G7 2 in1 instant coffee: (coffee and sugar), types: Lucky, Hero,
Win, Victory.
 High-end products, with categories:
 Weasel: Weasel coffee production worldwide is only about
200kg/year, so weasel coffee is the rarest and most expensive
specialty in the world.
 Legende: Unique bio-fermentation technology.
 Intermediate products:
 Passiona (packet 250g) gently fragrant, low caffeine content.
 Gourmet blent coffee (250g - 500g): rich taste with brown water -
House blend (250g & 500g): Strong aroma, stronger taste with
brown water.
 G7 Cappuchino instant coffee.
 Creative packaged coffee.
 Coffee beans roasted and ground (11 types).
2.1.2. The reason why Trung Nguyen coffee choose the U.S in order to
franchising.

The first, Trung Nguyen is one of the leading coffee brands in Viet Nam.
Operating in a fiercely competitive enviroment like Viet Nam with many giants
Nestle, Masan… although sometimes losing market share, Trung Nguyen still
retains its position. However, Viet Nam is not the target of CEO Dang Le

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Nguyen Vu. He always wants Asian to be the domestic mayor with Singapore
as the center launch, from which Trung Nguyen broke out into the great sea.
And just like very many other goods, the US market is a “dream” destination of
CEO.

The second, coffee demand in the US is quite stable, about 1 million tons
per year. It is great opportunity for Trung Nguyen Coffee to enter. Americans
have more demand for coffee than other countries, they also want to try more
coffee flavors in the world. Trung Nguyen is a coffee product that is easy to find
in American supermarket. But Trung Nguyen lovers are mainly from Viet Nam
and some Asian countries. Even Trung Nguyen coffee comes out to the US
mainly in the form of raw- materials that have not been deeply processed. If it’s
a processed product, it’s roasted and dissolved.

The third, the market in US is extremely fastidious with strict regulations

on tariffs and laws… has caused many obstacles for Vietnamese coffee
exporters. Exporting through the distribution system or selling online has its
own responsiblities private return. Therefore, Trung Nguyen is having a strategy
of using the “single move” , it’s franchise. In Vietnam and some Asian
countries, the form of franchising has achieved certain success. So America is
mayor that Trung Nguyen plans to apply “single move”. Franchising may be a
wise choice for Trung Nguyen, but wants to be successful. Trung Nguyen has to
deal with many difficulties. In particular, the biggest difficulty is the direct
confrontation with the giant Starbucks.

Finally, Trung Nguyen is still supported by the habit of “Go and drink
coffe” of Vietnamese people. This cultural feature hopes to contribute to
bringing Vietnamese coffee to a certain part of the world, following the trend of
attaching importance to humanistic communacation and authenic service
according to individual enjoyment, instead of culture, self-service and queuing”.

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2.2. The United States market.
2.2.1. Legal framework for franchising in Vietnam.

Before the 2005 Commercial Law, the law of our country did not mention
this new business form, businesses doing business in the form of franchising
had to apply the provisions of the civil and business law. economy, intellectual
property and technology transfer...

In 1998, Circular 1254/BKHCN/1998 guiding Decree 45/CP/1998 on

technology transfer mentioned that licensing of business privileges is also
considered as technology transfer. Next, in Article 755 of The 2005 Civil Code
stipulates the act of licensing business privilege as one of the subjects of
technology transfer.

Since 2006, franchising is officially legalized and recognized. On June

14, 2005, the 2005 Commercial Law (effective from January 1, 2006) was
promulgated, including regulations on franchising. Next, Decree No.
35/2006/ND-CP dated March 31, 2006 of the Government detailing commercial
franchising activities; On May 25, 2006, the Ministry of Trade issued Circular
No. 09 2006 TT-BTM guiding the registration of franchising activities. On
November 17, 2008, the Ministry of Finance issued Decision No. 106 2008/QD-
BTC to stipulate the fee level that prospective franchisors must pay when
registering for franchising. With the above documents, basically, the legal
corridor for franchising activities is relatively complete, ensuring the
implementation of development policies and the implementation of the state's
management function for this activity.

Under the conditions of franchising, enterprises that receive the right to

do business by this method must have an appropriate business registration line.
For franchisors the law requires them to have a business system intended to be
used for franchising that has been in operation for at least one year, the goods

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and services that are subject to the franchise with a business license. franchise in
hand. This condition is necessary because this is a systematic business form and
necessarily requires the franchisor's ability, experience and reputation in the
business.

For a commercial franchise contract, according to regulations, the basic

contents that need to be included in the contract are: (i) Contents of commercial
rights; (ii) Rights and obligations of the two parties; (iii) Bargain, recurring non-
franchise and payment method; (iv) Validity period, extension, contract
termination; (v) Settlement of disputes and violations.

Currently, according to regulations, when establishing a franchise

relationship, the parties must register at the Department of Trade for domestic
franchising and at the Ministry of Trade for franchising from abroad into
Vietnam or from Vietnam to abroad. Non-transferable fee is an amount agreed
upon by the parties themselves and is not subject to any limitation from the
State.

