UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business Bui Chau Sang INEFFECTIVE OPERATIONAL MANAGEMENT: A CASE OF PAPA GARDEN MASTER OF BUSINESS ADMINISTRATION Ho Chi Minh City – Year 2018 UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business Bui Chau Sang INEFFECTIVE OPERATIONAL MANAGEMENT: A CASE OF PAPA GARDEN MASTER OF BUSINESS ADMINISTRATION SUPERVISOR: NGUYEN THI MAI TRANG Ho Chi Minh City – Year 2018 EXECUTIVE SUMMARY Due to high quality of life and increase in free time and income, enjoyment of cuisines has been given considerable attention – leading to a significant growth of fast-food restaurants, especially in the central area of Ho Chi Minh City such as District 1, which has turned it into a key factor of most young people’s cuisine desires In business development of restaurants like McDonald’s BT, Burger King, Double B Spagetti, Con Ga Trong, Papa Garden has been facing with fall in sales volume and low level of customer satisfaction in period of 2016 to 2017 since its first launch in 2016 In food industry, operational management is playing a vital role of a successful business performance of any service organizations The aim of this study is to investigate the main cause and the main problem leading to these above symptoms and then provide potential suggestions for attainable improvement The findings of this study identified that ineffective operational management is the key factor that results in low sales performance and low evaluation of customers on their experience at Papa Garden in comparison with others Based on discussion and theories informed, this study also offered potential solutions and action plans to improve poor service operations management and overcome difficulties in low business performance and customer dissatisfaction The two potential solutions that restauranteurs and many researchers have suggested include holding seminars, counseling sessions and team building activities; and applying recruitment and selection programs Through insights of Board of Management and related theories informed, it is obvious to take consideration to execute the alternative solution of holding seminars, counseling sessions and team building activities at this time for improvement ACKNOWLEDGEMENTS This study was conducted as my thesis under the level of Master at the Master of Business Administration Program in 2018 I would like to express my sincere thanks and gratitudes to Professor Nguyen Thi Mai Trang for all her supervision, encouragement, valuable suggestions and precious advices throughout the period of this study I would also like to take this opportunity to show my gratitudes to my colleagues at work and classmates at ISB for their continuous support I must also send my sincere thankfulness to my parents and friends for their continuos support and encouragement Bui Chau Sang TABLE OF CONTENTS EXECUTIVE SUMMARY ACKNOWLEDGEMENTS LIST OF FIGURES LIST OF TABLES INTRODUCTION 1.1 The restaurant background 1.2 The restaurant’s vision and mission PROBLEM CONTEXT 2.1 Global fast-food restaurants industry 2.2 Vietnam fast-food restaurants market 2.2.1 Current situation of Papa Garden in comparison with key competitors 13 PROBLEM IDENTIFICATION 16 3.1 Potential problems 18 3.1.1 Ineffective operational management 18 3.1.2 Inadequate inventory management and personal hygiene issue 20 3.1.3 Weak human resource management 23 3.2 Problem validation 24 3.3 Cause –and –effect diagram 27 POTENTIAL CAUSES 29 4.1 Poor supervision from managers 29 4.2 Insufficient adequate staff for efficient operations 31 4.3 Lacking of strong interaction between departments 31 4.4 Cause validation 32 ALTERNATIVE SOLUTIONS 34 5.1 The first alternative solution: Applying recruitment and selection programs 34 5.2 The second alternative solution: Implementing seminars, counseling sessions and team building activities 36 ORGANIZATION OF ACTIONS 41 6.1 Action plan from Papa Garden 41 6.2 Effectiveness measurement through taking actions 44 CONCLUSION 45 SUPPORTING INFORMATION 46 REFERENCES 69 LIST OF FIGURES Figure 1: Papa Garden’s Menu Figure 2: Global fast-food market's revenue share in 2017 Figure 3: Brand value of the 10 most valuable fast-food brands worldwide in 2017 Figure 4: Fast-food revenue in Vietnam from 2014 to 2017 (in million U.S dollars) Figure 5: Top best-selling fast-food restaurants in HCMC from 2016-2017 Figure 6: Customer’s evaluation on service quality of Papa Garden and surrounding fast food restaurants Figure 7: Reasons for why customers not intend to re-visit Papa Garden Figure 8: Cause –and –effect diagram LIST OF TABLES Table 1: Top 10 best-selling fast-food restaurants in HCMC from 2016-2017 Table 2: Customer satisfaction scores of Papa Garden and of restaurants around District Ho Chi Minh from 2016-2017 Table 3: Sales volume of Papa Garden and other restaurants around District Ho Chi Minh City in 2016, 2017 and first months in 2018 Table 4: Explored factors of restaurateurs and customer’s evaluation on management issues Table 5: Estimating cost for recruitment and selection process Table 6: Estimating cost for group meetings and team building activities Table 7: Action plan Table 8: Board of Management’s expectations in improvement of current situation of Papa Garden INTRODUCTION 1.1 The restaurant background The restaurant industry is the sphere of business which is rapidly growing nowadays In Vietnam market, entrepreneurs pay considerable attention to this field as it is becoming more in demand and widespread There is a strong competitiveness on the market in this area, thus