BAGUETTE GALORE INTERNATIONAL

• In 1978, Adrien Scion, start a business with his

wife.
• They opened a small baguette sandwich shop in
Montreal, Canada, with the name of Baguette
Galore.
• A baguette was a long and thin loaf of French
bread and was considered a symbol of French
culture.
• The couple tried to ensure that they served fresh,
affordable, and made-to-order baguette
sandwiches. Therefore, BG became a hit with
customers on the go.
 CONTINUE..

• By 1988, BG owned and operated eight outlets in Montreal, Quebec City, and Toronto.
Adrien wanted to increase the number of outlets across other Canadian cities, and
especially in the USA.
• They decided to using the franchising model like Dunkin Donuts & McDonalds
• The franchising decision led to the rapid growth of BG within Canada and beyond. It
opened its 100th store in1995.
• By 2019, the BG brand was a significant global player in QSR (Quick Service Restaurant)
franchised chain market with over 7,000 locations in more than 67 countries.
• Outlets outside of North America numbered more than 4,000.
• BG franchise universe included 350 company-owned outlets, all located in North America.
 B A G U E T T E G A L O R E , T H A I L A N D : B R I E F H I S TO RY, O R G A N I Z AT I O N , A N D
PRODUCTS

• BG entered the Thailand market in

2008 when the first franchised store
opened in Bangkok, followed by
another
• One. In 2012 a store opened outside of
Bangkok – in Chiang Mai in the north.
• Initially, the BG organization treated
the whole of Thailand as one territory.
The territory was managed by BDA.

As shown in the diagram that the growth of BG outlets picked up a considerable pace after 2014. By 2019, BG had 58 outlets
In 2019.
 BG THAI LAND ORGANI ZATIONAL STRUCTURE 2019

In 2013, Mr. M. Chattha – a second-generation Pakistani

immigrant was appointed as BDA of the Southern
Territory As Chattha had no prior BG or any other
restaurant experience, he under went extensive training,
spread over a year.
Chattha felt that the potential of the rest of Thailand was
not fully exploited on account of the potential of Bangkok
alone being too lucrative. He, consequently, carved out two
territories, Southern – comprising Bangkok and cities south
of it and Northern – the remaining of Thailand.
Tyron Sabatta, a franchisee of BG, was appointed the BDA
of the Northern Territory.
Both Chattha and Sabatta reported directly to BG
International, Singapore As a policy, BG International
encouraged BDAs to own BG franchises as well.
According to the company, this practice seemed to reduce
the mistrusts between the franchisor and the franchisees.
 Business
Development
Agents (BDAs)
BDAs were key players in the BG
system and were typically called
business partners. They managed an
office with a few staff members who
provided on-the-job support to the
franchisees within their territory.
 NETWORK DEVELOPMENT

•   the responsibility of the BDA to identify geographical areas

where new outlets could be established without seriously
cannibalizing the sales of earlier outlets
• " BG provided a variety of proprietary tools to assist BDAs in
the recruitment of franchisees
• BG provided a standardized outlet design free of charge;
however, the franchisees needed to do their own construction
 MANAGING FRANCHISE OPERATIONS

• BDAs played a crucial role in providing managerial and financial

oversight to the franchised outlets within their territories. They were
responsible for assisting, evaluating, and ensuring that the franchisees
maintained high BG quality standards, trained and motivated staff, and
were financially successful themselves and the BG.
• BG International had traditionally allowed franchisees to set their prices
for the BG product line, as it was believed that the operators knew the
local market conditions better
 MARKETING

• One key area of responsibility of BDAs was to ensure

adequate marketing of the BG brand and its products. This
marketing was carried out at three levels, i.e., national,
territory, and local stores
• Marketing Board also provided oversight to new product
introductions.
• . BG franchisees had to maintain a separate business bank
account that allowed BG to debit money directly. Any delayed
payments were charged interest rates. The franchisees were
given enough warnings and notices before the termination
decision.
 The QSR Industry in Thailand QSRs
• QSRs were popularly known as fast-food outlets. fast food as food that could
be prepared and served quickly. Thai consumers got exposed to these
international chains in the seventies.
• The changing tastes and lifestyles of Thai urban consumers and the novelty,
decent food quality, and nice ambience led to the tremendous popularity of
the international fast-food chains.
• The competition in the QSR industry was essentially amongst international
chains. BG's main competitors are KFC, McDonald's, Pizza Hut, Burger
King, Subway, etc. Many of these chains adapted their menus to the Thai
palate and inserted some waitstaff services to benefit from the relatively
inexpensive availability of labour.
KFC was the first QSR chain to open in Thailand in 1975.
McDonald's entered the Thai market in 1980 and BG in 2008.
By 2019, fast-food outlets were found at many places, from
street corners to motorways, airports, shopping malls, and even
gas stations. The covered area and size of the competitive
outlets like McDonald's, KFC, and Pizza Hut were more
extensive than those of BG. A children's play area with modern
equipment was constructed in many outlets to attract kids where
birthday parties were frequently arranged. The upfront franchise
fees of these organizations were also significantly higher. Fast-
food restaurants usually specialized in one major food item,
such as burgers (McDonald's) or pizzas (Pizza Hut) or fried
chicken (KFC), etc. McDonald's and KFC seemed to target the
children, especially to attract the whole family to their
restaurants. BG's offerings, on the other hand, were more
targeted towards educated youth and middle-aged persons who
desired healthier, wholesome, and nutritious food. Compared to
the prices of traditional Thai food served in traditional outlets,
or even burgers, fried chicken, and pizzas served at copycat
QSR outlets, the prices of the international QSR products were
significantly higher. The ambience of these outlets was also
more modern, clean, and customer-friendly. In addition,
international QSRs undertook aggressive national and local
marketing to create brand awareness and build consumer
loyalty. The Picture presents some competitive data on
international QSRs.
 CONSUMER PERCEPTIONS OF SELECTED QSR BRANDS IN THAILAND