When joining the WTO, Vietnam has committed to provide unlimited

franchise services through cross-border supply. Since January 1, 2009, Vietnam
has officially opened its retail market since then. creating favorable conditions
for foreign investors to franchise into Vietnam. Thus, at this time, the
restrictions on the commercial presence of foreign enterprises in franchising
services have almost been removed. 2009 is also considered to be the
franchising boom in Vietnam.

With a fairly specific and detailed legal framework regulating this

activity, we can hope that the upcoming franchise model will have the
opportunity to thrive in Vietnam, especially when Vietnam has already
established itself as a franchisee. join the WTO.

2.2.2. Economic environment.

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 The United States has the largest economy in the world, with a well-
developed and highly efficient infrastructure. The United States is the largest
importer and also the second largest exporter.

The US economy develops thanks to rich natural resources,

synchronously developed infrastructure system and high labor productivity.
The value of natural resources ranks second in the world, estimated at $45
trillion in 2016. Americans have the highest household incomes and median
wages of any United Nations bloc. Economic Development and Cooperation
(OECD), and ranked 4th in terms of average income in 2010, down 2 places
compared to the highest level in 2007.

The United States has the largest consumer market in the world, with
average household spending five times larger than in Japan.

California's economy is the largest of any US state, with gross domestic

product reaching $3 trillion in 2018. If it were an independent country,
California would be the 5th largest economy in the world and contributes 13%
to the gross domestic product (GDP) of the United States. California is home to
many of the world's most valuable companies, including Apple, Alphabet Inc.,
and Facebook. California also has several important economic centers such as
Hollywood (for cinema), California's Central Valley (for agriculture), Silicon
Valley (for computers and high technology) and the Wine region.

Population

- In 2020, according to the US census, there are 331,449,281 people,

ranking 3rd most populous countries in the world. And the State of Cali, a
western coastal state of the United States with a population of 38 million people
and an area of 410000 square kilometers.
- The relatively high average life expectancy also proves that the
requirements for health care and life needs are relatively high.

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 - Per capita income is 33403 USD, ranking 12th in the country.
2.2.3. Cultural environment.
a) The world's largest economy.

The United States is the country with the largest economy in the world
with a gross domestic product of over 14 trillion USD/year, also one of the
richest economies in the world with an average income of over $47,000/year.
person/year. At the same time, the United States maintains free trade relations
with 17 countries around the world and trade turnover reaches 5 trillion USD
(according to 2010 statistics). This is a great opportunity for investors who want
to expand trade relations with the global economy. In addition, the United States
is a high consumer of goods with a population of over 310 million USD,
ranking third in the world.

b) Competitive business and attractive investment environment.

The United States is always at the top of most indicators for an attractive
business and investment environment. The United States ranks 2nd in the
ranking of AT Kearney direct investment, 4th in the World Economic Forum's
competitiveness rankings, and 5th in the ranking of the most attractive
investment environment in the world. of the World Bank.

c) Market with high consumer demand.

With 310 million people and an average household income of more than
$50,000 per year, the United States is a market with very diverse needs in
consumer tastes in terms of income and national origin, thus allowing
Successful investment in many business models. In addition, the United States
is a market that is considered to be the starting place of consumer trends such as
fashion, technology, etc., so some products are not called global products if they
have not penetrated into this market.

d) Large domestic market = Size of economies

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 The United States offers investors unique opportunities whether you are
selling to a single niche or all of the supply chain. In the United States,
everyone speaks the same language, follows the same legal system, and this
single business model can reach thousands of miles away and millions of
people. Businesses operating in the niche US market can grow bigger, more
dynamic. And given the size and scope of the US economy, the opportunities
for these business models are even wider.

e) Research and Innovation Center

The United States is the world's center for innovation. In 2007, the United
States spent 41% of the total cost to conduct the study. And nearly half of all
scientific researchers in world development work now work in the United
States.

Many U.S. businesses are on the Top 50 Most Innovative Companies

List. In this ranking, US Enterprises ranked 4th; in the top 10, US enterprises
ranked 6th; In the Top 50, US businesses ranked 22nd (according to
Bloomberg-Businessweek).

f) Protecting intellectual property rights.

The United States is a country with the world's leading intellectual

property protection (IPR) regime, each year millions of applications,
trademarks, and inventions are patented. As a result, the United States has
established and maintained a transparent legal system for intellectual property
rights. And businesses can rely on comprehensive U.S. enforcement to protect
their intellectual property rights from infringement.

g) Well-trained workforce with the ability to work effectively.

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 The United States has a highly educated workforce with over 40% of the
population aged 24-60 having completed a post-secondary education, ranking
second among developed countries.

2.2.4. The tastes of the United States customers.

The United States is not only a

leading economy in the world, but
also a large market with the third
largest population in the world after
China and India, with a young
population accounting for most of
the population structure. Most
people in the United States have a habit of drinking coffee and consider coffee a
very important drink in their daily lives.