it is essential to frequently improve the quality of service to satisfy customer’s needs and desires The better the service is provided, the more profitable the company is In view of life is getting more intense, the fast-food concept restaurants are gaining more and more popularity among full-service restaurants due to its time efficiency and cost saving In customer’s viewpoints, fast-food used to be associated with something unhealthy and calorics, however, those thoughts have considerably changed recently Increasing restaurants are offering healthy and delicious food which can fit people with gainful diets In Vietnam, there are many vegetarians, hence lots of restaurants tend to offer as many choices as possible to satisfy customer’s specific needs Papa Garden restaurant is one of the fast-food concept restaurants in Vietnam which offers healthy and beneficial food As the high level of competitiveness on the market, it is more important to overtake the quality of service, to make customer satisfied and be able to establish a loyal customer base and then boost revenue respectively Based on that, customer satisfaction and service quality research were conducted to enhance the restaurant’s effectiveness of operations and to atttract more customers for higher profitability 1.2 The restaurant’s vision and mission As Vietnam has been taking more and more steps advanced to become a developmental country in 2020s, the restaurant industry sector is more considered as one of the most important sectors in Vietnam In facts, the number of well-known fast-food chains in Vietnam is continually increasing KFC, Pizza Hut, Lotteria, Carl’s Jr., especially McDonald’s and Burger King – the two biggest name in the world of fast-food chains have been currently presented in Vietnam Most restaurants are located in busy areas like large supermarkets, main streets and tourism destinations This truly attracts plenty of customers In other sides, it indicates that there is a strong competition among these big brands in this area today; thus it it more necessary to make differences, continous innovations or to enhance the quality of services provided to meet customer needs and desires Papa Garden is a two-year-old restaurant with fast-food concept famous for its healthy and delicious food The restaurant offers a variety of vegetarian options, meals containing meat The main products are Papa’s bread, fried chicken fingers, fried rice with chicken, fried rice with minced meat and spaghetti Moreover, Papa Garden also offers various types of special beverages such as Green tea ice blended, Choco chip ice blended, Peach tea, Mint tea, Caramel frappuchino and many others fresh smoothies and juices Customers have a considerable possibility to choose from various ingredients with precise origins to experience Besides, Papa Garden offers catering for various occasions for a party or event of ten people Reservation can be made no later than four days before the event and they are processed during the weekdays only There is an official web page of Papa Garden on Facebook where customers can access and leave messages or make reservations for the catering specifically indicating the meal plans and number of attendances The menu is provided both in Vietnamese and English and it is shown as belows: Figure 1: Papa Garden’s Menu (Source: Operation Department of Papa Garden) PROBLEM CONTEXT 2.1 Global fast-food restaurants industry According to Transparency Market Research(1) – a global market research, analysis, and intelligence firms with offices in India and the U.S, the global fast-food market was valued at approximately 495 billion USD in 2014 and is expected to reach 645 billion USD by 2020, growing at a CAGR of 4.5% between 2015 and 2020 The global fast-food market observed significant expansion in North America in its early years 44.2% of global revenue share is estimated in North America, with 40% of global revenue concentrated in the United States It indicates that North America is really a large market for the fast-food concept Other developed regions also have a high concentration of industry revenue, including Europe at 17%, with a particularly high concentration in Germany (and France to a lesser extent) the powerhouse economy of the EU In the coming years, however, the non-traditional fast-food markets are expected to generate a significant chunk of the global revenue – these include Asia Pacific and Rest of the World Asia Pacific also makes up 4.2% of global revenue, and includes Australia and partly Vietnam, which has a strong affinity for fast-food(2) In addition, peer pressure among consumers to switch to Western eating habits is also a key factor influencing the growth of this market Georgraphically, North America stood as the largest market for the fast-food concept followed by Eroupe and Asia Pacific In North America, the busy lifestyle of individuals that does not leave adequate time for fresh cooking on a regular basis and dependence on convenient restaurants are driving the market It is obvious that the development of fast-food market is turning to Asia, especially developing country like Vietnam As shown in Figure 2, the sector of global fast-food restaurants market is categorized into the four segments by geography in 2017 Global Fast-Food Market's Revenue Share in 2017 North America Eroupe 35% 4% Asia-Pacific Rest of the World 44% 17% Figure 2: Global fast-food market's revenue share in 2017 (Source: Transparency Market Research in 2017) In the whole market, some restaurants chain – a group of related ones based in