BG International monitored consumer perceptions of its brand via an annual brand tracking survey
conducted by a market research firm. Selected data from the 2019 survey are presented in diagram
 CONSUMER PERCEPTIONS OF SELECTED QSR BRANDS IN THAILAND
 
While BG ratings had steadily improved over the years, there were still areas of concern for franchisees, BG, and BG
International. Overall, the brand awareness rating had improved, but it was still significantly lower than KFC, McDonald's,
and Pizza Hut. Chattha felt that this was due to the relatively recent entry of BG in Thailand and lower advertising spend at
the national level by BG. Therefore, he believed that a larger proportion of marketing spend should be allocated towards
branding and awareness efforts.

Below are the Customer Value Perception data that worried BG International the most was c
 CONSUMER PERCEPTIONS OF SELECTED QSR BRANDS IN THAILAND
 
BG led the overall category in its 'positioning' of providing healthy, nutritious, and customizable food. One downside
seemed to be lower scores on food that people felt 'tasty' or that they 'craved for'. The result of all these perceptions and
attitudes was that customer patronage (share of visits) scores were relatively dismal. While the three big competitors seemed
to have had a net gain of customers, BG's scores had declined.
 BUSINESS CHALLENGES AT BG IN 2019

In 2019, BG was growing steadily but was also facing a few challenges, some of them are

Key Performance Indicator (KPI)

BG had done very well in expanding its outlet network in the previous five years. However, its average same-
store sales (a key performance indicator) had not kept pace with this growth. BG International expected this
number to grow steadily as more consumers became aware of BG and developed loyalties.
Franchise Insecurities
Some franchisees felt that opening so many new outlets had cannibalized the sales of existing outlets and,
hence, while nationwide sales revenues had increased rapidly, the store-level numbers showed meagre
increases.
Poor Value Perceptions
BG International was also worried about the relatively lower ratings of BG on the critical variable of 'Value
for Money'. This was true not only in Thailand but also in other countries in the Far Eastern region. BG
International felt that the prices of its products in the region were on the higher side leading to both lower
sales and poor 'Value for Money' perceptions.
 BUSINESS CHALLENGES AT BG IN 2019
 Difference of Opinions on Appropriate Price levels of BG Sandwiches

BAGUETTE STANDARD SANDWICHES PRICE IN EARLY 2017

 
S. NO # Description Price
     
1 Tier 1 Veggie Lovers Sandwich Bhat 70
     
2 Tier 2 Ultimate Chicken Sandwich Bhat 76
     
3 Tier 3 Shrimps Delight Sandwich Bhat 79
     
4 Tier 4 Beef Steak Sandwich Bhat 85
The prices of large baguettes were higher but not double the standard size. These prices were kept by considering the
costs, competitive prices, and the capacity-to-pay of the average Thai household.
Consequently, in early 2018, they engaged a market research company to estimate consumers' price sensitivities
at various price points in Malaysia and Vietnam. Based on this research, the consultants recommended
significantly reduced prices for each sandwich type to optimize sales.
 BUSINESS CHALLENGES AT BG IN 2019
 Increase in Input Cost Versus Lower Price Challenges
By July 2018, these prices had not increased while many cost elements, especially labour and energy costs, had
increased significantly. Franchisees were unhappy as they felt that their margins were being squeezed unnecessarily by
keeping the prices low. They wanted to increase the price. Chattha agreed with his franchisees.
On the other hand, Tyron felt that their consumers were fairly price-sensitive and that higher prices would hurt unit
sales. In August 2018, after a hectic round of debates, prices were increased by 12%.
 Promotional Schemes
Because of the increase in BG Prices sales dropped by roughly 35 percent. Franchisees initiated many promotional
schemes and local marketing efforts to stem the decline. Finally, after approximately year-long hectic efforts, the sales
situation was retrieved to a large extent.
Below table has shown the Average Number of Baguette Sandwiches Sold Per Week Per BG Store from 2016 till 2019

BG International pointed out that an average BG store in Thailand sold around 700
sandwiches per week while their counterparts in other Far Eastern countries sold about 1000.
 BUSINESS CHALLENGES AT BG IN 2019

 Value Bonanza' campaign Challenges

In mid-2018, BG International experimented with a 'Value Bonanza' campaign in Malaysia and Vietnam using the
consultants' recommended reduced prices. The results were reasonably positive, with a considerable increase in the
franchisees' sales volume and profitability. In addition, in subsequent surveys, the 'Value for Money' scores went up
significantly. BG International wanted to replicate this campaign in Thailand. However, local franchisees did not
seem to agree. They felt that Thai consumers were different from those of other countries in the region.
 
