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Vietnam to see more franchise deals in 2012, market boom from 2014   2012-06-18 - TBKTSG

More and more international brands are seeking the way to penetrate the Vietnamese market through franchising contracts. Analysts believe that 2012 would be another bustling year for franchising deals.

 

The US Baskin-Robbins ice cream producer has returned to Vietnam with a very impressive record: just within the first 10 days since the opening in late 2011, the ice cream imports, which were scheduled to be sold within four months, were sold out.



With the unexpected encouraging sales, Ngoi Sao Xanh Food Joint Stock Company, the franchised Vietnamese partner of Baskin-Robbins, has every reason to believe in the feasibility of the plan to increase the number of ice cream shops from three now to six by the end of 2012.



Nguyen Thanh Nam, General Director of Ngoi Sao Xanh has committed to open at least 31 ice cream shops by 2015.



In fact, Baskin-Robbins once set foot in Vietnam in 1994, which was then brought to Vietnam by a Viet Kieu (overseas Vietnamese). However, the brand later had to leave Vietnam because of the loss and unfavorable conditions with the high import tariff of 70 percent.



The low market demand and the unfavorable conditions were also the reason that made KFC, a roast chicken brand, which arrived in Vietnam in 1997, also suffered loss for seven consecutive years.



However, the franchising market has been developing very rapidly in the last five years. A lot of well known brands in the world, like Goloria Jeans Coffees, Lee’s Sandwiches, Jollibee, BBQ, Pizza Hut, Bud San Francisco mostly in the food sector, such as fast food, bread, pizza, coffee and ice cream, have penetrated the domestic market.



Experts have pointed out that the size of the Vietnamese market has been increasingly big. The demand and the taste of consumers have changed significantly. Vietnamese people from well off families now tend to use foreign products, a tendency which is called the “thirst for high-class brands.”



Meanwhile, the presence of well-known brands in Vietnam, in their return, has also helped enlarge the market.



Sources have said that McDonald is also seeking the way to Vietnam. However, the fast food company still has not found suitable partners in Vietnam. Experts say that McDonalds want the partners who have financial capability, good knowledge about the market and have influential relationships.



Beth Solomon, Deputy Chair of the International Franchise Association based in Washington in the US, has noted that the US businesses like Vietnam because they understand that this is a suitable market for franchising deals with young population and the consumers who like changes and renovation.



In late 2011, she once led a group of 10 businesses which owned 18 brands in the food sector, to Vietnam to seek partners. She would lead another group of businesses in the education, retailing and healthcare sectors to Vietnam in 2012.



Vietnam has had 96 franchised systems so far since 1996, when Jollibee from the Philippines appeared in Vietnam. The figure is really modest if compared with other countries, such as Japan and China (more than 2600), India, the Philippines, Australia (more than 1000).



Nguyen Ba Binh, the doctoral fellow at the New South Wales in Australia, has noted that the Vietnamese franchising market in Vietnam now can be described as “potential”, while it has not witnessed a boom like in other countries.



Sean T. Ngo, Chief Executive Officer of the HCM City based Vietnam Franchise Ltd, also agreed that franchising activities in Vietnam remain weak. It’s partially because the franchisers are mostly targeting newly emerging markets with high population such as China or India, instead of Vietnam.



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