Introduction to Management (BUSM4185B)

HappyPizza
STUDENT NAME VU DUC DUY

ID NUMBER s3891599

LECTURER PHUC DG

ASSIGNMENT CASE STUDY _ HAPPYPIZZA

WORD COUNT 2038

NUMBER OF PAGES 8

TABLE OF CONTENTS

I. INTRODUCTION + BACKGROUND INFORMATION............3

II. CASE ANALYSIS...................................................................3

1. Poor leadership of head office............................................................................3

2. Poor working conditions.....................................................................................4

III. SOLUTIONS...........................................................................5

1
VU, DUY SEM 1/2021 – BUSM4185B
 1. Discussion between franchisors and franchisees............................................5

2. Improvement on working conditions.................................................................5

IV. RECOMMENDATIONS...........................................................6

1. Actions from franchisors and franchisees........................................................6

2. Applying a new wage structure..........................................................................6

V. CONCLUSION........................................................................7

VI. REFERENCES........................................................................7

2
VU, DUY SEM 1/2021 – BUSM4185B
I.INTRODUCTION + BACKGROUND INFORMATION:

HappyPizza is Vietnam's pizza brand with a network of franchisees and over 50 retail
stores in the country. It is said to have the largest pizza menu all over the world with
more than 2,000 choices, hence reaching 1 million sales yearly with a delivery time of
25-30 minutes. HappyPizza also picks their franchisees carefully, who believe this
franchise is a “highly profitable business” with the focus of growing high sales rather
than profit. However, HappyPizza is facing issues in head office's leadership and poor
working conditions, which can noticeably affect its business if the problems cannot be
solved completely. In addition to problems, this paper will suggest the solutions and
recommendations for the case study.

II. CASE ANALYSIS

1.Poor leadership of head office:

The first problem that HappyPizza is having is the leadership, or power of the head
office systems in dealing with the franchisees and its employees. Leadership is defined
as a set of useful skills and abilities whether one is in the top level of a company (Surji
2014), and power is defined as “the capacity to influence the behavior of others” (RMIT
University n.d.). The power in this case is the top level treating its employees, the
franchisees deal with workers and between the franchisor and franchisees. Good
leadership requires many components such as insight, self-awareness, organization,
ongoing communication and reinforcement, the ability to create a shared future vision,
recruiting qualified motivated followers to fulfill the action (Klingborg, Moore & Varea-
Hammond 2006). But in this case, HappyPizza didn’t show evidence of an acceptable
leadership with bad decisions. It only demands on making more and more profits, rather
than caring about the current situation in the franchisees, as mentioned in the case. As
a result, franchisees were under high pressure of losing a large amount of money, and
they would not make money unless they cut costs. Besides, the head office increased
ongoing fees and forced the franchisees to sell 100,000 VND pizzas, which made their
businesses more difficult. 

Surji (2014) also mentioned that leaders have a vital role with power in influencing
employees' performance and the organization's culture, and they are one of the most
important parts. Although the reasons the employees choose to work for a company
may be great benefits, a flexible schedule with a good salary, in the long term, the
relationship with the leader, or the head office, in this case, is more significant to make
them continue. In the HappyPizza case, the staff and the franchisees had difficulties in
controlling the situation due to the high level's decisions, and consequently, the
franchisees were failed to pay adequate salaries for its employees (lower than the
minimum hourly wage and not paying the overtime ones) and let the employees work in
the 200-degree condition since they have to cut costs in order to make profits and
maintain the franchise.    

3
VU, DUY SEM 1/2021 – BUSM4185B
      

4
VU, DUY SEM 1/2021 – BUSM4185B
2.Poor working conditions:

The second core problem that HappyPizza is facing is poor working conditions,
including wage underpayment and the working environment. This is also the poor ethics
in the organization, which is defined as “moral philosophy, is a branch of philosophy that
involves defending and recommending concepts of right and wrong behaviour”, and “the
systematic thinking about the moral consequences of decisions” (RMIT University
n.d.), as well as this situation can affect the stakeholders, in this case are the
employees in the franchisees.

