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SPECIAL FOCUS: IS NOW THE TIME TO FRANCHISE IN VIETNAM? The market gaps, stance on franchising, the experience Master Franchise Opportunities available throughoutthroughout AsiaAsia Simple Business Model; Low Employee Need Strong Growth & Unit Level Economics Now Operating in Vietnam

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FOR MORE INFORMATION CONTACT: TORI JONES • Franchise Development Coordinator +1Japan’s 985-792-7999 most • [email protected] Kong on The expert’s exciting investment business: “Cultural take on franchising opportunities differences matter” in Vietnam Report

Vietnam is relatively new to franchising and while major U.S. brands are already established in the country, it’s fair to say that franchising is still in a developmental stage. With this in mind, it’s essential that you take informed advice before you expand into a market which may be nascent and growing slowly, but which may reward those with a long-term view. Nguyen Phi Van, Chairwoman of Retail & Franchise Asia and the author of Go Global: An MSME Guide to Global Franchising, appraises Vietnam as your next target for expansion. Global Franchise Ross ASIA

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Nguyen Phi Van ASIA

Vietnam hen was franchising established in Vietnam? Franchising here dates back to 2009 when Circle KW entered Vietnam. From 2010 through to 2015, Vietnam saw the entry of several iconic franchises such as Domino’s, , , McDonald’s, and 7-Eleven. As such, Franchise franchising is quite new to the market and there is a lot of room for the industry to grow.

How successful is franchising Vietnam in Vietnam? Given that this a very young franchise industry Nguyen Phi Van talks about the slow but sure in Vietnam, there has been modest success by growth of franchising in Vietnam. With a young international franchisors. With commercial real population and a growing middle class, the country estate being limited, supply chain a challenge, should be an interesting proposition to brands and an early-stage franchise ecosystem considering expansion in the Far East development, Vietnam is considered a seed market where investors must patiently await a future harvest. On the other hand, young, local franchise brands are emerging, learning from the experience of international brands, and are keen to start establishing franchising as a strategic development model. However, very little success can be seen from the efforts of local franchisors. It is expected that it will take the industry another five years or so to be more understood, and for standards to be observed.

Which overseas brands are successfully established in the country? Mostly global brands such as Circle K, 7-Eleven, Domino’s, Pizza Hut, Burger King, Subway, Starbucks, McDonald’s, etc.

Does the Vietnamese government offer any assistance to franchisors? With the franchise industry being so young, the government is still learning about the model, first to regulate the industry, and then to think about support mechanisms. Franchising has been used successfully by a few governments in the region, such as Malaysia, , the , Taiwan and South Korea, as an effective way to help local brands to go global, and to contribute significantly to the economic development of a country. The government of Vietnam does recognize this opportunity and is taking this into consideration.

