Franchising
Vietnam
Overview
2004 2005 2006
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Imports from the U.S. N/A N/A N/A
(Data is not available)
The franchising market has experienced a recent surge with an average growth rate of 30 percent, witnessing an opening of more than 530 franchising shops in recent years. Although the market is still quite small, it is expected to grow quickly. In 2006, the Government issued Decree No. 35/2006/ND-CP, the first decree specifically aimed at regulating franchising in Vietnam. It provides key guidelines for franchise agreements and state administration of franchises. As this is untapped territory in many ways, there should be opportunities in a wide variety of sectors, and a strong surge of interest in U.S. franchises is anticipated.
Observers note that Vietnam currently has major advantages for franchise development. First, the economy has been growing steadily at 7-8 percent in recent years. Second, a young population of 83 million people is seeing living standards rise as disposable income increases. Particularly in the urban areas, consumer demand is surging for higher quality products and services that cannot be satisfied by local production. Franchising businesses that introduce Western and high-end products and services could help meet that growing demand. Third, Vietnam is politically stable and welcomes foreign investment. Just as important, the overall business environment is improving in various ways as Vietnam changes to meet its obligations as a member of the World Trade Organization.
Best Products/Services
Most existing franchise operations in Vietnam are in the fast food sector. Other franchising business opportunities are generally unexplored. Industry experts foresee that with the new franchise law and other pertinent regulations in place, the franchise market could grow an average 20% - 30% annually over the next several years. There are several factors that will contribute to the growth of foreign franchises in Vietnam and that will attract foreign franchisors to participate in this market, not only in the food and beverages sector, but also other sectors such as fashion, health care services, children’s services, cleaning and sanitation, employment services, tourism, hotels and motels, home furnishing, education products and services, convenience stores, cosmetics, beauty care and many others.
The franchise market in Vietnam, still in an introductory stage, is quite open. Presently, most third-party franchising businesses are concentrated in the food and beverages sector with such popular brands as KFC, Jollibee, Lotteria, Dilmah, and Qualitea already establishing a presence.
U.S. brands are well received by local consumers who associate them with superior quality, excellent customer service, and a Western lifestyle. High demand for U.S. franchises, especially in service sectors (including fast food, education and training, business management, and retailing), present significant commercial opportunities.
On March 31, 2006, the Government of Vietnam issued Decree No 35/2006/ND-CP regulating franchises in Viet Nam. This decree elaborates on the Commercial Law adopted by the National Assembly in 2005. The new decree provides key concepts in franchising, requirements for franchise agreements and State administration of franchises. According to industry experts, this decree is an important step in building the legal framework for this sector.
The Ministry of Trade (MOT) is the authority for registration of franchising agreements involving foreign entities in Vietnam and franchising agreements involving Vietnamese entities overseas. Franchisees must register their company at the Provincial Department of Trade in the jurisdiction where they will establish their business or with the MOT. The application for registration must be submitted to the appropriate authority within 15 working days of the date the parties sign the agreement. The relevant authority has five working days from the receipt of a complete and proper application to carry out the registration.
Opportunities
To be successful in Vietnam, new-to-the market U.S. franchisors should take the following suggestions into account:
· U.S. franchisors should register their intellectual property rights and be prepared to take legal action against IP violations.
· Understand cultural differences and adjust market strategy accordingly. U.S. franchisors should take local culture, habits, and tastes into consideration to be successful in this market.
· Be sensitive to product pricing and franchising fees for rapid expansion in the market. Vietnamese are very price-conscious and local incomes are substantially lower than in the United States, or, for that matter as compared with many other countries in the region. Moreover, local investors may not be familiar with and are reluctant to invest millions of dollars in a new business concept. The specifics of the market will require a flexible approach.
· U.S. franchisors may wish to work with the U.S. Commercial Service in Vietnam for assistance in identifying potential partners.
The U.S. Commercial Service is also organizing a Vietnamese delegation to visit International Franchise Expo, March 2007 in Washington D.C.
Resources
For more information, please contact:
1. Ms. Anh Ha, Commercial Specialist
U.S. Commercial Service
U.S. Embassy in Hanoi
E-mail: Ha.Anh@mail.doc.gov
2. Mr. Le Anh
U.S. Commercial Service
Ho Chi Minh City – U.S. Consulate General
E-mail: Le.Anh@mail.doc.gov
And visit our website at www.buyusa.gov/vietnam