Franchising essentially entails two parties: the franchisor and the franchisee. The franchisee purchases the right to use the franchisor’s business model, trademarks, associated IP rights, proprietary knowledge and goodwill.
Franchising essentially entails using a firms existing business model in order to grow and has proven to be a highly successful business model throughout the modernised world, though franchising in Vietnam remains modest, in contrast to its potential.
Safe and effective trading method
Pham Duy Cuong, Director of the Sen Viet Production and Services Company, who is keen on franchising, says his company has studied the US Subway fresh sandwich franchise with an eye to becoming a franchisee in Hanoi.
Cuong says in difficult economic situations, franchising is considered a safe and effective way of doing business as less time is spent building a brand name, developing human resources, and setting up a supply chain.
In short, it isn’t necessary to reinvent the wheel, Cuong says, the franchisor provides a complete roadmap for success on which a start-up venture can capitalize and thrive.
Just as importantly, the franchisor provides experienced financial consultancy, further increasing chances for entrepreneurial success, he says. Businesses in the food services sector are having particularly good success with the franchise model in Vietnam.
Foreign groups such as – Lotteria from the Republic of Korea and McDonald’s, KFC and Pizza Hut from the US – have been expanding their operations rapidly across Vietnam through franchising.
Additionally, supermarket and retail chains such as German Metro Cash & Carry and Malaysian Parkson have been capitalizing on the use of the franchise model to accelerate growth in Vietnam.
Recently, many Thai businesses have begun experimenting with the franchise model as a method of penetrating the Vietnamese marketplace.
To effectively cooperate with foreign franchise giants with strong international brand name recognition, it is essential for local businesses to have a well thought out and carefully crafted business strategy, says Sean Ngo, Director General of the Vietnam Franchise Company.
Ngo adds the world’s leading franchise agents are eyeing newly emerging markets like China and India. Furthermore, they are searching for enterprising cooperation partners who possess a real passion and want to closely attach to their brand names.
Opportunity for local investors
Since early 2013, more than 200 brand names have registered to do franchising in Vietnam, and over 60% of them have operated successfully, says Nguyen Truong Son, Director of the Vietnam Chamber of Commerce and Industry (VCCI) branch in Ho Chi Minh City.
This is an astonishingly high success rate for start-up businesses proving the business model is effective in Vietnam, Son says, adding, he is bullish on the strong development of the trend in the country.
There are many franchisors offering excellent ground floor opportunities for domestic partners to team up, especially in the larger cosmopolitan areas such as big cities at very reasonable prices.
There are now around 300 restaurant and fast food chains of both domestic and foreign businesses operating in Vietnam. The world’s leading brand names like KFC, Jolibee, Lotteria, Pizza, Hurt, and Subway, which have been in Vietnam for more than 15 years currently account for more than 40% of market share in the industry.
The BBQ Chicken franchise, one of the world’s top 13 leading brand names of Genesis group from the Republic of Korea, is a typical example. It presently has over 4,000 restaurants in more than 50 countries around the globe. Since it first appeared in Vietnam in 2007, the BBQ Chicken franchise has increased to more than 20 restaurants in Hanoi.
Sim Hwang Jin-BBQ Vietnam Director General attributes the success to the company’s commitment to supply good quality fast food, deserving of its motto “Best of the Best Quality”.
Albert Kong, President of the Asiawide Franchise, says Vietnam is still at the dawn of the franchise movement and there is much promise on the horizon thanks to the allure of Vietnam as a good place to do business in the eyes of foreign businesses.
Kong attributes the appeal of Vietnam of the foreign business community to the government’s stable politics, the economy’s fast-paced growth and large consumer market.
Kong is confident that franchising in Vietnam is here to stay and will be a highly successful model for doing business in the country in the coming time. More international groups will move to Vietnam in the future through franchising, he says unhesitatingly.