The United States is the world’s largest coffee consumer and importer.
The United States does not grow coffee, so all coffee consumed in the United
States, including raw coffee, comes from imported sources. The country’s
coffee import demand is relatively stable per year over 1 million tons. However,
because the world coffee price often fluctuates, the import value often fluctuates
accordingly.

The demand for coffee in the US is relatively stable, about 1 million tons
per year. All Vietnamese coffee brands in the US account for about 10% to 15%
of the volume and less than 6% of the value. In particular, Trung Nguyen does
not have a large market share, with annual modest export volume. In 2011,
1,400 tons of Trung Nguyen coffee were exported to the US. In 2012, the figure
slightly increased to 1,600 tons, mainly raw coffee.

In America, Trung Nguyen has to compete with not only Vietnamese

coffee brands but also many American coffee brands. According to a survey by

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the American Coffee Association, local consumers favor Arabica coffee. Up to
70% of the coffee consumed in the US is Arabica, imported from Colombia,
Brazil, and Mexico. The 30% remaining Robusta coffee is imported from
Vietnam and Indonesia.

CHAPTER 3: BUSINESS PROJECT IMPLEMENTATION

3.1. Trung nguyen coffee franchise process.

STEP 1 : CUSTOMER CONSULTATION.

Agents who sign up for a Trung Nguyen coffee franchise will get.

The most thorough and precise guidance on the Trung Nguyen coffee
brand, including several clauses in the business contract.

Brand orientation, brand requirements and binding restrictions, coffee

quality standards, retail design, and equipment.

Details about Trung Nguyen partnership packages for investment

collaboration, franchising expenses, advantages, and incentives.

 Information on the investor, his or her business approach, taste in

interior design, and criteria for quality.
 Brand guidelines and criteria must be effectively followed.
 The pros and cons of the Trung Nguyen franchise coffee shop.

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 Trung Nguyen's suitable company assets, including buildings and
products.

STEP 2: LEARN MORE ABOUT BUSINESS PREMISES.

Regarding the Trung Nguyen Legend franchise store's commercial space:

One of the key elements affecting a coffee shop's success is its commercial
space. Regarding the location of the premises, the franchising partner is advised
to select the type appropriate for each location, such as office buildings,
restaurants, hotels, train stations, bus stations, airports, markets, convenience
stores, schools, hospitals, residential areas, and tourist attractions, depending on
the actual condition of the store. Trung Nguyen Legend will assist store owners
in designing a spatial vision when working together.

The location need not be very big, but it must have enough room for
comfortable serving and dining places, as well as logical and scientifically
separated areas for the warehouse, cashier counters, and other amenities for the
clients. both customers and staff.

The agent gave Trung Nguyen information regarding the shop's location after
learning about Trung Nguyen Legend. Within 24 hours, our construction and
design team will analyze the site, review the criteria, and react through email.
The location must match the following requirements: distance, population
density, etc.

The business will open in Costa Mesa, California, in the United States. Trung
Nguyen agrees that, unless otherwise authorized by Trung Nguyen, it will not
directly or indirectly open more stores using the name "Trung Nguyen Legend"
within a radius of 1 k stores. Agent formally concurs.

STEP 3: TRUNG NGUYEN LEGEND FRANCHISOR AGREEMENT

AND COOPERATION AGREEMENT.

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 Trung Nguyen will carry out the procedures for a cooperation agreement
and the signing of a franchise contract after choosing the investment package
for collaboration and franchising Trung Nguyen Legend and deciding on the
design model.

The rights and obligations associated with the collaboration package will
be discussed and agreed upon by the two parties. The procedures and forms
pertaining to hiring, training in bartending and menus, operations, resource
management, personnel management, etc. will be supervised by Trung Nguyen.

Mandatory clauses in the Trung Nguyen Legend franchise agreement

include things like the scope of rights to use the coffee brand, the requirements
for opening a cafe, the obligations and advantages of the franchisor and the
parent company, discounts, the validity of the agreement, and contract
liquidation.

STEP 4: SURVEY THE AREA, EVALUATE THE PROPERTY, AND

CARRY OUT SHOP PLANNING.

After Trung Nguyen Legend and the group have agreed to a franchise
agreement, the organization's design and construction team will evaluate the site
and conduct a survey to determine the best design strategy.

Trung Nguyen will take into account if this location is appropriate for the
collaboration agreement that the agent has signed, whether it is essential to
repair and renovate the property, as well as measure and collect data to
complete the model's details. Images and shop design drawings of the franchisee
or agency.

The Trung Nguyen Company will build up store and inform the agency
when construction will begin. The business contract includes all expenditures,
including those for labor, transportation, building, and other expenses, so the
agent is not responsible for any supplemental costs.

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STEP 5: CONSTRUCTION AND INSTALLATION OF EQUIPMENT IN
TRUNG NGUYEN FRANCHISE STORE.