globalfranchisemagazine.com globalfranchisemagazine.com Global Franchise ASIA How can a franchisor make contact to the lack of infrastructure. Therefore, How do you see the future of with a master franchisee in Vietnam? it is highly recommended that franchisors franchising in Vietnam? There are various ways to recruit potential work on financial modeling for Vietnam I believe the future is bright. Coming from master franchisees in Vietnam. The best as a market to see the areas of risks that a very low base, the market can only be approach is through the biggest franchise show may potentially affect profitability of doing developed further. Franchising has been in Vietnam, namely the Vietnam Retail and business in Vietnam. embraced by local entrepreneurs in recent Franchise Show, which is mounted annually years and the market is very open to new in November. Secondly, you can list the I would probably do the same if I planned to brands, new concepts and new opportunities. I opportunity for free on two popular franchise enter any local market, not only Vietnam. My believe the franchise industry will continue to websites, namely vietnamfranchise.net and global experience has taught me to work on grow at a double digit growth rate over the next franchising.vn. Thirdly, you should look for modeling, market entry strategy and market five years. a local advisory firm to represent and vet launch plans for every market that franchisors potential candidates through their want to franchise into. Only through proper local network. planning with potential master franchisees can franchisors ensure successful and sustainable What advice would you offer market development. franchisors intending to establish Are there governmental regulations their brand in Vietnam? What sort of Western brand is likely that franchisors should be aware of? I think franchisors should consider these three to succeed in Vietnam? Vietnam established the franchise law in 2006, keys areas prior to engaging with Vietnam: In recent years, fast food has decreased in to offer a clear indication of what is required 1. Market readiness: Vietnam is at the top of attractiveness. The hot industries for Vietnam for international franchisors to be established the CLMV group, which stands for , now and for the next five years will remain in Vietnam, such as, for example, the need to Laos, Myanmar, and Vietnam. These are the education, kids’ services, health and beauty register trademarks and franchising activities future markets, whose household incomes are services, ethnic cuisines, entertainment, in Vietnam prior to signing any franchise the lowest in the ASEAN region. Therefore, business services, and personalized retail. agreements. The law, however, has not been if your products and services are targeted at updated since, due to the lack of precedented middle and high income earners, your markets Which sort of brand would have to legal cases. should be Singapore, Malaysia, be adjusted to succeed, or would not and the Philippines, which act as cash cow be welcome in Vietnam? What are the advantages of markets. Vietnam should be considered your Fast food, full service or casual dining need to franchising in Vietnam? seed market for future development. However, watch out for local adaptation to be successful. Vietnam is an emerging market with a if your products and services are targeted at Job franchises may be challeging to develop population of close to 100 million. It is also middle to low income earners, Vietnam should in Vietnam due to the lack of franchise a young market, with 60 per cent of the be high on your list as the market size is huge knowledge and understanding throughout population under 35. With such a young and the target market is right. the market. population, and the growing market of middle classes, buying power is increasing year-on- 2. Business Modeling: A few of the international How successful are franchising expos year. Franchising is new, and is embraced by iconic franchises can’t make it in Vietnam due in Vietnam and how can brands local entrepreneurs. Therefore, there are a to the reluctance to adapt to local needs. For benefit from visiting these shows? lot of advantages to participating as pioneers example, Vietnam is very new to the take-away The biggest and most long-standing franchise in this market’s early stages. However, this culture, and take-away and delivery models show in Vietnam is the annual Vietnam Retail is not a cash cow market. Investors need to should be modified to a somewhat hybrid & Franchise Show in November. This platform plan for long-term success and factor for model in order for these to work in Vietnam. creates great opportunities for international slow development at the beginning but rapid Because of that, we see more success from franchises. Check with your trade offices to see development in the long run. Asian regional brands in Vietnam due to the if there are opportunities to participate under flexibility in re-modeling or localizing their a national pavillion; I find these pavillions Which Vietnamese brands have business models to suit the needs of attract a lot more attention. Other than that, successfully franchised overseas and the Vietnamese market. If you are to enter you can explore participation as part of an to which countries? Vietnam, my honest advice is to take your advisory firm’s pavillion to get more support. There are very few Vietnamese brands that have time remodeling your business model to Some Vietnamese investors don’t speak made their marks overseas, and those that have ensure success. English well and you may miss the opportunity enjoyed limited success. Vietnamese brands to explain your model properly if you are to franchising overseas include Pho 24, Highlands 3. Financial modeling: Vietnam still imposes participate on your own. However, if you do , Wrap ‘n Roll, ABC Bakery and Trung high tariffs on certain ingredients or equipment. decide to participate on your own, make sure Nguyen Coffee. Besides this, supply chain costs can be high due you hire an interpreter for the show.

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Vietnam’s Franchise Menu

Western franchises are slowly making inroads into Vietnam. 7-Eleven established itself here in 2017. McDonald's was already entrenched, having opened its doors in 2014, a year after the first Starbucks coffee was served. Burger King, Little Caesars, The Boiling Crab and tutoring franchise Wall Street English have all seen the potential of a country with an expanding middle class and which is growing in popularity as a visitor destination. They have their competitors; franchising is showing signs of growth and Global Franchise notes that Far Eastern brands such as this selection will be worth taking into account before you make your move

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3. Pho 24 Vietnamese pho is a tasty aromatic soup and an increasingly popular outlet for this Vietnamese speciality is Pho 24. The concept opened its doors in 2003 on Nguyen Thiep Street, District 1, and the family recipe for its healthy stock-in-trade was an immediate success. Since then, the company has opened franchised outlets in Da 1. Golden Gate Nang, Ha Noi and Ho Chi Minh Restaurant Group City in Vietnam and expanded The Golden Gate Restaurant internationally, with restaurants Group was established in 2005 and popping up in Cambodia, Hong now has more than 210 franchised Kong, Macau, Indonesia and restaurants and 22 brand concepts. These Korea. Pho 24 is now Vietnam's include Japanese, hotpot, barbecue restaurants leading pho chain and is and beer clubs. Now recognized as the leading seeking partners now. restaurant chain operator in Vietnam in terms of pho24.com.vn sales, number of concepts and outlets, Golden Gate Restaurant Group currently operates 12 concepts of restaurant with over 75 establishments nationwide and is constantly seeking new avenues of expansion. CAPITAL ggg.com.vn/vi PRIMARY LANGUAGE VIETNAMESE

