Franchising as a business expansion method has become increasingly popular in Asia, especially in Vietnam. The country has a healthy economy, which has been growing in the last decade, also has mainly young-population of 94 million, and the most important is people are showing a strong interest in franchising. Not only that, many popular foreign brands are attracted by the business expansion there, meanwhile the local Vietnamese investors are looking for the opportunity to operate business under the well-known brands that Vietnamese are familiar with. Therefore, this article will offer you in-depth information about marketing entry strategy, focusing on franchising business. Let’s read until its end!

READ MORE: Viettonkin Consulting service to help your franchising business expand to Vietnam

Overview of Franchise Business

According to Vietnam's Ministry of Industry and Trade, Vietnam has experienced a 15%-20% growth in terms of new foreign and Vietnamese franchises entering the market for the last five years. Vietnam is expected to grow and recover, and the growth will slow to 8% - 12% in 2020 and revert back to its normal 15% - 20% growth in 2021.

Furthermore, many international franchisors continue seeking an entry in Vietnam as it is one of the most attractive markets in the ASEAN due to rising incomes and a rather young population. Since many businesses plan for long-term growth, reviewing new business opportunities like franchises is a wise thing to do, even in these challenging times since the actual franchise partnership may be months from when the discussion first starts.

There are companies that want to enter Vietnam, including food and beverage, education, services, and even hospitality chains. In addition, companies like Little Caesars Pizza, Delifrance, Mango Tree, Scholastic World of English, Helen Doron Kindergarten, Sureclean, and many others. The hotel chains, such as Marriott, Accor, Hilton, and others continue their search for the right partners.

However, some franchises have begun to adapt to the new environment by shifting their operation into online and accelerating their plans to move at least a part of their business online. In this case, F&B franchises have adapted well by focusing heavily on online deliveries. Then, hotels and catering companies have taken their businesses online to mitigate the impact to their normal business operations.

How To Market Franchise Business in Vietnam?

Creating a successfully target market with high growth potential, the business development team will need to resource properly, in which they must have the allocation of financial and human, marketing talent and senior leadership support. Moving from an opportunistic to a targeted approach for international expansion, it is critical that validating markets exist in each targeted region.

Moreover, the franchisor should select specific markets that are best suited for their brand or product and develop them as future validating markets, but the mistakes might occur as the validating markets are established. However, both failures and successes should be analyzed, and the criteria driving success and failure defined and internalized by the development team.

Therefore, there are some ways to market the franchise business in Vietnam, start from word-of-mouth to good old-fashioned networking. Here are the details information below:

1. Word-of-mouth of existing partner referrals

It is still the most powerful and valuable lead one will have. These candidates are often familiar with your brand and have developed an attraction for your business because of their relationship with a successful existing partner. They prepare better and give more realistic expectations of what it takes to succeed.

2. Events organized by the International Franchise Association

It is also a strong tool to market the franchising business. The focus of these events on the franchising community attracts a more elite group of interested companies, including local and regional franchise groups. If they are considering a portfolio approach to advantage their infrastructure, however these local and regional franchise groups can be their candidates for master franchising.

There are exhibitions that you should stopover at, for example, Franchising and Licensing Vietnam, Vinexad, and Vietrf.

3. The power of networking

You cannot leave out the good old-fashioned networking to market your business. In addition, companies may be surprised by the leads their auditors, ad agencies, outside counsel and suppliers can generate. For instance, existing partner referrals, because this group has the same advantage of having a basic understanding of your business.

4. This following resources should be considered too:

• Brokers and agencies, such as Viettonkin.
• Locally sponsored trade shows.
• Advertisement in select publications
• Internet and websites.

The Franchising Business Opportunity in Vietnam

The COVID-19 outbreak in 2020 has affected in a positive way for this franchise business. It somehow accelerated certain franchise opportunities if compared to those past years. 

One of the businesses is e-commerce, it is capturing a fast-growing online delivery market while at the same time minimizing the risk of other future pandemics. Another interesting fact to add is that the health emergency has pushed companies to implement their digital strategies nearly overnight. 

Modern retail will continue to grow faster as traditional markets are seen as less safe, and the number of supermarkets and convenience stores continue to grow at a faster pace to meet the demand.