Complete the construction and furnishing of the Trung Nguyen franchise

location. The two parties will agree to select the most ideal and integrated
solution once they have a design sketch. construction timetable Once that is
complete, Trung Nguyen franchise stores will be built. The shop should be
finished in around 20 days.

Trung Nguyen will also supply other equipment and gear, such as coffee
makers, coffee grinders, packaging supplies, toolkits, sales tools, etc.

STEP 6: TRUNG NGUYEN LEGEND FRANCHISE SHOP

PROFESSIONAL TRAINING AND TRIAL OPERATION.

The agent will receive and take control of the Trung Nguyen Legend
franchised store after the building and equipment installation are finished.
Dealers must ensure that the quality, quantity, and design adhere to the
standards, guidelines, and expectations.

Trung Nguyen will oversee the hiring and training of bartenders, chefs,
management and staff, operations, resource management, human resource
management, and process management after acceptance. process for production
management.

STEP 7: OPENING AND TRANSFERRING THE OPERATION OF

TRUNG NGUYEN LEGEND FRANCHISE STORE.

Opening and moving the franchised Trung Nguyen Legend store's

operations. The last step is to open the store and transfer the operation after
receiving professional training and trial runs. Two days after the store is
finished, dealers and franchisees will begin the setup and trial sale..

3.2. Describe marketing strategy in detail.

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 Our market penetration method is export franchise because not many
American people will accept foreign drink and the tax drink for imported drink
in some states in the U.S is still high. We will give the detail of marketing
campain in California so that Coffee can be consumed by American.

3.1.1. Customer segment.

In the US, coffee has been consumed since New Amsterdam, the modern-
day New York City, was founded in the 1600s. Since then, coffee has become
more often consumed. However, the current American coffee culture is thought
to have its roots in Italy and has developed significantly over the previous 20
years.

Despite being influenced by the Italian coffee culture that was brought
and the swiftly gaining popularity of the Barista method, there are distinct
variations between the Italian and American coffee cultures. You will
experience the wait in Italy as slow, pleasant, and fashionable. Americans, on
the other hand, are constantly in a hurry and make the most of their time. This is
totally understandable given that the US is a nation where people work very
hard, value their time, and expect order.

America is a large country with numerous categories and market so it is

really difficult for civilain to get access this product. Moreover, people in there
like having coffee, most of people them use coffee in working, going out….
That is the reason why many coffee brands are set up there. Fortunately, the
middle – age working in the office will fancy it. Besides, America has a great
market network which is really good for marketing.

Before entering the US market, Trung Nguyen coffee had many

advertising strategies such as Facebook, Tiktok ... and had advertising
campaigns for free products for customers to experience for the purpose of
learning about customer segments.

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 Trung Nguyen coffee's target customers are Men, age 25-45, like things
related to business, economics and have an enthusiastic attitude towards
business lessons. business story.

The target customer portrait of Trung Nguyen coffee can be described as

follows:

 Demographic:
 Gender: The target audience of Trung Nguyen coffee is Men.
 Geographical location: The target customers of Trung Nguyen
coffee are mainly concentrated in urban areas, in big cities is California,…
 Age: The target audience of Trung Nguyen coffee is mainly
Mature (25-35 years old) and Middle-aged people (35-45 years old).
 Income: The target customers of Trung Nguyen coffee are
concentrated in Group A Class (6000-10000 USD) and Group B Class (1800 –
5000 USD).
 Family life cycle: Trung Nguyen coffee's target customers are very
diverse, depending on the brand and business model of the company, often
concentrated in the group of single children; Married children have no children;
Married children have children; Married middle-aged children have children.
 Education: The target customer of Trung Nguyen coffee is
concentrated in the College group; University; After university.
 Attitude: The target customer of Trung Nguyen coffee likes things
related to business, economics and has an enthusiastic attitude towards business
lessons and business stories.
 Life behavior: Trung Nguyen coffee's target customers are always
looking for and discovering new areas of knowledge and experience related to
business and start-up.
 Shopping behavior:

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  Shopping places: Trung Nguyen coffee's target customers are
concentrated in home consumption channels (Supermarkets, Mini Supermarkets
for instant products); Local consumption channels (Coffee shops for F&B
model products).
 Occasion for shopping: Trung Nguyen coffee's target customers
usually buy for meals (usually in the morning).
 Purchase purpose: The target customer of Trung Nguyen coffee
belongs to the group of Habitual shoppers (Habitual purchases).
 Usage behavior:
 Frequency of use: Trung Nguyen coffee's target customers use
products and services 3-4 times/week or more.
 Amount used: The target customers of Trung Nguyen coffee
usually use 4 liters/month.
 Psychology: Trung Nguyen coffee's target customers belong to two
personality groups: Concentration, competence, control and Confident, assertive
and straightforward.

