On the cusp of a Vietnam franchising boom

A Vietnam franchising boom is nearing with about 40 foreign brands reportedly seeking franchise partners in the nation.

With the signing of several free-trade agreements and Vietnam’s involvement in the Asean Economic Community (AEC), the franchise industry is expected to boom, reports VietnamNet.

Figures from the Ministry of Industry and Trade show that it has licensed more than 150 foreign-brand franchises since 2007.

VF Franchise Consulting CEO Sean Ngo says the recent free trade agreement with the EU and, more importantly, the upcoming TPP, promise to be beneficial for Vietnam. He is also Southeast Asia MD for global franchise consultancy Edwards Global Services (EGS).

While industries such as manufacturing, textiles, and food processing are sure to benefit, he says other franchised businesses that will also do well include equipment, furniture and fixtures and raw materials, as Vietnam drops import duties or lowers them to near zero under the new agreements.

He says that when the AEC materialises it promises even more benefits, as the focus in franchising is to offer products and services that cater to the Asean consumer.

“This will help many regional franchises successfully enter markets like Vietnam, and help Vietnamese franchises also expand further into the region,” says Ngo.

Retail & Franchise Asia chairwoman Nguyen Phi Van says 90 per cent of the franchisors its represents in Vietnam are from the EU and the US, primarily in the fields of food, education and training, and gyms.

“Although 90 per cent of franchise brands are in the food industry, as the market thrives over the next five years, the percentage of franchises in the service industry will increase substantially,” says Van.

She says Vietnam has the three factors needed for developing franchising. Besides its large market size, the country’s stable macro-economic situation is also key to development.

Meanwhile, Vietnamese enterprises have not really seized the opportunities from franchising. Van says the main drawbacks include inefficient operations, weak management and lack of finance.

She says that devising the right pricing strategy will be critical to success, as consumers typically have lower disposable incomes than other Asean markets.

Meanwhile, the Vietnam Retail & Franchise Show will be held in Ho Chi Minh City from June 8 to 10.