Title Page
1.0 EXECUTIVE SUMMARY 1
2.0 BACKGROUND (INTRODUCTION) 2
3.0 OBJECTIVES 2
4.0 RESULTS (FINDINGS) 3
5.0 CONCLUSION 11
6.0 REFERENCE LIST 12
7.0 APPENDIX 13
8.0 PRESENTATION SLIDES 19
1.0 EXECUTIVE SUMMARY
In year 1997, Secret Recipe was founded in Malaysia. It was an independent restaurant
with only one outlet. The founder used it as pilot operation to test how Malaysian accepts
the restaurant which focuses mainly on cakes with several unusual flavors. The pilot test
was successful and the founder started to franchise it among his friend in 2000. After
finding the franchise model is workable, in 2001, the franchisor opened the business
option to potential franchisees. The business expended to other neighbour countries as
well. To date, the business has more than 150 outlets throughout the region. The
franchisor has 2 stages in the franchising procedures whereas stage 1 is pre-opening stage
and stage 2 is opening stage.
The franchisor had standardized the method of operation whereas the design and
promotions are standardized among the outlets with certain exclusions applied to selected
outlets. The franchisor uses IBM Solutions based Point of Sales (POS) application to
track the sales in real time. Besides, Enterprise Resource Planning system is implemented
and applied whereas the inventory tracked in real-time and resources allocated more
carefully. Training provided to both franchisee and the new employed staffs who will
start serving at any new outlet.
Secret Recipe entered China market in 2007 with support of Carrefour. Secret Recipe
solely owns its 3 outlets in China. China business is not yet open to franchising as it is in
several stage of pilot operation test process. The China operation catered their menu to
suit the local taste. Currently master franchising opportunity opened for India, Vietnam
and West Asia. Secret Recipe follows factory based supplies whereas the cakes
manufactured at one single location and distributed throughout its outlets around. The
business spends in research and development to research the market demand and cater the
menu to suit the trend. The franchisor targets to establish 200 outlets by end of 2009.
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2.0 BACKGROUND (INTRODUCTION)
Food and beverages industry is among one of the fast growing industry in Malaysia.
Many foreign franchise businesses had entered Malaysia and specifically into this
industry since 1950’s. Malaysian had followed the trend of franchise and several new
franchisors was born locally in this food and beverages industry. Among them are
MarryBrown Fried Chicken, Kyros Kebab, and Eden Bakery (George Miranda, 2000).
This trend continues and the industry keeps seeing new comers. According to Wahaizad
in his recent articles listed 10 established Malaysia franchises. The top of the list is Secret
Recipe as first fast growing local franchisor and followed by MarryBrown as second.
3.0 OBJECTIVES
Objectives of this report are:
• Learn Secret Recipe restaurant history
• Learn Secret Recipe franchising history
• Identify the franchising procedures
• Identify the method of operation
• Identify trainings provided
• Identify the franchisor’s globalization activities
• Highlighting success factor of the franchisor
• Highlighting the franchise business growth pattern
• Critic the existing franchise model
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4.0 RESULTS (FINDINGS)
4.1 Restaurant Overview
Secret Recipe is a Malaysia born franchise business. Their nature of business is bakery.
They are categorized in food & beverages industry. Cake is their core product. Although
they provide several other foods and drinks, they still never lose their brand awareness
and popularity over their cakes. The Secret Recipe’s real corporation name is Secret
Recipe Cakes & Café Sdn Bhd. They are locally registered company under Companies
Commission of Malaysia. The business was registered in year 1997. According to Hali J.
Edison and Carmen M. Reinhart (2000) research paper, 1997 is the year Malaysia fall
into serious financial crisis whereas faced recession, inflation and Ringgit value dropped
below the margin. This proves to be a reason why the Secret Recipe owner did not
franchise the business straight away. Neither franchising idea nor activity was in place
when the business was first founded. The brand name that the owner decided to use is
“Recret Recipe” and the brand is registered with Intellectual Property Corporation of
Malaysia (MyIPO). The headquarters of the operation is in Petaling Jaya, Malaysia.
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above the demand and creates competitions among their franchisees. The Secret Recipe
does not encourage competition among franchisee as mentioned by their Chief Executive
Officer in recent interview with BizWeek press.
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educated over the franchise business operation methods and procedures. The franchisor
will make the franchisee understand on what are the responsibilities that he has in
operating the outlet. When orientation complete, they will proceed to step 2 which is
discussion on design and renovation. The franchisor will bring in his expert designer
team to plan the interior design of the new outlet. At the same time, selection and
recruitment of new staffs will take place. In step 3, the renovations of the new outlet will
begin and meanwhile the recruited staffs will be provided off site training by the
franchisor HR team. Next stage 4, once the outlet and staffs are ready; the franchisor will
setup the equipment and machineries into the outlet. Finally they will advertisement in
newspaper or local magazines about the new outlet and conduct the grand opening fiesta.