B2B business model:

 The B2B e-commerce concept relies on a network between two

companies, Trung Nguyen and South Coast Plaza. As a result, the transaction
time should be shortened and the transaction costs should go down because
fewer intermediary channels are required. severely diminished
 In addition, the costs for marketing and distribution are not too
much. This model also helps businesses be much more proactive, able to be
proactive in adjusting the needs and purposes of customers faster.
 Businesses still have plenty of chances to choose superior suppliers
at cheaper prices. B2B is a business-to-business approach that aids in removing
a lot of pointless middlemen so that products can reach retailers and customers
more quickly.
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  All business is conducted online, which is quite easy for both
buyers and sellers. Trung NguyenNguyen has the ability to upload information
about goods and services, such as details on the goods' categories, illustrations,
costs, and delivery. This allows South Coast PlazaPlaza to conveniently search
for products, get product information, or place online orders without having to
visit a physical store.
3.1.2. Marketing Strategy.

Public relations (PR) is crucial to the success of the Trung Nguyen brand.
Numerous articles, reports, etc., regarding this "coffee phenomenon" were
published in the early years of its inception, and practically all of them included
favorable information. One may argue that PR was the cause of the Trung
Nguyen fever.

Trung Nguyen Group always focuses on creating and perfecting a

comprehensive ecosystem, making a difference, becoming special and unique.
To achieve the set goals, the leadership has built and implemented marketing
strategies of Trung Nguyen coffee according to the 4P model.

3.1.2.1. Product strategy of G7 coffee.

Famous coffee firms' marketing plans solely take coffee into account as a
typical beverage. Recognizing the macroenvironmental influence on Trung
Nguyen, the Group has always been interested in the flavor and quality of
coffee in its goods.

In order to continue the success of “G7 Instant Coffee” launched in 2003,

Trung Nguyen focuses on promoting the product line “G7 Instant Coffee” with
its slogan: “Energy Coffee – Change Coffee” life". With a strong taste, intact
aroma, affirming "real coffee", G7 coffee has made a great impression on
customers and is increasingly expanding its identity.

25
 Along with concentrating on diversifying its product line, Trung Nguyen
never compromises on taste or quality. Each coffee bean used by G7 has been
meticulously chosen, and the company uses cutting-edge grinding technology
together with a special roasting and drying formula to give each cup of Trung
Nguyen coffee a distinctive flavor.

3.1.2.2. Marketing strategy of Trung Nguyen on price (Price).

Trung Nguyen always focuses on keeping the average price for each
product to have a competitive advantage in the market. The marketing strategy
of Trung Nguyen coffee on price has helped the brand achieve success in the
market

Trung Nguyen's prices are also very diverse, depending on the type of
product and the market segment and target customer of the product. Besides,
Trung Nguyen has also implemented preferential price policies, distinguishing
each customer segment.

Therefore, the pricing strategy has helped Trung Nguyen gain a

competitive edge over other influential product lines such as nescafe, vinacafe,
etc. From saving a large amount of transportation costs in the process. The
product distribution process from the factory to the stores has helped the price
of each type of Trung Nguyen coffee to be lower, stable, and easy to compete
with.

3.1.2.3. Distribution strategy.

The group developed its network before entering the US market by

franchising other nations including China, Singapore, Japan, etc. The success of
creating the Trung Nguyen network has been tremendously aided by our
marketing strategy, which is based on the 4P model.

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 Besides, Trung Nguyen has also caught up with the trend when using the
online store: "Trung Nguyen Coffee store".

Trung Nguyen has benefited from both conventional and contemporary

distribution strategies to meet its objectives. The brand presently uses three
main avenues for distribution: franchises, modern channels, and conventional
channels.

a) For the traditional channel.

With the traditional channel, G7 has applied 3 levels to bring products to

consumers:

 Wholesaler (distributor).
 Retailers (small points of sale or retail stores such as grocery
stores).
 Consumers.

In the traditional channel, Trung Nguyen mainly focuses on distributing

medium and large-scale coffees, because these product lines are being accepted
and trusted by consumers the most, with affordable, easy-to-use prices. easily
accessible to the vast majority of customers.

b) For modern distribution channels.

In the marketing strategy of Trung Nguyen coffee about the distribution

system. The brand has built the G7 Mart system. According to Trung Nguyen,
the G7 Mart system was born to meet the habits of Vietnamese people of retail
shopping. Along with determining the shopping habits of consumers close to
home, G7 Mart is usually a small-scale store such as a grocery store or a chain
of convenience stores. With this system, Trung Nguyen has distributed all
existing coffee products, in addition to distributing other products.

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 Therefore, Trung Nguyen's franchising system has overcome the
shortcomings that still exist in the form of distribution on traditional channels
such as low selling price, uniformity, and assurance like a supermarket. market
and incorporate technology into the management process. The birth of this chain
of systems has shown the strategic vision and ambition to dominate the
domestic market and reach out to the world.

c) Trung Nguyen's franchise system.

Trung Nguyen is the first Vietnamese coffee brand to apply the business
model in the form of domestic and international franchising since 1998, only
two years on the market. In just a short time, there have been about 1,000 coffee
shops franchised by Trung Nguyen across the country and 8 in foreign
countries.

