Figures from the Ministry of Industry and Trade show that 203 brands have so far registered as foreign franchises to Vietnam. The majority of franchisers is from the US, the UK, France, Australia, South Korea, Singapore, Thailand, Japan, Hong Kong, Taiwan, Canada and the Philippines.
Food and beverage is among sectors with the most franchising potential
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Nguyen Phi Van, chairwoman of Retail & Franchise Asia, founder and manager of World Franchise Associated, said that Vietnam ranked eighth of the top 12 markets identified by the International Franchise Association as the most valuable markets for international expansion.
The sectors with the most franchising potential are food and beverage, education, health and nutrition, business services, hospitality, fashion, beauty and skincare, entertainment, children’s services, and convenience stores, she said.
According to economist Le Dang Doanh, the business development towards franchising helps businesses utilize capital source as well as human resources from partners to expand business while increasing sales and profits from franchise fee revenue to enhance brand value, and more importantly, to upgrade the business. This is a very smart way of foreign investors to mobilize capital and human resources.
Not only bringing about large benefits to the franchiser, this model also minimizes risks to franchisees. Thanks to the prestige of large brands thanks to franchising, the products of small and medium businesses are consumed strongly in the market and are known by consumers. These businesses save a large amount of money to develop brand as well as advertising costs, sales promotion costs.
Higher growth prediction
Experts forecast that more international and regional brands will enter Vietnam’s retail and franchise sector in the coming years.
According to Suttisak Wilanan, deputy managing director of Reed Tradex, Vietnam has all the potential elements for franchise development, such as a large consumer base, rapidly rising incomes and a generation of educated, young and growing professionals, bringing an optimistic prospective for national and international brands to double its retail and franchising industry in the next few years.
Van also said that the trend that brands enter Vietnam will continue in the next three years. Among which, regional brands, including those from Malaysia, Singapore, Thailand and the Philippines will come along with international brands.
“Vietnam will continue to be a destination for international brands, especially regional brands. At the same time, local brands have started to develop platforms to promote their brands in the world market,” she said.
However, according to Van, Vietnam has not had a professional franchise market. Franchising began in the country 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.
More Vietnamese businesses are now exploring new business opportunities available via franchising, Van said, adding that the Vietnamese franchise market is still new, and local businesses do not have much understanding of or experience with it.
Nevertheless, experts suggested there are a number of risks that a franchiser should investigate carefully before engaging or expanding in business in Vietnam.
On the other hand, Vietnamese franchisees need to be knowledgeable about the franchise business as well as seek consultancy from industry experts to avoid risks, they said.
