Vietnam looks to promote franchise market

HCM City (VNA) - The Ministry of Industry and Trade (MoIT) has licensed 17 foreign enterprises specialising in franchises to operate in Vietnam so far this year, according to statistics from the ministry.

The franchise market features both domestic and foreign enterprises. The ministry said there were 213 businesses with hundreds of trademarks licensed for franchising in Vietnam over the last decade.

A series of world-famous brands in the fields of fast food, hotel, restaurant, cosmetics and clothes have been rapidly entering the Vietnamese market, with expanding scale.

These brands include McDonald's, Baskin Robbins, Pizza Hut, Kentucky Fried Chicken, Burger King, Swensen’s, Lotteria, Tous Les Jours, BBQ Chicken, Warehouse, Topshop and Coast London.

According to economic expert Le Dang Doanh, franchising helps businesses fully tap capital and human resources from their partners to expand, thus increasing sales and profits from franchise fees to improve the value of their brands and their position in the market.

This is a very smart way of mobilising capital and human resources from foreign investors, Doanh added.

Not only bringing great benefits to franchisors, this model also minimises the risk to franchisees, he noted.

Thanks to the prestige of big franchisors, products of small- and medium-sized enterprises are consumed a lot and known by consumers. Through the model, these businesses can save huge amounts of money that they would spend on advertising and promotions.

Experts said franchising in Vietnam will ramp up in the next three years, especially brands from the Southeast Asian countries as Malaysia, Singapore, Thailand and the Philippines will have the advantage of logistics and transportation.

Representatives from Malaysia’s Franchise Association said foreign investors need to be aware of everything involved in the Vietnamese market.

Malaysia has a franchise law, and its businesses that bring their national brands abroad receive much support from the Malaysian government, they said.

Foreign businesses are investing to bring their brands abroad, however, this has not yet developed in Vietnam.

At present, Vietnamese brands that have or intend to apply the franchise include Hoa Huong Duong tea, Trung Nguyen coffee, Pho 24, Highlands Coffee, Tuan Map Bread, and Viva star coffee.

Statistics from the MoIT show the number of Vietnamese businesses involved in franchising, and those licensed to operate in the field abroad is modest at only three enterprises.

Nguyen Phi Van, founder and chairwoman of Retail & Franchise Asia, said with the increasing integration and the rapid progress of bilateral and multilateral trade agreements, Vietnamese enterprises have no choice but to improve their operation and their products’ quality to compete with same brands in the region.

She said Vietnamese dishes using local materials have potential in the franchise industry for food.

Health services, salon and repair services will be the trend of franchise in the coming time, she noted, adding that the model requires enterprises to invest in plans and resources before the franchise progress.

Franchising began in Vietnam in the 1990s with the introduction of well-known fast food chains like KFC, Lotteria and Jollibee. It began in regional countries like Malaysia, Singapore and Thailand in the 1980s.

The Vietnamese franchise market is still new, and local businesses do not have much understanding of or experience with it.  

More Vietnamese businesses are exploring new business opportunities available via franchising. Nevertheless, there are risks a franchisor should investigate before engaging in business in Vietnam.

On the other hand, Vietnamese franchisees need to be knowledgeable about the business as well as seek consultancy from industry experts to avoid risks.

Doanh said Vietnamese businesses need to lift themselves through investing and use of technology to improve the quality so they can compete.-VNA