The age of franchised food shops
‘Pho 24’ has never been considered the most delicious pho (noodle soup) in Vietnam, but it is surely the most well-known pho brand name in the eyes of foreigners.
‘Pho 24’ and ‘Trung Nguyen Coffee’ have been cherishing the hope of developing their networks of shops throughout the world under the form of franchising, the way that fast food giants McDonalds and KFC have. While Vietnamese companies have been reaching out to the world, a lot of well-known brand name food shops have arrived in Vietnam to exploit the lucrative market.
2009 witnessing franchised shops booming
In fact, franchising is not a new business model in Vietnam at all: The first franchised KFC fast food shops appeared in Vietnam nearly ten years ago. However, experts all believe that 2009 will witness a boom of franchised food shops.
Le Vu Minh, Deputy Director of RedSun ITI, which signed a franchise contract with ThaiExpress in March, said that the retail market has been more widely opened since January 1, 2009 with easier conditions for this type of business.
Minh said that Vietnamese consumers, especially youth, nowadays tend to prefer modern food shops which allow them to have food at soft prices and in a comfortable setting.
“They not only eat and drink, they also want to enjoy the friendly atmosphere of the shop and the high quality of services. That is the reason why ThaiExpress tries to maintain a fresh and youthful decoration style,” Minh said. Meanwhile, Ly Quy Trung, the founder of Pho 24, attributes the boom of food franchises in Vietnam to the global financial crisis. He said that the crisis has prompted international brand names to seek newly-emerging markets like Vietnam to develop.
“I think that franchising activities will become more bustling in two or three more years with the participation of many retail brand names like Seven-Eleven, McDonalds and supermarket chains,” he added.
There are some 100 international brand names present in Vietnam under the mode of franchising. The franchising market proves to be so bustling that experts have predicted that the market’s growth rate will be no less than 30% per annum.
All international brand names, from ones which have been present in Vietnam for ten years like KFC and Lotteria, to ones which have just operational for a few years like Gloria Jeans Coffees, Lee’s Sandwiches, Jollibee, BBQ and Pizza Hut, have chosen 2009 as the right time to develop their chains. Lotteria has announced a plan to increase the number of shops from 56 to 80; KFC also plans to raise the number of its shops to 80.
The oriental-style food brand names have also been quietly conquering the market. Only in Vietnam for three months, ThaiExpress has also set the ambitious plan of developing 15 franchise shops in the country. “As far as I know, many other well-known brand names are conducting negotiations to enter Vietnam’s market,” Minh said.
Why franchising?
According to the International Franchising Association (IFA), 90% of franchised companies reportedly run well even after ten years operation. That explains why franchising has become a favourite way of doing business.
Minh frankly said that one investor will have a 10% chance of success if he develops a business himself, but he will have an 80% chance of success with the model of franchising.
He went on to say that franchising can help investors avoid initial risks, and allow the to shorten the time a business needs to begin, while they do not have to make heavy investment in developing brand names.
“We have found out there are many schools of food and drinks, including Chinese, Thai, South Korean, Japanese and western. We finally chose ThaiExpress because we found it an effective model: 80 shops have been set up in nine countries over the last five years. Thai dishes prove to fit Vietnamese people and foreign tourists,” Minh said.