These are the best franchising opportunities for foreign brands in the country:

• Food and Beverage, including fast food, fast casual, casual and fine dining, snacks and beverages, and desserts.
• Education and Training (for young children, teenagers and adults), and other vocational training franchises (for hospitality management, tourism, and many more).
• Another education franchises that are popular, such as English Language Learning Centers, and other languages (e.g mandarin), STEAM based learning (Science, Technology, Engineering, Art/Dance/Music, Math), Robotics, Computer Programming or Coding, professional skills development training for adults, Information Technology (IT), and Finance.
• Retail, fashion, and lifestyle based franchise, for example convenience stores, fitness & health, children’s entertainment, health supplements franchises, health and beauty spas.
• The rapid increase in car ownership presents good opportunities for franchises to supply the demand, for instance auto repair and maintenance franchises.

As mentioned above, there are still a lot of opportunities to enter the market in Vietnam through franchise business. After getting hit hard by COVID-19, the franchise businesses still survive and operate well. 

If you have a plan to get into the market through franchise, just keep it in mind that you must have the right market for your business. Not to forget about networking and visiting the exhibitions to strengthen your business. In conclusion, if you are unsure and need help, please contact us below. Viettonkin is always ready to assist you anytime!

Franchising is no longer a new business term in Vietnam. In fact, there are a lot of franchising models that are currently run in Vietnam such as KFC, McDonald, Dairy Queen, Circle K, 7-Eleven, and so on. The Vietnamese government has streamlined the franchise laws and regulations to boost franchise business growth. This article provides you with in-depth knowledge about franchising business in terms of regulations and procedures and typical franchising companies in Vietnam. 

The regulation of setting up a franchising business in Vietnam

Franchising is governed by the Commercial Law and the following legal instruments, which provide details for implementing the Commercial Law on franchising activities:

  - Decree 35/2006/ND-CP (Decree 35), as amended by Decree No. 120/2011/ND-CP (Decree 35) and Decree 08/2018/ND-CP.

  - Decree 120/2011/ND-CP (Decree 120).

  - Decree 185/2013/ND-CP (Decree 185).

  - Circular 09/2006/TT-BTM (Circular 09).

According to Article 17 of Decree 35/2006/ND-CP (Decree 35), before conducting commercial franchising activities, Vietnamese traders or foreign traders that intend to franchise must register commercial franchising with the Ministry of Industry and Trade. The Ministry of Industry and Trade shall have to register commercial franchising of traders in the commercial franchise register and notify in writing the traders of such registration.

According to Article 17a, the registration of commercial franchising is not required in the following cases: domestic commercial franchising and Vietnam-to-overseas commercial franchising. In such cases, the registration must be reported to the provincial-level Industry and Trade Departments. 

Conditions to be met for franchisors and franchisees

For franchisers, the franchisor's business must be in operation for a significant period, for instance, the minimum of one-year operation. Plus, the franchiser must obtain written approval from the Ministry of Industry and Trade. 

On the one hand, for franchisees, the franchisee must register their business in relevant sectors with regard to their franchise business in Vietnam. On the other hand, for a master franchisee in Vietnam to sub-franchise to another party in Vietnam when permitted by the franchisor, the master franchisee must also have been operating for at least 1 year before the sub-franchising can be conducted. 

Furthermore, the goods or services that are the subject of a franchise agreement must not be on the Government’s list of banned goods and services. If they are on the list of goods and services subject to business restrictions, a special business license must be obtained before franchising is deployed.

Before a franchisor can offer its franchise in Vietnam, the franchisor must ensure that all of the trademarks associated with the franchising activities in Vietnam are either:

- Registered as trademarks with international trademark registrations, where Vietnam is named as a designated jurisdiction.

-  Registered with Vietnam's National Office of Intellectual Property (NOIP).

Pre-disclosure requirements

According to Decree 35, the franchisor has an obligation to provide the franchisee with the information regarding the franchise system, namely a copy of a form of the franchise agreement and an introduction of the franchise business, at least 15 days before signing the agreement. The franchisor must also notify the franchisee of all substantial changes in the franchise system.

In case of a master franchise, in addition to providing the aforementioned information, the secondary franchisor must also submit a proposed franchisee with the following information in writing: (a) information about the franchisor which has granted the franchise; (b) contents of the master franchise contract; and (c) the manner in which secondary franchise contracts will be dealt with in the event of termination of the master franchise contract.

Penalty

Depending on the circumstances, a failure to register franchising activity can result in the following sanctions:

- Small fines ranging from VND5 million to VND10 million (approximately US$225 to US$475).

- The forced relinquishment of profits gained from the franchising activity that has not been registered (this sanction can be very problematic for the franchisor).