 THE 'VALUE BONANZA' CAMPAIGN

In July 2019, they decided to move away from gut feel and conduct a comprehensive price sensitivity survey of the Thai
market , The findings of the survey confirmed some of the intuitions of the franchisees while disconfirming others. Some of
the results were:

The results also suggested that the Thai prices were way above the sales optimization levels. A significant price reduction
across various sandwiches was called for. Armed with better price sensitivity information BG International strongly
recommended that BG launch the 'Value Bonanza' campaign in Thailand at the consultant's recommended prices as
possible. They advocated that it would solve the stagnation of critical same-store sales numbers, improve consumer
perceptions of good value for money, and increase loyalty. Thus, it would set the stage for the sustained long-term success
of BG.
THE CONSULTANT'S RECOMMENDED PRICES
 B A G U E T T E G A L O R E : T H E ' VA L U E B O N A N Z A ' C A M PA I G N

On October 15, 2019, Mr M. Chattha, Business Development Manager, Southern Territory, Baguette Galore, Thailand
(henceforth, BG), faced a challenging situation. Along with his colleague in the Northern Territory, he had to decide
whether to roll out the 'Value Bonanza' promotional campaign at the consultant's suggested prices or not. This
campaign, launched in 2018, had been very successful in Vietnam and Malaysia. Therefore, Chattha's bosses at BG
regional headquarters in Singapore (henceforth, BG International) were anxious to launch the campaign in Thailand as
soon as possible using the consultant's suggested prices. They felt that the campaign was sorely needed to address the
persistent and worrying consumer perceptions about BG products in Thailand and improve the somewhat stagnant BG
same-store sales and profits. BG franchisees in Thailand, however, were not convinced. They were already dissatisfied
with their bottom-line figures, and they felt that this campaign would seriously dent it further. In addition, there was
the question of advertising spend allocation for the campaign. In 2019, BG was using only 30% of the marketing
communication budgets for national brand advertising. The remaining was used for more localized marketing
activations. Chattha felt that more money might be needed both for the national launch of this campaign and for
national brand building. He believed that consumer perceptions of BG products reflected BG's lack of significant
investment in brand building. On the other hand, the franchisees were yet to be convinced of letting go of their 'hard-
earned' share of the marketing budgets. They believed that local marketing campaigns gave them far better returns.
Chattha knew that he simply could not order his decisions to be implemented by the franchisees. He needed to
convince them with logic and homework. He called an urgent meeting of the Marketing Board and the Pricing
Committee to finalise campaign-related decisions. Chattha was required to develop a sound rationale for his
recommendations to achieve broad agreement amongst cynical Board/Committee members.
 FRANCHISEE APPREHENSIONS

Franchisees were not too happy with this new campaign. They were highly skeptical of the research data
presented. Unfortunately, their price sensitivity data based on local knowledge and intuition had fallen flat in the
shape of the previous disastrous 12% price increase. Despite the recent success of the 'Value Bonanza' campaign
in other markets, franchisees were not too convinced of the campaign's potential success in Thailand. They
argued that the campaign might increase sales revenue, but it would hurt their bottom lines drastically. They
believed that a significant sales increase, sufficient to compensate for reduced margins, would not be
forthcoming. Many also worried that such a drastic reduction of prices might send negative signals to the market,
especially when the competitive QSRs were increasing prices in the face of rising inflation in the country. Some
franchisees suggested that the reduction in prices could be made but not at the levels suggested by the consultants
to soften the adverse profitability impact. Some indicated that prices of only the low popularity sandwiches be
reduced.
 THE MEETING

Chattha and Tyron were in a severe bind. As an intermediary between

BG International and the local franchisees, it was their responsibility to
ensure that both the parties were happy and prosperous. Chattha had
already ordered the advertising agency to work on the 'Value Bonanza'
campaign. They had sent a sample of posters to be used in stores
Chattha, however, felt that only local marketing was not enough for such
an important campaign. He believed that the campaign needed a
significant boost in the national advertising budget to increase unit
volumes substantially. Chattha wondered whether he should ask for an
additional 15% budget from his franchisees for this purpose. He
discussed his ideas and the concerns of franchisees in various meetings
and over phone calls, but time was running out. BG International was
asking for action. Chattha decided to call an emergency meeting of the
Marketing Board and the Pricing Committee to finalise decisions. He
understood that he needed to make a solid case to convince his
franchisees
THANKYOU