different locations that are operated either by franchise agreements or under shared corporate 59 A: If you have rights to change this situation, will you have any solutions to improve these problems? B: In my opinions, these problems can not be solved in short term, thus I have no ideas to suggest A: Many thanks for your time this morning! Have a great day, guy! In-depth interview 12:  Interviewer (A): Bui Chau Sang  Interviewee (B): Mr Vu Hoang Nguyen  Title: Customer at Papa Garden  Age: 35  Period of experience at the restaurant: months  Date of interview: July 04, 2018  Duration: minutes A: Good morning, guy! I am Sang – an investigator of business activities at Papa Garden Would you mind if I ask you some questions? B: It is okay A: Could you introduce something about yourself and your experience at Papa Garden? B: My name is Nguyen – a frequent guest at Papa Garden and I have been experienced here for months For my evaluation on the quality of services here, I see that the restaurant not concern about personal hygiene appropriately to ensure high standard of service delivery Actually, standard policies like uniform, manners, appearance are not good to create professional image to attract me and customers That is all I evaluate about the restaurant and they need to improve my satisfaction for further return in the future A: Many thanks for your sharings! THE FIRST QUALITATIVE RESEARCH FINDINGS  Interviewer: Bui Chau Sang  Interviewees: 12 people from different groups as belows Group 1: Managers/supervisors/staff who are currently working for Papa Garden restaurant: (A)Mr Ho Phuoc An – Owner and CEO (B) Mr Truong Tuan Tai – Staff Manager (C) Mr Le Nguyen Tri Dung – Operation Manager 60 (D)Mr Le Thanh Nhan – Operation Supervisor (E) Mr Do Hoang Hieu – Head Chef (F) Ms Truong Thu Thao – Staff Supervisor (G)Ms Le Thi Thu Trang – Server (H)Mr Nguyen Huu Dung – Chicken Staff (I) Mr Le Van Hoang – Shift Supervisor Group 2: Regular customers: (a) Mr Thai Thanh Binh – who is a frequent customer during one year (b) Mr Nguyen Tan Tai – who frequently visited Papa Garden for last months (c) Mr Vu Hoang Nguyen – who is a patron with continual visiting frequency within months Data collected after the interviews: Questions Findings Common theme Could you share (A): There are lots of issues existing The qualiy me your ideas within each department relating to services about quality services the management, inventory and personal management of hygiene and human resources of and of whole operations that (B): The operational efficiency of the are not effective, you experienced restaurant is getting worse due to our personal hygiene at Papa Garden? personnel issues, the problem of weak are connection, interaction between related maintained departments and each other properly (C): There are many problems which are identified by some staff and supervisors, such as ineffective inventory management system and lacking of supplies for operations, difficulties in monitoring and controlling all aspects of operations and empowerment issues resulting to delay of service delivery to customers (D): I realise that most employees have been working in severe conditions with consecutive shifts and under heavy not 61 pressure due to insufficient human resources (a): I realise that most of employees who are serving independently at dining without area work necessary guidances and interaction between each other Litterally, it is so hard to provide attraction and high quality of services towards customers due to weak coordination like that Sometimes, they unintentional neglected my requests as there are lots of guests visiting the restaurant at the same time, however one of the key supervision causes from is ineffective supervisors and managers (b): Although the food pricing is reasonable, there is not enough staff to capture all I need and sometimes they even could not see me in the booth seating When I need to reorder food and drinks or make some order adjustments but I feel that they seem to neglect my orders or in some cases, they not arrange my orders properly I really like the taste of cooked food and drinks here but I think that the restaurant needs to retrain some unqualified people and hire more professional and courteous employees to deliver a greater service (c): I think that personal hygiene activities including cleaning, sanitation are not maintained and sustained effectively to ensure the high standard 62 quality of services Could you tell (A): me The main reasons are poor Management some supervision from supervisors, insufficient issues, inventory reasons why staff for serving, inefficient operation management, there are and lacking of interaction between multi- inadequate existences of departments these problems? supervisors, (C): I see that two main causes are employee inadequate supervisors and employee empwerment empowerment that we should immediately solve for betterment, you know (b): In my opinion, one of reasons is ineffective inventory management leading to slow services and food quality In your (A): Management is the biggest issue Ineffective viewpoint, what directly is the cause affecting our operational management main efficiency and leading to slow service operations, poor among delivery and low sales results them inventory truly (B): The whole operations of the management leading to slow restaurant is not only inefficient as our service delivery expectations, this issue but also create a and your long distance dissatisfaction? Why think so? of between related key positions as well as poor communication you