2. Huy Vietnam POPULATION 92.477m Huy Vietnam, which has an expanding range of brands, specializes in producing good-quality Vietnamese cuisine at POPULATION around 200 franchised outlets. Founded GROWTH in 2006, Huy Vietnam has grown rapidly 1.03% to become the largest self-managed, local Vietnam Vietnamese food restaurant company in Vietnam. At present, Huy Vietnam is POPULATION operating about 200 restaurants in prime NEED TO KNOW NEED TO UNDER 15 locations. Huy Vietnam's four famous 24.6% brands are Mon Hue, Pho Ong Hung, Com Tho Chay and Great Banh Mi & Cafe, all of which attract high numbers of repeat UNEMPLOYMENT visitors. huyvietnam.com 4.3% All Need to Know facts courtesy of the IFA globalfranchisemagazine.com globalfranchisemagazine.com Global Franchise ASIA

5. Trung Nguyen Coffee Coffee does well in Vietnam. The Trung Nguyen Coffee chain of franchised outlets has around 1,200 coffee shops in operation, making it the largest such concern in the country. Trung Nguyên, established in 1996, is a Vietnamese business group involved in the production, processing and distribution of coffee and exports its products to more than 60 countries, including major markets such as the United States, , , , , Russia, , Dubai and Singapore. trung-nguyen-online.co.uk

GDP (PPP, $BN) 325.9

GDP REAL GROWTH 5%

CORPORATE INCOME TAX Vietnam 25% 7. ABC Bakery

NEED TO KNOW NEED TO INFLATION Asia Bakery & Confectionery Pte RATE % Ent (also known as ABC Bakery) 9.1 is passionate about what it does and reflects this in its motto 'Fresh From Our Hearts!' The well-known home-grown bakery chain based 6. Wrap & Roll in Ho Chi Minh City serves 'only 4. Highlands Coffee Founded 2006 in Ho Chi Minh, Wrap & Roll is a contemporary the freshest and best products' Highlands Coffee began in 2000 as a purveyor Vietnamese restaurant offering a wide variety of traditional dishes, and produces a high-quality range of packaged coffee and has since expanded its with a special focus on the unique Vietnamese dining style of of bakery products such as bread, operations and grown rapidly as a modern coffee wrapping and rolling. Nguyen Thi Kim Oanh, founder of Wrap & pastries and cakes. The concept shop chain both in Vietnam and internationally. Roll, spent two years researching Vietnamese cuisine, travelling began as a small store in an alley in Born of a passion for Vietnamese coffee beans, throughout Vietnam to source the best recipes and ingredients. The District 11 and has since developed the company has been continuously expanding its concept has since opened ten outlets, including one in Singapore. into a chain of bakeries with outlets domestic and overseas operations since 2002, its Wrap & Roll Vietnam has since grown to 10 outlets and counting, and all over Ho Chi Minh City, Nha well-designed and welcoming locations reflecting won numerous awards such as "Top 10 Vietnamese Restaurants in Ho Trang & Can Tho. ABC Bakery’s its mission, it says, to reflect the modern lifestyle of Chi Minh City" and "Fastest Growing Vietnamese Restaurant Chain". presence is also felt internationally people in today's Vietnam. highlandscoffee.com.vn wrap-roll.com.sg in Cambodia. abcbakery.co

globalfranchisemagazine.com globalfranchisemagazine.com 8. Jumbo Group Among Far Eastern franchises coming into Vietnam and partnering with domestic entrepreneurs is Singapore-based seafood restaurant group Jumbo, which signed an agreement with Nova Bac Nam 79 Joint Stock Company in December 2016 to open locations in Ho Chi Minh City and Danang. Known for its award- winning chili and black pepper crab, the restaurants offer high- quality cuisine stylishly presented. Already successfully positioned in China and Japan, Jumbo Group would appear to see Vietnam as a likely target for further expansion. jumbogroup.sg/en/home

9. Thai Express Thai Express, the world’s largest chain of modern Thai restaurants, has eight locations in Vietnam. The chain offers a relaxed yet contemporary ambience in which to enjoy authentic Thai cuisine at reasonable prices. The concept has already proven itself over the last ten years in more than 30 restaurants in China, Malaysia, Vietnam and Singapore. A menu of popular Thai specialities including curries and noodles is supported by vegetarian options and a well-curated choice of both alcoholic and soft drinks. thaiexpress.ca

10. Mon Hue With over 50 restaurants strategically located in or near high-density, high-traffic areas throughout Ho Chi Minh City, still-expanding Mon Hue's concept of offering healthy and authentic 'royal Vietnamese' or Hue cuisine is a sit-down, fast-casual format has proved a notable success in Vietnam. Emphasizing taste, food safety and direct food sourcing, the affordably-priced Mon Hue menu has over 50 signature dishes which attract target customers, namely, middle-class families, professionals and students. nhahangmonhue.vn

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