Franchise: The "playground" of foreign enterprises

Trung Nguyen Coffee is one of the Vietnamese trademarks that have been franchised abroad. Photo: ST.

Foreign enterprises are overwhelmed

According to the Ministry of Industry and Trade, from the beginning of this year, the Ministry has licensed 10 foreign companies to franchise in Vietnam. From 2007 until now, there have been 206 companies with hundreds of trademarks that have been licensed in Vietnam. In the opposite direction, the number of Vietnamese businesses involved in franchising, or licensed to conduct franchising abroad is quite modest, only 3 units.

It is easy to see that many famous brands in the world such as fast food, hotels, restaurants, cosmetics and clothes have been entering the Vietnam market and expanding their scale. Typical names include: McDonald's, Baskin Robbins, Haagen-Dazs (from the United States), Pizza Hut, Kentucky Fried Chicken, Pepper Lunch, Burger King (Singapore), Lotteria, Tous Les Jours, BBQ Chicken Swensen's (Malaysia), Oasis, Karren Millen, Warehouse, Topshop, Coast London (England), Bulgari, Moschino, Rossi (Italy) ... In fact, many experts recognized that the statistics of the state management agencies do not reflect all the excitement of the franchise market because there are brands that have been active in the market but have not been recorded in the list.

Talking to the reporter from the Customs News, Assoc. Dr. Nguyen Quoc Thinh, Head of Brand Management Subject (Vietnam University of Commerce), said that although the franchise business in Vietnam is exciting, but for many years, Vietnamese enterprises have been mostly franchisees instead of franchisors. However, this is a very normal thing because getting a franchise requires a lot of factors. First of all, the company’s brand must be prestigious, famous. This is difficult for Vietnamese enterprises because most of the Vietnamese brands are only in the domestic market, and have not reached the foreign market.

Dr. Nguyen Quoc Thinh further analyzed: The positions of franchisor and franchisee are very different. To become a franchisor, enterprises must have thorough knowledge of the market, build a relatively good system and compatible products with the market... Meanwhile, a franchisee can just be a startup business without experience in business or skills, but with a capacity for building and developing a system…..this type of business entrepreneur has a limited brand and wants to rely on a well-known, reputable brand in the market to become a "chain" of the famous brand. "Although being a franchisee has many benefits, it must be affirmed that if the company only invested in this part and abuse it, there is not any opportunity to exploit their private brand. This is a remarkable drawback," Dr. Nguyen Quoc Thinh emphasized.

Effort from many sides to "change the role"

Mr. Suttisak Wilaman, Deputy managing director of Reed Tradex (a Thailand company specializing in organizing exhibition events in the ASEAN region), said that Vietnam is an emerging market for retail and franchising. The Vietnam market is full of potential factors such as: large consumption, rapidly rising incomes and young, active consumers. These are optimistic factors for the retail sector as well as franchise development in the coming years. It is expected that from 2018 onwards, Vietnam will continue to be a potential destination for international brands, especially those from Asia, especially South East Asia. The typical brands come from Malaysia, Singapore, Thailand and the Philippines.

According to MSc. Hoang Thi Thuy (Vietnam University of Commerce): To help domestic companies take advantage of integration opportunities to develop franchises and create favorable conditions for foreign partners to expand their markets in Vietnam, the government should issue policies to support the development of this business. Accordingly, it is necessary to improve the legal corridor in line with the integration commitments that Vietnam is participating in; promote administrative reforms, facilitate business investment and simplify the Tax procedures and licensing for foreign partners coming to Vietnam.

Some experts said that nowadays, among the franchise brands in Vietnam, besides the well-known brand names, there are many new emerging brands that want to develop quickly as a branding method so they have chosen Vietnam as their destination for franchising. These brands have not even completed the model or operating procedures. They apply a discounted franchise fee to attract buyers. Therefore, the domestic enterprises should carefully consider before conducting business with a franchise. Enterprises can choose the brand that has been working properly to quickly stabilize. However, enterprises can also go along with building and perfecting models with weak brands, as long as they ensure the interests in the business problem.

Looking from the angle of domestic companies planning to franchise abroad, MSc. Hoang Thi Thuy said that the State needs to promote the provision of market focus information, enabling enterprises to participate in conferences promoting capital. Therefore, domestic companies are able to build their brands and expand their market. Moreover, businesses need to determine the feasibility of the franchise model for their industries, then restructure, consolidate and develop the internal force before applying the franchise model.

In addition, businesses need to build essential franchise support platforms, including: Brand and marketing platforms, operations and supply platforms, human and training platforms, and development platforms of a franchise system. If the company rushed to franchise without the preparation of these platforms, the failure risk of the system will be very high.

From the angle of "changing role", Vietnamese businesses become franchisors instead of franchisees, some experts said: With the coming trend, Vietnam could promote the franchise to the neighboring markets such as Laos and Cambodia. In order to promote this franchise role, in addition to self-operation of enterprises, it is necessary to have strong support from the state management agencies, especially Vietnam Trade Offices and Vietnamese Commercial Counselors in foreign countries in finding out, approaching the market, supporting enterprises for necessary procedures in building the system...

Franchise is a commercial or business activity whereby the franchisor permits and requests the franchisees to carry out the purchase and sale of goods or provide services under certain conditions. Specifically, the purchase and sale of goods and services are conducted in the manner of business organization stipulated by the franchisor and associated with trademarks, trade names, trade secrets, business slogans., business logo, advertising of the franchisor. The franchisor has the right to control and assist the franchisee in running the business.

For the franchisee, the benefits are: no need to build the brand; inherit the benefits, experience and secret of the franchisor's business organization; minimize the risk of start-up stage; Enjoy the chain effect of the system. Meanwhile, the benefits to the franchisor are: expanding the business model, increasing consumption, thereby raising the brand value; Creating a chain effect without spending a lot of money.