Vietnamese franchise market in early stage of development

The 2015 report of the International Franchise Association showed that the total value of franchise contracts in 2014 was $3.8 trillion. Of this, the contracts in the US made up $2.4 trillion and only $600 billion was from Asia. However, the future will belong to the continent.

Asian countries have made heavy investments to franchise their brands in other countries. The Malaysian government runs a $2 billion program to support its businesses to franchise their brands.

Meanwhile, in Vietnam, the franchise industry is still underdeveloped.

At an international trade fair on retail and franchising held in Vietnam in June 2016, Sean Ngo, director of VF Franchise Consulting, which specializes in giving advice to foreign companies to franchise their brands to Vietnamese partners, said only 144 foreign brands have been franchised in Vietnam so far.

A survey conducted by Euromonitor showed that in 2015, every household in Vietnam spent less than $4,000, the spending level which is just above Myanmar among 10 ASEAN countries. Meanwhile, the average spending of one family in Singapore was $73,704.According to Nguyen Phi Van, the founder of World Franchise Associates in South East Asia, international brands in Vietnam are still ‘sowing’, and cannot ‘harvest’ because the market is too small.

Vietnamese brands are just beginning trial franchising in the domestic market. Van commented that if they don’t have good consultants, they will have to learn for three to five years to become experienced in franchising.

In fact, there are many food and retail chains run by Vietnamese, but they just run their own chains, while there are few franchised chains.

Meanwhile, of the top 10 leading food chains globally, only two brands – Starbucks and Darden – own more than 50 percent of their branches.

In 2008, Burger King owned 12 percent of branches bearing Burger King brand, but the figure fell to 0.4 percent in 2013. Subway doesn’t own any Subway shop.

According to Van, most of the brands franchised will be in food, education and healthcare sectors. Vietnamese will mostly franchise food brands.

However, Vietnamese traditional food brands franchised such as pho (noodles served with beef or chicken), banh mi (sandwich) and banh cuon (steamed rolled rice pancake) are not from Vietnam. Pho Hoa, for example, with 80 branches in seven countries, is from the US.

Van thinks that after five years, when the spending level increases sharply and businesses have better knowledge about franchising, the Vietnamese franchise market will boom.