VietNamNet Bridge – Newly emerging and potential--Vietnam has
become a lucrative market for foreign franchisors. However, the high retail
premises rents would challenge them.
Foreign food groups have been
flocking to Vietnam to seek business opportunities through franchising
contracts.
The US fast food Burger King has
set up its first shop on Pham Hong Thai Street in district 1 of HCM City. Elias
Diaz Sede, President of Burger King Asia Pacific, said Burger King plans to
open 12 shops by the end of the year in three big cities of HCM City, Hanoi and
Da Nang.
Its Vietnamese partner is BKV, a
food and drink service company, a subsidiary of IPP Group.
In August 2012, McDonald’s senior
executive arrived in Vietnam and had a working session with the Ministry of
Planning and Investment on some potential partners, a preparation step for the
setting up its first shop in HCM City.
The giant reportedly plans to be
present in Vietnam in the next two years under the 100 percent franchising
mode, hoping that 100 shops bearing McDonald’s brand would turn up in big
cities.
Starbucks Coffee has confirmed
that it would be present in Vietnam in 2013. Meanwhile, Johnny Rockets has
joined hands with CBRE, a real estate service provider, revealing the intention
to give franchise on the development of a fast food chain in Vietnam.
A lot of other US big enterprises
also arrived in Vietnam to seek business opportunities, including Pollo
Tropical, Dennys, Applebees, The Melting Pot, Great American Cookies.
The franchise boom has been seen
not only in the food sector, but in other sectors as well, such as education,
fashion and healthcare.
A senior executive of a
consultancy firm, which has advices in many franchise deals, has noted that the
franchise market in Vietnam remains below the potentials. However, he said the
market would be bustling in the near future, since more and more foreigners
have been eyeing Vietnam.
The expert explained that
franchising would be the choice of many foreign groups, because the method
allows them to save time and lower the investment costs. If making direct
investment, they would have to spend time and money to develop the market.
Meanwhile, they would be able to reduce the costs and avoid legal risks.
However, he has warned that
foreign franchisors would face a big difficulty – the high retail premises
rents.
The retail premises located on
advantageous positions which can easily catch up the attention of passers are
believed to decide the success of retailers. Meanwhile, the rents of retail
premises in Vietnam are the highest in the world, which have been increasing
steadily by 20-30 percent per annum.
The rents account for 25-30
percent of the total revenue of franchise shops, which makes it very difficult
to make profit.
Dr Dinh The Hien, a well-known
economist, affirmed that franchising will be a growing tendency in Vietnam.
When asked when he thinks the
franchise boom period would begins, Hien said that by 2014, all the market
barriers would be removed in accordance with the WTO’s commitments, which means
that foreign investors would be easily penetrating the Vietnamese market. By
that time, when the national economy recovers, the youth income increases and
the family spending rises, the franchise market would boisterous.
Huan Tu
Business & Investment Opportunities
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