Franchising in Vietnam:

includes the case of fast food businesses like Jollibee, KFC, and so on
Franchising in Vietnam is a relatively new phenomenon, but one that offers significant
commercial opportunities for American firms. Previously deterred by government
restrictions on royalty payments for technology transfer agreements, including franchise
license agreements, new laws and regulations are now issued to relax restrictions on
franchising activities. As a result, prospects for engaging in franchise arrangements
activities in Vietnam are expected to become much more attractive.
Market Overview and Best Prospect
Consumer and economic conditions in Vietnam appear to be developing quite favorably
for the entry of international franchising into Vietnam. There are positive signs that
changes in law and regulations governing franchising, bolstered by Vietnam’s anticipated
entry into the World Trade Organization (WTO) will lead to a more transparent, open
market. In addition, an expanding consumer class should create a wide scope for the
development of international franchises.
With Vietnam enjoying a steady GDP growth rate of more than 7 percent annually, many
entrepreneurs are seeking business opportunities from overseas. Awareness of franchise
businesses in the United States is strong, with many Vietnamese businesses interested in
acquiring the rights to operate American franchises. There appears to be a strong
potential market for franchises in many sectors, with particular interest in services,
including education and training, as well as the fast food industry. Other potential fields
are business services, apparel, cosmetics, beauty care and retail.
Franchises in Vietnam are increasing at a rate of about 20 percent annually, with 70
systems operating under both foreign and Vietnamese brand names. Vietnam already has
a number of successful franchises, with current franchise operations focused on fast food
outlets. Other business opportunities in the franchising sector remain largely unexplored.
Many Vietnamese companies will opt for franchising to expand their market share at
home and abroad. However, many still have a limited understanding of brand value and
legal regulations relating to franchising.
Franchising activities have become more widespread in Vietnam in recent years, with a
number of well-known products and services of local and foreign entities being
franchised in the local market. However, before the Commercial Law was issued in early
2006, the Vietnamese Government viewed of franchising seems to have been one of
skepticism and lack of recognition of franchising as a legitimate vehicle for promoting
commercial activity and investment. This perspective has been changing as Vietnam
witnesses the development of strong franchise sectors among its neighbors and begins to
recognize the role this sector can play in creating jobs, as well as attracting investment
and new technology. The issuance of the new Commercial Law, together with the Degree
specifically stipulating franchising services in 2006, marked the important change of the
Government’s perspective towards the development of the franchise sector in Vietnam.
New Government Regulation
Franchising activities were legally recognized for the first time by the Commercial Law,
which took effect from 1 January 2006, includes eight articles dealing with franchising
activities. The new commercial law, which is passed by Vietnam’s National Assembly,
has provided for a legal and regulatory climate more conducive to the development of the
franchise sector. Three months from the effective date of the Law, the Government issued
Decree 35/2006/ND-CP dated 31 March 2006 to implement provision of the Law on
franchising. Basically, the new Vietnam's regulation on franchising has opened the
franchising market, and has no limitation on franchise royalty, which was most concerned
by international franchisors. The new franchise law and other relevant regulations result
in the anticipated market openings, Vietnam’s franchise market could experience
significant growth.
According to the new franchise regulation, the Ministry of Trade or the Department of
Trade are the authorities that will oversee franchising activities, depending on the kind of
franchising. Franchising contracts for franchises from overseas to Vietnam, and from
Vietnam to overseas must be registered with the Ministry of Trade not later than fifteen
working days from the date of execution of the contracts.
The application to register franchising activities must contain the following documents:
• Application for registration of franchising activities (in the standard form);
• Introduction letter on franchising system (in the standard form);
• Documents in respect of legal status of the franchisor and certificates of the intellectual
property registered in Vietnam or abroad if the franchisor wishes to license such
intellectual property;
Within five working days from the date of receipt of a full and valid application, the
authority shall register the franchising activities and notify the franchisor of such
registration.
If the franchising contract involves objects of intellectual property rights, the part on
granting the right to the franchisee to use the objects of IPR must be made into a separate
part in the franchising contract. It is also subject to the laws on intellectual property.
