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Franchising poised for ‘exponential' growth
Singapore's Astreem is a boutique business consulting company that specialises in helping businesses grow through franchise development, business matching, and branding and marketing locally and overseas. It advises Singaporean companies in developing market strategies for Viet Nam. Viet Nam News correspondent Quynh Hoa spoke to Johanna Ho of Astreem about franchising in Viet Nam.
Franchising is still a relatively new phenomenon in Viet Nam. Why are Singaporean firms eager to get into franchising in Viet Nam?
For many years now Viet Nam and Singapore have developed an excellent and dynamic relationship. The expansion of trade and business contacts between the two nations has also been a significant factor in forging strong bilateral ties. Singapore is one of the top five foreign investors in Viet Nam, having made cumulative investments of US$15.6 billion as of January 2009 and its future outlook remains positive.
In 2009, Viet Nam had the highest GDP growth rate in Southeast Asia of 5.3 per cent. It performed strongly in the retail sales and services sector with an 18.6 per cent year-on-year increase generating $64.8 billion, showing there is stability as well as growth potential.
This growth can be represented by the 86 million Vietnamese population seeing rising living standards with higher disposable incomes. With government boosts and stimulus packages in the Vietnamese market, close proximity to Singapore, and a growing domestic market, Viet Nam is definitely one of the hot places to enter.
As the locals are becoming more receptive to international brands, it is the perfect time for international brands to enter the market and franchise their brands.
In Viet Nam, which sectors are Singaporean franchises interested in? And what opportunities and challenges do foreign companies, including Singaporean, face in trying to establish their brands in Viet Nam?
Singapore franchises, be it food and beverage, retail, education, or lifestyle would focus mainly on HCM City and Ha Noi for franchise offerings and the opening of their first outlets.
However, depending on the offering, Singapore companies are also open for master franchise offerings for the whole of Viet Nam.
To build a brand name, a franchiser would consider the living standards, disposable income, and market trends and preferences to decide how receptive locals will be towards their brand and concept.
Currently, there is a LEAD programme offered by the Franchising and Licensing Association Singapore to Singaporean companies. Astreem Corporation has been appointed the LEAD consultant for this programme. This programme helps Singaporean companies minimise risks and maximise opportunities through proper research and guidance in developing a sound market development plan for Viet Nam.
The first LEAD programme focused on food and beverage companies. This year the LEAD programme will focus on the education sector.
What do Vietnamese businesses stand to gain if they become franchisees rather than set up their own start-ups?
Franchisees have the opportunity to take up a proven method of investment rather than starting afresh. Also, there is lower risk involved. Risk exists in all investments and since investment in a franchise has lesser risk, one should consider a franchise where they have a similar interest and can afford it.
Also, there will be training, pre-opening and ongoing support provided by the franchiser to the franchisee. For existing business owners taking up a franchise, it may also open a new avenue of investment.
Depending on the current business model, franchising can even complement their existing business. For example, businesses that are currently manufacturing clothes can expand by establishing themselves as distributors (Creating their own brands) and eventually franchising their own brands in the retail sector locally and internationally.
Where and how fast do you see Vietnamese franchising going from here?
Fast, exponential growth. Recently, legal regulations have been set in place for a more conducive business environment. The Vietnamese government has also allowed 100 per cent foreign ownership in retail business.
With this, Viet Nam has already presented herself as an ideal territory for business expansion through franchising. The rise of the middle class in Viet Nam presents a growing market opportunity for Singapore-based companies.
Not only does a growing economy point to rising disposable incomes, but also the population is relatively young with 65 per cent of Vietnamese aged below 35 years. This is a large young consumer market that businesses can tap into. Depending on how well brands are received, franchising (Food and beverage, retail, lifestyle, and education) can be developed easily in all sectors in Viet Nam.
What should the Vietnamese government do to develop franchising?
The government could establish a franchise association or body to govern all franchising activities in Viet Nam to safeguard the interests of both franchisers and franchisees. The government can consider granting tax breaks and/or subsidies to both local companies (With eligible criteria) and international brands that are considering entering and franchising out in Viet Nam.
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