The object of implementing this system, Trung Nguyen wants to target

those who want to fully enjoy the taste and feel the value of coffee. Therefore,
here only serve the best quality coffee with state-of-the-art technology and a
well-trained and knowledgeable service team. From there, expressing the
quintessential value of each type of coffee, not only providing coffee but also
satisfying the satisfaction and spiritual value of coffee.

3.3. Commercial transfer contract.

TRUNG NGUYEN CỘNG HÒA XÃ HỘI CHỦ NGHĨA VIỆT NAM

LEGEND CORPORATION Độc lập – Tự do – Hạnh phúc
Số: 53498/HĐ Buon Ma Thuat, September 19, 2022

FRANCHISOR CONTRACT

Based on:

 2005 Commercial Law.

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  Decree No.35/2006/ND – CP detailing the Commercial Law on
franchise activites commercial rights.

Based on the needs and capabilities between the parties.

Today, September 19, 2022 at Trung Nguyen Legend Corporation – we include:

FRANCHISOR: Trung Nguyen Legend Corporation (Party A)

Certificate of Business Registation No 21523

Tax code: 6000429946

Address: No 268 Nguyen Tat Thanh Street, Tan Lap Ward, Buon Ma Thuat
City

Representative: Dang Le Nguyen Vu

Position: Director

FRANCHISEE: Mr. Victor Gruen – South Coast Plaza (Party B)

Addres: Costa Mesa, California, U.S

ARTICLE 1: FRANCHISOR CONTENT

1.1. Party A by this contract allows Party B the right to open 01 business
establishment (Store) to provide services of providing Vietnamese traditional
coffee branded "Trung Nguyen". According to the system, the design that Party
A has built, established, and operated and Party B is entitled to label "Trung
Nguyen Legend", other commercial indications such as: product design,
business slogan business, business logo, business secret, advertisement owned
by Party A in business activities at Party B's Store, specifically as follows:

 Possess the authority to affix the trademark "Trung Nguyen

Legend" on the signs of Traditional Coffee Shops in accordance with the

29
Trademark Registration Certificate No. 112131 issued by the National Office of
Intellectual Property on September 1, 2002. System, transactional paperwork,
and business resources of Party B's Store are all Vietnamese.
 When Party B has been given permission by an appropriate state
agency in line with the Law on Advertising, it may use the content in
advertising banners and banners of Party A that have been utilized by Party A to
market for the System..

1.2. During the performance of this contract, Party B is under Party A's control
during business operations at the Store.

ARTICLE 2: SCOPE OF FRANCHISOR

2.1. This franchise agreement is only valid within the territory of the state of
California, USA.

2.2. Franchise form: Non-exclusive.

2.3. During the effective term of this contract, Party B is entitled to open 01
(one) Store in California, USA to conduct business activities according to the
business method as stated in Article 1 of this Contract. This store will be opened
at: Costa Mesa, California, U.S.

Party B is only allowed to change the location of the Store or open a second or
more Store with the written consent of Party A.

In addition, Party A agrees that, unless otherwise agreed by Party B in writing,

it will not directly or indirectly open another Store with the brand name "Trung
Nguyen Legend" within a 1 km radius of the Store.

ARTICLE 3: RIGHTS AND OBLIGATIONS OF PARTY A

3.1. Party A has the following rights:

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3.1.1. Ownership of all trademarks, trade names, company names, slogans,
logos, and other intangible assets displaying the "Trung Nguyen Legend" brand
identity.

3.1.2 The franchise fee, as specified in Article 6 of this Contract, shall be paid
in whole and on time.

3.1.3. Sometimes or irregularly audit Party B's operations in order to guarantee

the continuity of the franchise system and the constancy of product and service
quality

3.2. Party A has the following obligations:

3.2.1. Provide full documentation on the model of a shop selling traditional

coffee and cake products under the brand name “Trung Nguyen Legend” to
Party B.

3.2.2. Party A is responsible for providing Party B with a detailed list of items
to be built, assets to be purchased to ensure the above-mentioned brand identity
requirements (including signboard design, interior and exterior, menus, etc.) ,
uniforms, visiting cards, brochures) and guide to design, display and decorate
the Store for Party B according to the general standards of the system.

3.2.3. Party B will need initial instruction and ongoing technical support to use
the technology created by Party A.

3.2.4. Party A is responsible for the costs related to advertising, initial staff
training costs for Party B.

ARTICLE 4: YOUR RIGHTS AND OBLIGATIONS

4.1. Party B has the following rights:

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4.1.1. Party A is required to provide full information and technical assistance
related to the Trung Nguyen Traditional Coffee Brand System to be able to
operate.

4.1.2 To ask Party A to treat franchisees in the same franchise system as Party
A equitably.

4.1.3. During the valid contract period, Party B is entitled to use the trademark
"Trung Nguyen Legend" to carry out business activities at the Store, but must
ensure the brand's reputation. Party B has the right to use the trademark "Trung
Nguyen Legend" to supply coffee products according to the standards and
quality applied under the "Trung Nguyen Legend" system. These standards are
a collection of unique elements to identify Trung Nguyen brand, including
quality factors of traditional Vietnamese coffee products, service style and
identity factors. visually, such as architecture, decoration, and costumes.