U.S. Market Position
Vietnam’s franchise sector is small at the moment, but it represents one of the largest
untapped franchise markets in the world. U.S. brands are perceived well by local
consumers, who associate them with superior quality, excellent customer service, and
generally a western lifestyle.
Last year, 530 foreign and local brand names were franchised and another 811 franchises
were transferred into Vietnam, according to the National Department of Intellectual
Property (NDIP). Foreign fast-food franchises are slowly finding their place alongside the
country's traditional shophouse vendors, including the likes of KFC, Dilmah (a teahouse
chain), Jollibee (of the Philippines), and Lotteria (of Japan). Some consumer goods have
tested the franchise waters in Vietnam, including Swatch, Clinique, Baskin-Robbins.
Major international film companies have established extensive networks of photo labs in
franchise-like agreements with Vietnamese entrepreneurs. Vietnamese companies are
also beginning to enter the franchise sector, with many having ambitious expansion plans.
Trung Nguyen Coffee, is probably the largest chain in Vietnam, with some 1,000 outlets,
including several overseas. Kinh Do bakery presently has 25 establishments, including
one franchise. A fast growing entry into the food sector is Pho 24, which now has 26
noodle shops in operations, of which 70 percent operating as franchises.
Kentucky Fried Chicken, the only U.S. fast-food chain in Vietnam, opened its first
restaurant in the southern commercial hub of Ho Chi Minh City in 1997. Since then it
operates 21 outlets in HCMC and plans to add more in other parts of the country. KFC
Vietnam will officially open its first outlet in the capital Hanoi in early June 2006.
Global brands such as McDonald's, Starbucks, Gloria Jeans, Pizza Hut and Dairy Farm
are readying to make inroads once Vietnam accedes to the World Trade Organization
(WTO), which is very likely to happen in 2006. IKEA, Tesco and Wal-Mart have also
reportedly examined the market. With a potential market of more than 82 million people,
annual economic growth hovering around 8 percent, and total domestic consumption of
$21 billion in 2005, big Western multinational distribution groups are salivating for
access to Vietnam's virgin markets.
As the legal and regulatory environment has improved, franchises would take advantage
of the recent explosion in retail space development in Ho Chi Minh City and Hanoi,
which has significantly increased the number of high-traffic sites that would be suitable
for retail franchise outlets.
Potentially strong demand for U.S. franchises industries exists in Vietnam, especially for
fast food restaurants, education and training, business management and retail. Despite the
good economic potential, doing business in Vietnam can be difficult for many foreign
companies. The following suggestions might be helpful to those new-to-Vietnam
franchisers:
- Register brandnames/trademarks promptly upon entering the Vietnamese market.
- Carefully seek local partners who can help navigate the local business and regulatory
environment.
- Understand cultural differences and adjust market access strategies accordingly. In
addition to product pricing, U.S. franchisers must consider adapting to the local culture
and local tastes.
- Carefully consider product pricing. The Vietnamese market in all sectors is very price
sensitive, with relative income levels making individual consumers especially price
conscious.
http://commercecan.ic.gc.ca/scdt/bizmap/interface2.nsf/vDownload/ISA_6490/$file/X_6
627729.DOC
Number of people suffers food poison in Vietnam
Nearly 200 people suffer food poisoning in Vietnam
( 2003-09-30 14:44) (Xinhua)
Nearly 200 people in Vietnamese northern province Thai Binh had to receive emergency
treatment due to food poisoning on Monday afternoon, local newspaper Labor reported
Tuesday.
After having a wedding party, all of the patients showed the symptoms of vomiting,
stomachache, and lower blood pressure.
By 4 PM on Monday, the Thai Binh Province Polyclinic Hospital received more than 50
serious poisoning cases, mostly children and elder people.
The hospital took 22 testing samples from the patients to find out reasons for the
collective food poisoning case.
As of August this year, 2,300 people suffered from food poisoning, of whom, 21 died in
Vietnam.
http://www.chinadaily.com.cn/en/doc/2003-09/30/content_268956.htm