Paris Baguette

3.2.1 Formation of the SPC Group

The SPC Group is the parent company of Paris Croissant, which operates a bakery franchise brand “Paris Baguette” as a food specialist. The SPC group was founded as

"Sammi Dang" in October 1945, it was opened by founder and honorary chairman Hur Chang-sung. In 1959, he changed the company name to Samlip Confectionery Corporation and established a biscuit factory in Yongsan, Seoul. In the 1960s, the company founded an automatic production bread machine facility, and it became a leading company in the Korean bakery industry in the 1970s with the introduction of new breakthroughs. In 1968, the company changed its name to Samlip Food and tried to leap into becoming a comprehensive food company (Kang, 2014).

Year 2008 2009 2010 2011 2012 2013 2014 2015

Average per person

3.9 4.1 4.4 4.7 5.0 5.4 5.8 6.6

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In 1983, Hur Young-In, chairman and son of Hur Chang-sung, took over the management of Shani, a company specializing in high-quality cakes. Thus, Samlip Foods and Shanny formed two pillars of the bread industry’s domestic production. In 1985, Shanny, led by President Hur Young-In, founded BR Korea and introduced premium ice cream to Korea in cooperation with Baskin Robbins of the United States.

In 1986, he founded the Paris Croissant and presented the Paris Baguette brand; it also started its affiliate business in 1988 and was fifth-place in the bakery industry until 1992.

However, as the number of franchisees increased each year due to its sophisticated marketing strategies and bold investments, it opened the 600^th franchise in Korea as the first in the Korean franchise industry and became the bakery industry’s top brand.

After that, Shani absorbed Samlip Food, which was hit by the IMF in Korea in 1997, and changed its name to the SPC Group in 2004. SPC has grown into a world-class bakery specialty company by successfully entering the China’s market in 2004 and entering the US in 2005.

3.2.2 Management method

In 1986, Shani founded Paris Croissant, which offers premium bakery products. It offered premium products and operated directly. Hur wanted to apply the franchise system to Paris Croissant. However, Paris Croissant was deemed unsuitable for the franchise system because it uses a high-quality and direct manufacturing method.

Nevertheless, when McDonald's and Burger King's US franchise system was successful, he believed that he could apply this franchise system to Korea (Kim, 2015).

Apart from the Paris Croissant directly managing a business that began in 1986,

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Paris Croissant launched the Paris Baguette brand in June 1988 and opened the first directly operated store in Seoul Gwanghwamun. Paris Croissant operated the Paris Croissant directly managed store after verifying that his brand, which replicated a French-style high-end bakery, gained enormous popularity among consumers for two years, to promote this, the franchise business then launched the Paris Baguette brand by introducing the system. When Paris Croissant made use of the "brand" strategy centering on directly managed stores after the market test period, Paris Baguette introduced a franchise system with a fast business development speed to popularize it more than this “popular type" strategy.

Paris Baguette, a brand developed as a franchise model of Paris Croissant, keenly focuses on expanding merchants from the early part of launching. Paris Baguette with its fresh and delicate French high-end items, unique interior, and high-quality service gained popularity with consumers (Kang, 2014). Meanwhile, the member headquarters introduced a "bake-off system" that supplies frozen dough rather than raw materials or finished items to franchise stores, so that the founder can start up without bread-making technology. This was absorbed and enabled rapid adaptation in the franchise industry.

Paris Baguette first made a branching strategy to spread merchants in the restaurant after creating stores in Seoul, the center of the bakery industry and the fundamental metropolitan area. Paris Baguette was successfully established in major commercial areas such as the Seoul Gangnam Trade Center and then expanded its base to other cities.

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3.3 85°C

3.3.1 Formation of 85°C

Gourmet Master operates Cafe 85°C; a representative of Wu Jing Shi founded the company in 2004. The company name comes from the idea that 85°C is the ideal temperature for brewing coffee; 85°C seeks to create café-type bakeries that sell tea, bread, and cakes in addition to coffee.

Wu was always interested in business since childhood. He gained business experience while managing drinks, food, and beauty businesses. Taiwan went through a startup boom in the 90s, and this was when Wu started his own business.

The specific 85°C business started after he visited Japan. Having experienced the excellent quality of Japanese restaurants and excellent service, he wanted to introduce a similar system in Taiwan. At that time, Starbucks entered Taiwan as a high-end café.

Starbucks was more expensive than other cafés, but it satisfied consumers through a high-quality strategy. Unlike this Starbucks strategy, 85°C pursued an opposite approach. For this, Wu recruited a five-star hotel chef to provide high-quality bakery products while also insisting on using Premium Guatemalan coffee beans. The price of these products at 85°C was competitive and reasonable, and therefore cheaper than Starbucks; 85°C needed to maintain its competitiveness to compete with Starbucks (Yu, 2015).

After starting the franchise business at 85°C, the branches expanded rapidly. In this success, Wu realized the need for central factories and distribution channels to defend this business. It invested 3 billion TWD to create factories and distribution

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channels.

3.3.2 Management method

The 85°C coffee company was established in Taichung City by Mr. Wu Cheng Hsueh in 2003 and the first 85°C opened in New Taipei City in July 2004. After that, 85°C has become popular and has signed contracts with many shops in Taiwan. Wu thought it needed more systematic management considering the size of 85°C (Tsai, 2013). Thus, Gourmet Master Co. Ltd. was established in February 2005; Gourmet Master Co. Ltd. is a holding company that incorporates the 85°C Bakery Cafe as its representative brand and various subsidiaries. There are many processing and trading stages in the operation of a bakery café business; these steps are divided into subjects for each role. Gourmet Master Co. Ltd. acts as a holding company that plays the part of a subsidiary company in charge of each of tasks’ various stages (Zheng, 2016). It divided into business headquarters, a raw material factory, product production factory, distributor, and regional offices. Due to the holding company’s establishment, 85°C could expand its sales force in Taiwan more systematically. Within two years, 85°C grew to over 100 shops throughout Taiwan.

85°C had opened 237 stores in Taiwan as of October 2006; Wu thinks that 85°C stores have gradually saturated the market in Taiwan and it is challenging to develop further. In September 2006, Gourmet Master Co. Ltd. established its first overseas retail store in Meriton, Australia. In May 2007, Gourmet Master Co. Ltd., which had been investigating the market reaction through the establishment of a retail store, established an overseas branch office called 85°C Cafe International Pty, Ltd.; this was the first

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foreign subsidiary of Gourmet Master Co. Ltd. In September 2007, Gourmet Master Co. Ltd. established Golden 85 Investments Inc. in California, USA and entered the US bakery market.

3.4 Comparison analysis