4.2. Party B has the following obligations:

4.2.1. Pay the franchise fee and other payments under this franchise contract in
accordance with Article 6 of the Contract.

4.2.2. Invest in facilities, financial resources and human resources at the request
of Party A, including:

 Directly sign a space/store lease contract with the lessor after Party
A's approval on the location of Party B's Store;
 Paying all investment costs for the Store according to the system's
standards, including salary payment for employees working at Party B's store.

4.2.3. Accept the control, supervision and guidance of Party A; comply with the
requirements on design, arrangement of sales and service locations at the
request of Party A;

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4.2.4. Keeping the secret of the business secret, the recipe of the Vietnamese
traditional coffee product branded "Trung Nguyen Legend" of Party A from the
date of signing the contract and is responsible for keeping the information
confidential even after the contract is signed. franchise agreement terminates or
terminates;

4.2.5. The related rights and obligations specified in this contract may not be
transferred to another third party without the consent of Party A in writing.

4.2.6. Operating and reporting with transparency. Party B is obligated to input

all information into the sales software, the cash register system, and any other
software that Party A needs in order to manage and keep an eye on business
operations at the Store.

4.2.7. During the business operation of the Store, Party B uses raw materials
and machines on the market to ensure optimal costs, but in case Party B cannot
find a supplier, Party A will carry out transfer in the form of export.

Party B will have to submit quarterly and annual reports to the business, and the
materials available on the market that Party B intends to utilize must guarantee
product quality, food hygiene and safety, and other medical standards.

ARTICLE 5. DECLARATION OF RIGHTS AND RESPONSIBILITIES

IN THE MANAGEMENT, MANAGEMENT, AND FINANCE OF THE
STORE.

5.1. Under the supervision, support and management of Party A, Party B will
carry out the entire business to ensure that the Store is operated according to the
general standards of the System.

Party B is the subject directly named on the Business License of the Store; has
the right to self-determine the internal spending activities of the Store and to be

33
solely responsible for the business situation, the arising financial obligations of
the Store to the third party and to the host Country.

5.2. Party B is not required to contribute to the expense of Party A's general
advertising for the entire System.

5.3. Except for the expenses mentioned in Clause 5.2, Party B must bear all
other costs related to the operation of the Store, including the costs for
advertisements that Party B proposes to Party A to serve exclusively for Shop.
All these expenses must be reported to Party A on a monthly basis at Party A's
request.

ARTICLE 6: PRICES, REGULAR FRANCHISOR FEES AND

PAYMENT METHOD

6.1. Franchise fee includes 02 items: initial franchise fee and monthly franchise
fee.

6.1.1. The initial franchise fee is 200,000 USD (In words: Two hundred
thousand US dollars) and is paid in 02 installments.

6.1.2. The monthly franchise fee is calculated as: 5% of the previous month's
total sales of Party B's Store for 5 years of contract performance. This revenue
is calculated on the revenue that Party B earns from doing business under the
System provided by Party A and has not deducted the costs of the Store, unless
the materials Party B imported from outside meet the requirements of Party A.
If they meet the conditions mentioned in Article 4, Clause 4.2, and Section
4.2.12, such revenue does not include a monthly franchise fee.

The monthly franchise fee Party B is obliged to pay to Party A from the 5th to
the 10th day of the following calendar month to pay for the previous month's
franchise fee.

ARTICLE 7: VALIDITY OF CONTRACT

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7.1. The term of the Contract is 05 (Five) years from the date of signing this
contract.

7.2. After the expiration of the contract term, the two parties can agree to extend
the contract by signing the Contract Addendum.

ARTICLE 8: TEMPORARY CONTRACT, CONTRACT

TERMINATION AND DISPUTE SETTLEMENT

8.1. The contract will be suspended in the following cases:

8.1.1 Party B is in breach of the contract's Article 6 payment obligation.

8.1.2. The owner of the premises affects the reputation and brand "Trung
Nguyen Legend".

8.2. In case of suspension of the Contract, Party B is not allowed to conduct

business activities and must close the Store to ensure the fulfillment of Party B's
financial obligations as well as remedy the behavior of the lessor. cause. The
contract will be resumed when Party B has finished repairing the damage and is
approved in writing by Party A.

ARTICLE 9: CONTRACT PENALTIES AND COMPENSATION

9.1. The two parties commit to implement all the terms committed in the
contract. Any party in breach of any term of the contract shall be subject to a
fine for breach of: $65,000 (Forty-five thousand US dollars).

9.2. Except in cases of force majeure, any party who violates the contract and
causes both tangible and intangible damages to the other party is liable for
covering all damages incurred.

ARTICLE 10: Force Majeure events

10.1. The following are examples of occurrences that fall under the category of
"force majeure": war, accident, civil war, strike, embargo, and natural disaster.