According to Cooper and Kroeger (2017), wage theft, or wage underpayment, is the
practice of employers failing to pay workers the full wages which they can legally earn.
The salary theft can be illustrated in many ways, such as refusing to pay the contractual
wages, paying lower than the minimum, not paying for all hours for work, or not paying
overtime salary. About the working environment, it is defined as a ‘physical
geographical location such as offices which involves factors like air quality, noise level,
employees’ welfare, or even adequate parking.’ (Thiruchelvan 2017). Finally, the
stakeholders are the people or “any parties in the organisation’s external and internal
environment that are affected by the organisation’s decisions and actions”, so the
business must think about them before making any decisions, especially the internal
ones.

 If a company decides to pay its employees lower than what they deserve to earn, it is
an unethical behavior and will lead to several consequences for both employees and
the company. TERRA Staffing Group (2019) mentions that pay has a direct impact on
productivity and engagement, so if that company makes an adequate payment,
employees will do their work better; otherwise, it will lead to poor performance. Besides,
the underpayment also leads to the lack of allegiance, which disengaged employees
tend to do the bare minimum job to get the work done and don’t care about additional
time or effort to help the company to achieve the goal. According to research conducted
by Vermandere (2013), the feeling of not being paid fairly related to the workload will
have a negative impact on motivation, and employees will be more intended to change
their jobs, which can be led to a high turnover rate. High employee turnover will create a
loss of human capital investment, as well as many costs for the replacement. It will also
affect profitability, customer service, and satisfaction (Ongori 2007). Besides, the
working environment, along with factors such as health and safety also has a significant
impact on employee's engagement, productivity, and comfort level.

The evidence for this case is many workers in HappyPizza are unhappy due to the
widespread underpayment and the stores often fail to pay the staff full entitlements,
which has become a “standard practice". An example that is mentioned in the case is
Mr. Long, who had to work from 50 to 60 hours a week, but the store only reported 40
hours since anything above 43 hours may receive a penalty from the franchiser. He was
promised to be paid the overtime wage, but he never received it. In addition, the

5
VU, DUY SEM 1/2021 – BUSM4185B
working environment in HappyPizza through Mr. Long's description is not comfortable
enough for the workers with “suffocating heat", “without air conditioning and work close
to the 200-degree oven". Finally, he couldn't stand the situation, which made him quit
this job and be an employee turnover, due to the fact that his tolerance reached its limit.

III. SOLUTIONS

1.Discussion between head office and franchisees:

The issue that the HappyPizza franchisees are facing is related to the misunderstanding
between them and the head office. The solutions suggested here is the discussion
between both parties to improve the organizational culture. Franchisees expect
confirmation, trust, and relationship satisfaction from the head office to minimize
potential conflict within the franchising relationship (Frazer et al, 2012). According to the
franchisees in the research, the franchisors often fail to reach the expectation gap and
trust of them by not providing all factual information, only focusing on sales with
unrealistic expectations. On the other hand, the franchisors said that the franchisees
may not have enough education or experience of running businesses, and they usually
blame the head office rather than their own since there's a gap between the
expectations and what they actually achieved. Hence, trust between franchisors and
franchisees is vulnerable.

Back to the HappyPizza case, it is suffering the same issue. Therefore, it is suggested
that there should be a meeting and additional training between HappyPizza corporate
level and the franchisees to solve the internal problems in the franchisees' stores. The
ongoing fees of each store and the minimum price of each pizza can be a topic to be
discussed. Furthermore, there's a model suggested by Stefania Sigurdson Forbes for
the case, where the questions are asked directly such as “Is the performance problem
important or not?” or “Is there any skill deficiency to solve the problem?”, if yes, the
franchisees and employees need formal training, if no, it will lead to knowledge
deficiency questions (Forbes 2019). The model is said not to start the “blame game”
between the franchisor and franchisee, instead, it will analyze the situation and can be
used to propose the solutions.      

2.Improvement on working conditions:

Wage is one of the most important factors to keep the workers retaining their jobs,
especially for low-income workers, who may not afford a loss in income. Minimum wage
violations took a significant percentage of low-wage workers already struggling to make

6
VU, DUY SEM 1/2021 – BUSM4185B
ends meet (Cooper and Kroeger 2017). The working environment is another factor that
affects productivity and employee engagement.