is becoming a urgent issue of low quality of service provided (C): Two typical problems leading to slow service delivery that I identify are lacking of effective supervision and inefficient operational issues (D): Insufficient staff is really a major cause of low performance in service quality and this deficiency truly decreases operational efficiency and indirectly lowers customer satisfaction 63 (E): Poor inventory management is really a typical issue that cause slow service delivery to customers What are (A): It is essential to build close space Seminars potential solutions and atmostphere such as seminars and counseling that counseling the restaurant supervisors has taken sessions and for employees, sessions; managers such as communication, better the quality interaction, motivation and willingness to support others (B): + Rebuilding new management system + Recruiting more people with high competencies, especially raising the managerial skills and conflicts handling skills + Setting up seminars program and counseling session periodically + Holding team building activities to raise interaction team for building activities to improvment in managerial skills and soft solve them and skills, of service? and and cooperation (C): Two of actions should be taken immediately is building seminars and counseling sessions and organising team building activities to improve skills and qualifications of staff and supervisors as well as to fullfil their abilities and responsibilities associated with jobs (D): I am considering two potential solutions to immediately take action Firstly, it is necessary to hire more people who are proactive, trustworthy 64 and responsible for assigned tasks In addition to those requirements, qualified candidates are able to work under pressure and cope with new challenges, despite difficulties Secondly, we should build effective recruitment and selection process to provide qualified human resources to give outstanding contribution for our performance in service quality Which solutions (B): It could be necessary to propose you think some practical exercises and practises to Practical that should be improve internal communication and exercises considered and to interaction In my experiences, these practises take? to practises help the restaurant increase the improve internal operational efficiency by creating communication occasions and creative atmostpheres for and interaction all staff and supervisors to open their minds as well as build positive culture of interaction and improvement THE SECOND QUALITATIVE RESEARCH In-depth interview 1:  Interviewer (A): Bui Chau Sang  Interviewee (B): Mr Ho Phuoc An  Title: Owner and CEO of Papa Garden restaurant  Age: 39  Working experience period: 10 years  Date of interview: July 05, 2018  Duration: 15 minutes A: Hello, nice to meet you again How are you today? 65 B: Hi Sang, I am very well You have some ideas needed to talk to me, right? A: Oh yes, that’s right.You really get my points So that, based on your previous suggestions about the solution that should be taken, could you please to share with me a little bit more about the solution will be applied in the near future? B: Well, I am very available to share with you Let’s start A: Thanks What you think about the feasibility of the best solution that you have indicated? B: In my viewpoint, I see that if we can utilise the seminars and counseling sessions to gather all staff for deep discussion, sincere sharing and good communication, positive effects bringing us are very great In perspective of employees, they can be comfortable to talk to, learn from formers and experts through practical lessen and precious experiences to cultivate and improve their skills and abilities step by step In a role of management, supervisors and managers can be highly enthusiastic to communicate, instruct and interact with their employees without embarrassment and long distance Certainly, it combines employees and supervisors/managers to cooperate and work with together with pleasure and effectivenes in operations of the restaurant In addition, teambuilding activities are more effective to create a proactive environment with pleasant atmostphere for staff to enjoy and give initiatives, not only about their daily work, but also creative ideas to bring values to the restaurant’s operations In the long term, it will help us improve management of the whole operations completely A: It is great So that, holding seminars and conseling sessions is the best choice for improvement right? B: Yes, of course, I strongly conlude that we should take immediate actions to implement this solution for betterment A: Yes, I see Thank you so much for your precious contributions today Hope that we will have more chances to talk to you in the future, guy! In-depth interview 2:  Interviewer (A): Bui Chau Sang  Interviewee (B): Mr Le Nguyen Tri Dung  Title: Operation Manager at Papa Garden  Age: 34  Working experience period: years  Date of interview: July 05, 2018  Duration: 10 minutes 66 A: Hi guy, I am so glad to meet you again today Are you okay? B: It’s great, guy! Can I help you? A: Well, in addtition to our last conversation, I want to invite you to join with me for a short interview about previous disscusion Are you free? B: Okay, I am ready to discuss, guy A: It is great How think about the feasibility of the solution that you have chosen? B: As I indicated, we should take consideration to accomplish conseling sessions and seminars to gather all staff for close discussion on their performance and giving positive initiatives and