Vietnam sees bustling franchise sector

In the first half of this year, the Ministry of Industry and Trade granted licenses for the franchise deals of 15 overseas companies, mostly from the US, Belgium and Canada, in the food and beverage, fashion and information technology industries in Vietnam.

The figure reflected a noticeable growing interest from foreign groups in franchise operations in Vietnam, where the consumer market is getting more powerful and the population has now reached 85 million people.

Currently, the US’s Grainger Group is looking for Vietnamese manufacturers of industrial equipment and other devices to supply to the group, which already sells 850,000 different products. Grainger has established a network of 18 distribution centres and 600 branches scattered around the world.

The Vietnam Business and Franchise Association and the Business Centre from the Republic of Korea have forecast that the Vietnamese franchise sector will earn 36 million USD in revenue in 2010 if it keeps growing at the current rate.

They also forecast that by 2010 the number of franchised shops in the country will rise by 50 percent. In 2008 there were only 890.

The Japan External Trade Organisation (JETRO) has predicted that franchise activities in Vietnam will heat up in the near future, particularly in the catering and tourism industries, as a large number of Japanese businesses have shown their eagerness to start up businesses in the country.

More Vietnamese businesses are accepting franchises as an appropriate way of securing their investments when trying to establish a niche in local markets and indirectly penetrating foreign markets in a quicker and easier fashion, if they are not strong enough financially to launch overseas promotions themselves.

For example, the Phu Thai Group, one of Vietnam’s leading distributors of consumer goods, has teamed up with Japan’s Family Mart to develop a network to distribute Japanese goods in Vietnam and Vietnamese commodities in Family Mart’s stores in Japan.

Pho 24 is a successful example in the franchise business, as six years after starting up, it has established a total of 70 franchised restaurants in and out the country.

The company is mulling over a plan to increase its franchises to 80 by the end of this year with the opening of its first restaurant in Hong Kong and its second in the Republic of Korea in October.

The company expects to set up more franchised shops in Japan, China and the US in 2010.

At present, there are around 70 franchising networks operating in Vietnam, mainly Malaysia’s Parkson, Germany’s Metro, the US’s CBRE, Dilmah and KFC. Several Vietnamese businesses are joining these networks, such as Trung Nguyen Coffee, Pho 24, Kinh Do Bakery, AQ Silk and 24-Seven.

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Source: Vietnam News Agency

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