Steps to set up a franchising business in Vietnam

Required documents

The following documents are the required documents to register a franchise in Vietnam:

- Franchise registration application

- Power of Attorney

- Franchise agreement

- Audited Reports in the last year

- Brief Introduction of the franchisor

- Business certificate (or equivalent documents) of the franchiser

- A copy of the trademark certificate or copyright (if any)

- Papers proving the approval of the primary franchisor’s permission of franchise in case the trader registering to the franchise is the secondary franchisor

Process of setting up a franchising business in Vietnam

The process goes through two main steps: receipt of dossiers of registration of commercial franchising activities and registration of commercial franchising. 

In regard to receipt of dossiers of registration of commercial franchising activities, the franchiser submits the required documents at the Ministry of Industry and Trade (MOIT).

- For incomplete and improper dossiers, within two working days after receiving the dossiers, MOIT shall send written notices, made according to a set form, to the franchiser, requesting the supplementation and completion of the dossiers. The time limit for handling dossiers shall count from the time the franchiser registering commercial franchising complete their dossiers.

- Franchisers registering commercial franchising may request to clearly explain reasons for dossier supplementation and completion. MOIT shall have to respond to such requests.

Regarding registration of commercial franchising in commercial franchising registration books, within 5 working days after receiving complete and valid dossiers, MOIT shall register franchisers' commercial franchising in commercial franchising registration books, made according to a set form, and send to franchisers written notices thereon, made according to a set form.

If refusing to register commercial franchising, within 5 working days after receiving complete and valid dossiers, MOIT shall issue written notices thereon, made according to a set form, clearly stating the reasons therefore.

Some typical franchising companies in Vietnam

As of June 2020, there have been 252 franchises activities including franchises from foreign franchisors to Vietnam and franchises from Vietnamese franchisors to oversea. These franchises operate in several sectors such as education, fashion, education, and so forth. 

Food and beverage

Case study 1: The Golden Gate Restaurant Group, founded in 2005, currently operates over 21 concepts with nearly 400 restaurants nationwide. It serves 17 million customers each year, and it has planned for further development.

Case study 2: McDonald's entered Vietnam in 2014. As of 2019, it had 22 outlets across the country.

Fashion

Case study 1: Entering Vietnam in 2017, H&M - a world's leading fashion company- has had 9 stores in HCM City, Hanoi and Danang.

Case study 2: Uniqlo first entered Vietnam in late 2019. As of June 2020, it has had 4 stores in Hanoi and HCM City.

Education and training

Case study 1: In December 2017, Maple Bear Global Schools Ltd announced the expansion of Maple Bear Canadian schools into Vietnam. As of 2020, there are currently 3 schools in Hanoi and 3 in Ho Chi Minh.

Case study 2: Arkki is a School of Creative Education for children and youth where pupils learn general innovation skills through architecture. Founded in Finland in 1993, and after 25 years, Arkki has organized thousands of courses and workshops for more than 20,000 children in more than 20 countries. In 2018, Arkki came to ASEAN, starting from Vietnam, with an aim of building a systematic and progressive creative education platform for children and youth from 4 – 19 years old, and to connect children between ASEAN countries, and with Finland through international camps, projects and exchange programs.

Logistics

Case study 1: BEST Express entered Vietnam in 2019. After one year of development, BEST Express now has seven operation centers, more than 100 service points and has 3-20 such points in one province. In Hanoi, it has 20 service points and in HCM City 26.

Case study 2: Entering Vietnam in 2019, ZTO Express now has 12 service points.

Convenience store

Case study 1: The first 7-Eleven store in Viet Nam opened in 2017, making Viet Nam the 19th country to host the world’s largest convenience store chain. Seven System Viet Nam (SSV) is the Master Franchisee of the 7-Eleven convenience store system in Viet Nam, based in Ho Chi Minh City. As of January 2020, Vietnam has 45 stores in Ho Chi Minh City.

Case study 2: Circle K is the first international convenience store chain in Vietnam, with the 1st store opened on December 20, 2008. Circle K Vietnam currently has nearly 400 stores in Ha Noi, Ha Long, Ho Chi Minh City, Vung Tau, Can Tho.

READ FURTHER: How To Set Up A Manufacturing Business In Vietnam.

In conclusion, the article covers three main parts. The first part provides in-depth information about regulations about franchising in Vietnam. Steps of setting up a franchising business are introduced in the second part so that investors and business owners can understand clearly about the franchising process in Vietnam. The article concludes with typical franchising companies in Vietnam. Some popular franchising companies are taken as examples to help readers understand the trend of franchising business in Vietnam. If you would like to set up a franchising company in Vietnam and still have difficulties in approaching the market, Viettonkin always supports you to solve your problem.