35
These events take place after the contract is signed, are objective, cannot be
predicted, and cannot be repaired.

ARTICLE 11: GENERAL TERMS

11.1. This contract is complied with and governed by the laws of the Socialist
Republic of Vietnam.

11.2. The contract is valid for 5 years and is only applicable at 01 Store.

This contract consists of 7 pages, takes effect from the date of signing and is
made in two copies, each party keeps one copy, all copies have the same legal
validity.

REPRESENTED BY A REPRESENTED BY B

(Sign and write full name) (Sign and write full name)

Some key terms in the negotiating and singing process:

 On September 10, the company convened a workshop to sign a

contract between the chairman of the board of directiors and the representative
of the South Coast Plaza.
 Mr. Dang Le Nguyen Vu, Chairman of the board of Directors of
the company, represents the representative company.
 Mr. Victor Gruen, Director of the South Coast Plaza

36
 The two parties met on the same day and struck contracts with the
following major accounts:

 Commodity: G7, Weasel, Legende, Passiona, Gourmet blent

coffee, G7 Cappuchino instrant coffee, Creative packaged coffee, Coffee beans
roasted and ground.
 Delivery: 20 tons in September 2022

Delivery conditions:

 Loading Port: Sai Gon Port, Vietnam.

 Destination Port: Long Beach Port, California, USA.
 Delivery time : 35 – 40 days

Franchise fee includes 02 items: initial franchise fee and monthly

franchise fee.

The initial franchise fee is 200,000 USD (In words: Two hundred
thousand US dollars) and is paid in 02 installments.

CHAPTER 4: PROJECT’S ECONOMIC EFFICIENCY ESTIMATIONS

4.1. Expected revenue.

Revenue Price (USD)

Franchise fee 150.000
Profit percentage 40.000
Branch management fee 10.000
Total 200.000

37
 For each year, profits are expected to increase by 5% - 10% per year.

4.2. Estimated cost.

Utility costs: Increase 3%/year.

Estimated cost items of the business include:

Cost Price (USD)

Trademark registration fee 10.000
Activity monitoring fee 8.500
Cost of raw material 2.190
Packing cost 2.170
Utility costs 4.300
Fees for making documents related to export
650
(quarantine certificate....)
Forwarder rental fee 1.500
Training costs 15.000
Production cost 10.000
Total 54.310

4.3. Profit and profit margin for 5 years.

4.3.1. First year.

Factors Price (USD)

Expected revenue (year) 200.000
Franchise fee 150.000
Profit percentage 40.000
Branch management fee 10.000
Estimated cost (year) 54.310
Profit before tax 145.690
Corporate income tax 29,138
38
 Corporate profit after tax 116.552

4.3.2. Second year.

Factors Price (USD)

Expected revenue (year) 204.000
Franchise fee 150.000
Profit percentage 44.000
Branch management fee 10.000
Estimated cost (year) 54.310
Profit before tax 149.690
Corporate income tax 29.938
Corporate profit after tax 119.752

4.3.3. Third year.

Factors Price (USD)

Expected revenue (year) 208.400
Franchise fee 150.000
Profit percentage 48.400
Branch management fee 10.000
Estimated cost (year) 54.310
Profit before tax 154.090
Corporate income tax 30.818
Corporate profit after tax 123.272

39
4.3.4. Fourth year.

Factors Price (USD)

Expected revenue (year) 213.240
Franchise fee 150.000
Profit percentage 53.240
Branch management fee 10.000
Estimated cost (year) 54.310
Profit before tax 158.930
Corporate income tax 31.786
Corporate profit after tax 127.144

4.3.5. Fifth year.

Factors Price (USD)

Expected revenue (year) 218.564
Franchise fee 150.000
Profit percentage 58.564
Branch management fee 10.000
Estimated cost (year) 54.310
Profit before tax 164.254
Corporate income tax 32.850,8
Corporate profit after tax 131.403,2

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 CONCLUSION
Franchise business is a very new form in Vietnam. This is the field that
generates great revenue, promotes the brand widely with low cost but effective.
However, the level of risk in the business process is quite high. Trung Nguyen
is a typical Vietnamese enterprise in building a coffee franchise model. They
have applied relatively successfully to promote their brand to consumers.
Especially, despite facing difficulties, Trung Nguyen business has gradually
overcome and learned from experience to expand its market. From the
achievements of Trung Nguyen, Vietnamese enterprises have applied a lot of
experience in the business process. Currently, in Vietnam, there are many
businesses involved in franchising activities such as Pho 24, Kinh Do
Barkery,...

Thanks to Dr. Doan Thi Thu Hang’s support, we was able to finish the
dissertation of the subject. From that, we can understood the benefit of

41
international business. This will be the crucial specialized economic knowledge
for us to put it into practice in the future.

We sincerely thank!

REFERENCES
1) 2005 Commercial Law.
2) Circular 1254/BKHCN/1998.
3) Article 755 of The 2005 Civil Code.
4) Decree No. 35/2006/ND-CP.
5) Trung Nguyen Wikipedia.

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