Franchising as a business expansion method has become increasingly popular in Asia and one region which has been performing notably well in this respect is Vietnam, says Albert Kong.
Vietnam’s healthy economy (which has been growing in leaps and bounds in the last decade), coupled with a huge, mainly-young population of 94 million (65% of Vietnam’s population is under 30 years old), has meant that more and more people (and corporations) are showing a strong interest in franchising.
Although ‘early birds’ such as Texas Chicken (at that time franchised to an Indonesian company to operate in Vietnam) and certain ice cream brands did not do too well in the 1990s, the situation now is a lot more conducive to successful franchising, due to the increasing size of Vietnam’s middle income group.
By 1997, the franchising market increased threefold with the entry of KFC. Other pioneer franchise brands in Vietnam include Lotteria (fast food) and Jollibee (fast food). As for local franchise brands, Trung Nguyen (coffee and cafés), Pho 24, Pho 2000 (both sell beef noodles) and Maxx clothing shops were the first few to appear, increasing the buzz among locals.
Foreign brands
According to the Vietnam Ministry of Industry and Trade, there are currently about 145 foreign brands that have registered their franchising businesses in Vietnam. The majority of franchisors come from the USA, Australia, South Korea. Singapore, Thailand, Japan, Hong Kong, Canada, and the Philippines.
In tandem with a growing interest in western-style food and beverage concepts (McDonald’s, Starbucks Coffee, Pizza Hut, Hard Rock Café, Domino’s Pizza, Popeye’s Chicken, Dunkin’ Donuts, Coffee Bean and Tea Leaf are all now in Vietnam), there is also a considerable demand for lifestyle-oriented products and services such as retail (e.g. convenience stores like G7 Mart, Circle K, Family Mart and Shop & Go ), education (e.g. Mathnasium, Crestcom, Cleverlearn, Dale Carnegie, and Kumon), entertainment, healthcare, and lifestyle-oriented businesses.
The enthusiasm is infectious. It is inevitable that more and more Vietnamese businesses are now exploring new business opportunities available via franchising. For example, Wrap and Roll has even expanded overseas, with potential overseas franchises like Phuc Long (café) probably following suit in the near future.
Another healthy indicator is the amount of M&A deals involving franchise brands: example Highland’s Coffee and Pho 24 being acquired by Viet-Thai International /Jollibee Foods Corporation.
Other notable facts about Vietnam that will entice franchisors include:
1) Vietnamese middle class: Vietnam now has 12 million people classified as “urban middle-class consumers.” This figure is expected to double in size to 33 million by 2020.
2) Urban living: More than 34% of the population now lives in urban areas
3) 100 per cent foreign-owned: As of 1 January 2009, franchises established in Vietnam can be 100 per cent foreign-owned. Note: Many legal firms have detailed info concerning the rules and regulations affecting franchising
4) Growing retail developments: There are rapidly emerging modern retailing channels and growing retail developments in the key cities of Ho Chi Minh City, Hanoi, Danang, Can Tho, Haiphong and Nha Trang thus making it easier to find suitable locations
5) Franchise-related trade shows: These include the Food & Hotel Vietnam, IFBO and the Vietnam International Retail & Franchise Show
I am bullish about Vietnam. The franchising scene will be even more robust should the association that represents the franchising fraternity in Vietnam join the Asia Pacific Franchise Confederation (and subsequently, the World Franchise Council).