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4.4.3 Real-time Sales Tracking
Each and every single sale in every outlet is transacted in real-time. They have database
system to track all the sales and procurement whereas the franchisor and franchisee can
monitor and get real-time statistic. This is done through online; the Point of Sale (POS)
application is installed at all outlets. This POS application provided and maintained by
IBM Solutions. It is also installed in all the order taking handheld gadget. With this
application in place, the system tracks the sales in real time and input into single
database. All outlets POS system sends input into same database. Therefore the
administrator and management team can get the statistic immediately and accurate. This
method ensures the correct sales and procurement report received by franchisor.
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4.5 Training
4.5.1 Franchisee Training
Franchise introduction courses provided to the franchisees with coloration of Malaysia
Franchise Association. This course provides basic understanding of how franchising
concept works for both franchisee and franchisor. After the basic course, the franchisor
will provide detailed training on how Secret Recipe franchise system works. This training
provided to the franchisee in franchise orientation step in stage 2 of franchising
procedures. The reporting system, the inventory tracking and all required information
will be provided to the franchisee.
4.6 Globalization
4.6.1 Expended with Master Franchisee
Secret Recipe expended their franchise business to Singapore, Indonesia, Thailand, and
Philippines. In these countries, they franchised to master franchisees whole helps them to
take care of the local business there and more flexibility for the franchisor.
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encouraging but yet the revenue is sufficient for the unit. This first outlet was used as
pilot operation to test their weakness. Up to date, Secret Recipe has 3 outlets in China and
still not franchised. The CEO believes that the sales will be encouraging after opening it
to franchisee which will be considered soon.
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them to keep their product quality consistent and they remarkably providing good product
all the time throughout all outlet. They hire and train staff off site before opening the
outlet and his helps the team to educate the small number of staffs more specifically on
how to handle the customers by keeping them on first priority in each of their service.
When staffs trained well, the service they provide is good. Secret Recipe sets a
reasonable and affordable price on their products. Customers are not forced to buy the
whole cake; they are given flexibility to buy pieces of it as well. And the price is
reasonable for every piece.
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4.8 Growth
Secret Recipe marked RM 70 million as revenue in 2005. The figure increased to RM 90
million in 2007. In the recent report released by Secret Recipe management, the business
had reached RM 100 million as revenue for 3rd quarter of 2008 and this figure expected to
reach RM 110 million at end of the year. At the same time, the business is expecting RM
20 million higher turn over this year due to their international expansion. The franchisor
is targeting to establish 200 outlets by end of next year as currently they have around 150
outlets.
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4.9.3 Inconsistent Staff Training
Staffs are trained only when opening new outlet. When a staff quit in any of the outlet,
the franchisor tends to hire new staff in rush and provide training. The new staff will be
lack of experience and no consistency found in the service provided by the staff. Secret
Recipe does not have any training institution to provide consistent training.
5.0 CONCLUSION
Secret Recipe had established well in their unique market. The operation conducted
resulting steady growth and promises profits. The business invests in research and
development department as one of their important invest and in return they are catering
the menu to suit the latest trend as well as local taste when expending global. Thus
market research conducted before opening new outlet. This avoids them from doing any
mistake when expending. At the same time, they also do not open multiple outlets if the
demand not sufficient in those areas and avoids opening near any existing outlet as they
do not encourage competition among their franchisees. They provide enough space and
market for the franchisees run the outlet. On the other hand, the business runs pilot
operation when entering new country like China. They collect the weakness then find and
implement the appropriate solutions as well as being flexible to cater the menu to suit the
local taste and demand. The only start franchising out in that particular country after the
pilot operation success. Secret Recipe is a well growing franchise business both locally
and globally. They franchise business born in Malaysia made its moves carefully until
today it had expended globally with more than 150 outlets.
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6.0 REFERENCE LIST
Chow How Ban, 19 July 2008, Secret Recipe for China, BizWeek – The Star Publication
Secret Recipe uses IBM SurePos & iWaiter solutions to empower staff to increase sales
and improve tracking of its franchisees' sales, IBM Solutions Articles archive
Secret Recipe Improves Responsiveness and Customer Relationships With an IBM POS
Solution, ZDNet Articles archive
Oxford Business Group, 2007, The Report: Malaysia 2007, Page 216, Oxford Business
Group Publication
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APPENDIX I
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APPENDIX II
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APPENDIX III
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APPENDIX IV
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APPENDIX V
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APPENDIX VI
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