To solve the problems, the Human Resources (HR) part of the franchisees should
consult with the head office to find the most suitable way to deal with the wage issue for
employees, as well as considering adjusting the variable pay for individual performance,
which is said to “improve organization and team financial performance" and “creating a
more competitive total compensation market position" (WorldatWork 2003). Besides,
extra fringe benefits, forms of indirect compensation given to an employee in an
organization (Zirra and Mambula 2019), should be added to the contract with
employees to attract, retain and motivate them to perform the best in their jobs. Such
benefits can be retirement plans, health insurance, workers' compensation, or meal
subsidization (bambooHR n.d.). Furthermore, the Maslow Hierarchy of Needs can be
used in the improvement of working conditions, which means HappyPizza stores must
try their best to enhance the variable pay for their employees to fulfill their physiology
needs, and then to safety and security level with the fringe benefits By applying these
methods, the HappyPizza employees will see that they are respected and will
collaborate with the stores to overcome the present difficulties. 

  
IV. RECOMMENDATIONS

1.Actions from franchisors and franchisees:

There needs to be an understanding between the franchisors and franchisees of

HappyPizza to perform the work better in the future. According to Clauson (2013), on
the side of the franchisor, HappyPizza corporate level should listen to the franchisees to
show their concerns, and meetings, conferences between the top level and the
franchisees should be organized frequently to help to build a sense of trust and security.
Secondly, HappyPizza's managers can help the franchisees to improve their businesses
and deal with difficulties in several ways like providing seminars and newsletters,
keeping the franchisees up with the marketing plan. Conflicts may happen anytime, but
if there exists a strong relationship between the franchisees and the brand, the issue
can be resolved more comfortably for both sides as the main goal of this cooperation is
making profits, but “a healthy relationship is a key to financial success".

On the other side, the franchisee also has responsibilities to make the relationship
sustainable. Clauson (2013) also states that the franchisee can seek advice from the
franchisor to increase the store’s performance. If the franchisee opens communication
tracks about performance with the franchisor, the top level will be more understanding
when the franchising store is in difficulties or underperforming. Additionally, the
franchisees, HappyPizza's stores specifically, should follow the rules laid out for them.
But if the franchisee finds problems with the rules, it can contact for communication and
find out a solution. In this case, this method can improve relationships and trust
between both parties, the top level of HappyPizza and the franchisees.

7
VU, DUY SEM 1/2021 – BUSM4185B
2.Applying a new wage structure:

The HR part of HappyPizza corporate level and the franchisees should research the
current salary base of the F&B industry carefully. Tahir (2016) indicates that a good
salary package is a strong factor in the organizational commitment of an employee.
After deciding the new wage structure, the HR part must decide more on other aspects
such as variable pay, fringe benefits, compensation. 

Next, HR should discuss with the employees about the future policies, since they are
the main stakeholders of salaries and benefits. If there is any disagreement, HR should
receive the comments and try to adjust the rules to fit the majority. And finally, the HR
and the managers must talk to the employees about the benefits of the change, and
persuade them to accept the new offer. Furthermore, the action of bringing the policy
into real practice needs to be witnessed clearly so as not to create conflicts like in the
case. 
   

V. CONCLUSION  
In conclusion, HappyPizza is facing issues of leadership, working conditions, as well as
other issues related to management concepts such as power, ethics, organization
culture, therefore the solutions and recommendations are proposed for the company
and its franchisees to solve completely in the present and future. As a result, the
business of the franchisees and the benefits of the employees can be resolved and they
can aim for higher sales and profits. 

