Commercial franchise will increase rapidly in the future

Vietnam will witness a real boom of commercial franchise from 2011, along with the opening of the retail market and its strong growth (of nearly 25 percent in 2010).



Although franchise has become a very popular business model in the world, it is still a new idea for domestic enterprises; the very first franchise deal was done in the 90s. However, recently, this model has evolved rapidly with the participations of a series of foreign brands. According to the International Franchising Committee, there have been more than 120 foreign brands presenting in Vietnam.



The Vietnam franchise centre (vietnamfranmart.com) said that in the first three months of 2011, the centre has received requests for assistance in finding domestic partners for franchising of over 30 foreign brands, mostly in the field of foods, cosmetics, and clothing, such as Math Monkey, Nelson’s, Chocolate Graphics, Burger King, Foot Solutions, Tous Les Jours, Villa & Hut, MamaFu’s, Pizza Hut, Andersen’s Ice Cream and Glamour Secrets, etc. In the first three months of 2011, the centre each month received over 200 requests of individuals and enterprises in the country for information about franchisors. According to Tran Tinh Minh Triet, Managing director of Vietnamfranmart.com, in the first three months of the year, 15 foreign brands have registered to operate in Vietnam in the fields of foods, nursery schools, etc.; the franchising price has fallen to $3,000 to $5,000, appropriate with the financial capacity of small and medium enterprises in the domestic.



By looking at just one information channel on franchise, it can be seen that the demand and supply of franchise in Vietnam have been increasing, that is why foreign brands have been seen densely on the streets. This is the opportunity for Vietnamese small and medium enterprises to access to new business models, learn technology know-how of a business model with high success rate.



However, according to experts, the massive development of foreign franchised brands is creating competitive pressures on a series of domestic brands which are and will be developing under franchising model. There are currently very few domestic brands develop under this model. They are only developing in chains of stores (coffee, noodles, mobile phones, bread-cakes, etc.) The reason is that domestic enterprises have not been daring to invest in franchise, not understood franchising techniques, lacked of professional personnel, and not yet had a comprehensive plan and strategy to follow this model. Most domestic enterprises have been focusing on technical aspects of how to get high quality, delicious taste, and large output volume, but lacking knowledge to expand more distribution stores.



A further obstacle for the development of franchise in Vietnam is the unfamiliarity of domestic enterprises with new business model, they prefer to do business in their own ways, when problem arises, they use different measures compared to franchisors do. The massive development of franchised stores has caused rental prices in urban areas, major streets and favourable locations to rise constantly, creating more difficulties for franchising activities to grow.

According to international franchisors, not being protected legally in brand protection has also made it difficult for developing franchise in Vietnam, adding that franchising should develop gradually and cautiously in Vietnam, otherwise there would be high risk.



Commenting on franchise in Vietnam, Harish Babla, Managing director of Franchise Mind Corporation (USA), the franchising race in Vietnam has passed the starting point, all brands are accelerating to seize market shares and this competition does not only require speed but also high professionalism. Regarding the prospect of this activity, International Franchise Association (IFA) said Vietnam would be the fastest growing market for franchising model due to the young population, and great potential of retail market.

Particularly, domestic investors are very active and open to new brands and new business models. Potential industries that will develop strongly under franchising model in Vietnam would be food services (fast food, coffee, bead, etc.), training services, and other business models that serve children and retail products.



With the rapid growth rate and huge potential of the market, many seminars and training programmes for domestic enterprises and individuals to have better understanding on franchising have been held. Recently, Franchise Mind Corporation (USA), with supports from US Commercial Service in HCM City and Vietnamfranmart.com, said in March and April 2011 would hold two training conferences on commercial franchise. The first is ” To develop rapidly by franchising” for enterprises that are or will be operating under franchising model, in order to provide knowledge and experiences on setting and operating under international standards. The second seminar is “How to choose the right franchised brand?” for enterprises looking for franchisors or Master License.

Tags: Vietnam business news, Vietnam companies

Posted by donniesanman on Mar 10 2011. Filed under Enterprises. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry