(VOVworld) – In recent years, Vietnam has emerged as a franchise market. Rapid economic growth and increases in personal income, population, and consumer spending have made Vietnam attractive to franchises. Vietnam’s membership in the World Trade Organization has created more favorable conditions for Vietnamese businesses to get involved in franchising.

Over the past decade, the world’s leading brands of fashion, cosmetics, and household electronics have been available in Vietnam’s retail market. And famous brands of food, beverages, and fast food have been increasingly franchised in Vietnam. Hoang Thi Tuyet Hoa, Deputy Director of the Planning Department of the Ministry of Industry and Trade, said:

A host of foreign franchises are primed to enter Vietnam’s lucrative market Photo: Le Toan

“To date franchising in Vietnam has made steady progress. More than 800 foreign brand names have registered to do franchising in Vietnam, focusing on retailing, equipment and machine leasing, and education and training. The US, UK, Australia, and EU countries are the countries driving the trend.”

Foreign groups, mostly in the food industry, have been flocking to Vietnam seeking franchising opportunities. The most successful so far have been South Korea’s Lotteria and the US’ McDonald’s, KFC, and Pizza Hut.  Supermarket and retail chains such as the German Metro Cash & Carry and the Malaysian Parkson have also been capitalizing on the franchise model to achieve rapid growth in Vietnam. Recently, many Thai businesses have begun experimenting with the franchise model as a way to penetrate the Vietnamese market.

'Pho 24' brand has been franchised at 20 million USD

Vietnamese enterprises have emulated the business model by developing trademarks and selling them abroad. Successful Vietnamese franchisers include Pho 24, Wrap&Roll, and Trung Nguyen Coffee.

Pham Duy Cuong, Director of the Sen Viet Production and Services Company, says his company has studied the US Subway sandwich franchise with an eye to becoming a franchisee in Hanoi.

Cuong says in difficult economic times franchising is a safe and effective way of doing business as less time is spent building a brand name, developing human resources, and setting up a supply chain. More importantly, the franchiser will provide experienced financial consultancy throughout the company’s operation. Cuong told VOV:

“It’s much safer than creating a new brand. Think of it like this – in an orchard many seeds are planted. Everyone has an idea and wants to make his seed or product stand out. But we’re not sure we have enough experience to use an untested seed to grow a tree. I think Vietnam needs to learn more before it can successfully develop its own brands.”

Franchising has two big advantages over other business models: established brands and proven ways of operating. These strong points of franchising shorten the time for a start-up business to become profitable. But to effectively cooperate with foreign franchise giants with strong international name recognition, it is essential for new businesses to have a well-thought-out and carefully crafted business strategy.