VI. REFERENCES
bambooHR, Fringe Benefits, bambooHR, viewed 22 April 2021,
<https://www.bamboohr.com/hr-glossary/fringe-benefits/#:~:text=Some%20of%20the
%20most%20common,%2C%20commuter%20benefits%2C%20and%20more>

Clauson, M 2013, Franchise Combat: The Franchisor & Franchisee Relationship

Dynamic, University Honors Capstone: Business Policy & Strategy, viewed 22 April
2021,
<https://auislandora.wrlc.org/islandora/object/1213capstones
%3A92/datastream/PDF/view>

Cooper, D and Kroeger, T 2017, Employers steal billions from workers’ paychecks each
year, Economic Policy Institute, 10 May, viewed 22 April 2021, 
<https://files.epi.org/pdf/125116.pdf>

8
VU, DUY SEM 1/2021 – BUSM4185B
Forbes, S.S 2019, How to Resolve Franchisee Problems Effectively, FRANCHISE
BLAST, 27 June, viewed 22 April 2021,
<https://www.franchiseblast.com/how-to-resolve-franchisee-problems-effectively/>

Frazel, L., Weaven, S.K.W., Giddings, J., Grace, D.A. 2012, ‘What went wrong?
Franchisors and franchisees disclose the causes of conflict in franchising’, Qualitative
Market Research: An International Journal, vol.15, no.1, pp.87-103, viewed 22 April
2021, ResearchGate database.
<https://www.researchgate.net/publication/254189315_What_went_wrong_Franchisors
_and_franchisees_disclose_the_causes_of_conflict_in_franchising>

Klingborg, D.J, Moore, D., Varea-Hammond, S. 2006, ‘What is Leadership?’, Journal of

Veterinary Medical Education, vol.33, no.2, pp.280-283, viewed 23 April 2021,
ResearchGate database.
<https://www.researchgate.net/publication/6937144_What_Is_Leadership>

Ongori, H 2007, ‘A review of the literature on employee turnover’, African Journal of

Business Management, pp. 49-54, viewed 23 April 2021,
<https://academicjournals.org/article/article1380537420_Ongori.pdf>

RMIT University n.d., ‘Environment and Culture’, RMIT University, viewed 22 April 2021.

RMIT University n.d., ‘Power, Politics and Ethics’, RMIT University, viewed 22 April
2021.

Surji, K.M. 2014, ‘The Positive Affect of Leadership on Employee Performance and
Its Impact on Improving Workplace Environment in Addition to Organizational Culture’,
European Journal of Business and Management, vol.6, no.25, pp.150-161, viewed 22
April 2021, ResearchGate database.
<https://www.researchgate.net/publication/313636490_The_Positive_Affect_of_Leaders
hip_on_Employee_Performance_and_Its_Impact_on_Improving_Workplace_Environme
nt_in_Addition_to_Organizational_Culture>

Tahir, U. 2016, ‘Impact of Salary Structure, Employee Perception and Working

Conditions on the Organizational Commitment in Sme’, European Journal of Business
and Management, vol.8, no.7, pp.64-72, viewed 23 April 2021, 
<https://core.ac.uk/download/pdf/234627136.pdf>

TERRA Staffing Group 2019, The Long-Term Effects of Underpaying Employees,

TERRA STAFFING GROUP, 23 July, viewed 22 April 2021,
<https://www.terrastaffinggroup.com/resources/blog/long-term-effects-underpaid-
employees/>

Vermandere, C 2013, Impact of salary on job satisfaction, Eurofound, 06 May, viewed

22 April 2021,
<https://www.eurofound.europa.eu/publications/article/2013/impact-of-salary-on-job-
satisfaction>

9
VU, DUY SEM 1/2021 – BUSM4185B
WorldatWork 2003, VARIABLE PAY AND ORGANIZATIONAL PERFORMANCE,
WorldatWork, viewed 22 April 2021, 
<https://www.worldatwork.org/docs/research-and-surveys/e157963vp04.pdf> 

Zirra, C and Mambula, C.J. 2019, ‘Impact of Fringe Benefits on Employee Performance:
A Study of Nasco Group, Jos Plateau State’, viewed 23 April 2021, ResearchGate
database.
<https://www.researchgate.net/publication/331586595_Impact_of_Fringe_Benefits_on_
Employee_Performance_A_Study_of_Nasco_Group_Jos_Plateau_State> 

10
VU, DUY SEM 1/2021 – BUSM4185B