potential sugesstions for corrective actions Once the option is implemented, we will overcome the problem of ineffective operational management accordingly A: It sounds good Thanks for your deep conversation today! Have a nice day, guy! In-depth interview 3:  Interviewer (A): Bui Chau Sang  Interviewee (B): Ms Le Thi Thu Trang  Title: Server at Papa Garden  Age: 22  Working experience period: year  Date of interview: July 05, 2018  Duration: 10 minutes A: Hello Trang, Are you fine? Is your job still good? B: Hi you, I am okay My work is still normal A: Well, It’s a good new Could I ask you a little bit about the issue that we discussed before? B: Yes, you feel free to ask, guy A: Do you know about the coming plan from board of management relating to building seminars and counseling sessions? B: Hmm, yes, I A: Okay, How you think about these actions? Are you interested in this plan? B: Well, in my thoughts, I see that it is very useful for the restaurant to fix the problems in management system As I mentioned, we were lacking of adequate managers and supervisors, but I think that we can significantly improve our staff and strengthen linking between employees and managers due to encouragement, advices from experts Besides that, through games in team building activities, we also motivate and excite everyone to be more proactive and creative with inspiration in their work tasks It is so beneficial to their long term 67 sustainable development in operations of the restaurant A: Thanks for your sharing today! Have a great working day and then we will have different occasions to discuss later! THE SECOND QUALITATIVE RESEARCH FINDINGS  Interviewer: Bui Chau Sang  Interviewees: restauranteurs from Papa Garden as belows: (1) Mr Ho Phuoc An – Owner and CEO (2) Mr Le Nguyen Tri Dung – Operation Manager (3) Ms Le Thi Thu Trang – Server Data collected after the interviews: Question Findings Common theme How you think (1): I see that if we can utilise the Combine employees about the feasibility seminars and counseling sessions to and of the best solution? gather all staff for deep discussion, supervisors/managers sincere sharing, interactive to cooperate and communication, effects bringing us are work with together very great In perspective of employees, with pleasure they can be comfortable to talk to, learn effectivenes from formers and experts through operations and in of practical lessen and precious experiences restaurant; the high to cultivate and improve their skills and posibility to abilities step by step In a role of overcome the management, supervisors and managers problem can be highly enthusiastic of to ineffective communicate, instruct and interact with operational their employees without embarrassment management; and long combine distance Certainly, employees being they very useful for the and restaurant to fix the supervisors/managers to cooperate and problems in work with together with pleasure and management system operational effectivenes of the and being beneficial restaurant In addition, teambuilding to long activities are more effective to create a sustainable term 68 proactive environment with pleasant development atmostphere for staff to enjoy and give operations initiatives, not only about their daily restaurant work, but also creative ideas to bring values to the restaurant’s operations In the long term, it will help us improve management of the whole operations completely We expect that the customer satisfaction score will be increased by 10.76% and total sales volume will reach 71.4 billion dong at the end of year 2018 In addition, with the progress of action plan, we hope that our management of the whole operations will be runned smoothly and effectively (2): As I indicated, we should take consideration to accomplish conseling sessions and seminars to gather all staff for close discussion on their performance and giving positive initiatives and potential for sugesstions corrective actions Once the option is implemented, we will overcome the problem of ineffective operational management accordingly (3): I see that it is very useful for the restaurant to fix the problems in management system As I mentioned, we lack of adequate managers and supervisors, but I think that we can significantly improve our staff and strengthen linking between employees and managers due to encouragement, advices from experts Besides that, in of the 69 through games in team building activities, we also motivate and excite everyone to be more proactive and creative with inspiration in their work tasks It is so beneficial to their long term sustainable development in operations of the restaurant REFERENCES (1) https://www.transparencymarketresearch.com (2) https://www.ibisworld.com/industry-trends/global-industry-reports/hotelsrestaurants/fast-food-restaurants.html (3) https://www.statista.com (4) Namkung Y, Jang S Does food quality really matter in restaurants? 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(Source: Papa Garden s Operation Department) According to data from Operation Department of Papa Garden, figures indicates that sales volume of the restaurant has gradually decreased in the last two... personnel and operational procedures to accomplish Thus, management is one of key factors leading to the success of any organizations Mr Ho Phuoc An – Owner and CEO of Papa Garden acknowledged that Management. .. Papa Garden s Menu (Source: Operation Department of Papa Garden) PROBLEM CONTEXT 2.1 Global fast-food restaurants industry According to Transparency Market Research(1) – a global market research,