What do you think are the key factors that attract foreign businesses to do franchise in Vietnam? Or in other words, why is Vietnam considered the so-called Asia's franchise hot spot?
- Vietnam is top 3 in population in the ASEAN, leading the CLMV cluster & franchising wise is still a seed market with huge potential growth.
- Business wise, franchising and licensing is one of the best ways, the most risk-aversed to expansion to Vietnam, a legal environment where business risks are still high and changes in government policies can be unexpected. I always advise my friends and partners to enter the market via franchising or licensing to avoid a legal complications.
- Free trade agreements such as EVFTA, RCEP, CPTPP are accommodating lower tax and simpler customs procedures, facilitating supply chain which is key in the success of franchising
You have a talk show called "Nguy - Co" (Risks - Opportunities) that focuses on sharing sustainable solutions during and after the pandemic from market leaders for the wider entrepreneur community. Can you share some of the concerns and hopes that your guest speakers have regarding the Vietnamese economy?
Concerns:
- Unknown future as no one can predict when this pandemic shall end. Consumer confidence index is all time low Q3/2021. GDP growth is 1.6% and expecting 3-3.5% by the end of 2021 versus the expected 6-7%.
- Disruption is so fast and so dramatic for a country thats already behind in many aspects vs. regional or international counterparts. Now everyone has to work triple hard to stay afloat yet at the same time having to innovate, to transform to integrate into the new future, especially with the unavoidable acceleration of digitalization.
- Everyone knows they need to be agile but it’s easier said than done with a workforce that has been so used to old habits especially given the current emotionally unstable and mentally strained situation.
Hopes:
- The pandemic works like a natural storm. It washes out weak enterprises and creates new opportunities for those investing in a solid foundation for growth. This can be seen through over 70k Viet companies closing their doors during the first half of 2021. This is a new era for professionalism and long-term investment, which is great news for the franchising and licensing industry as entrepreneurs now understand and want to be part of something bigger, more systematic and professional to fight risks.
- It accelerates the overdue must of digital transformation, which with or without the pandemic is essential for future growth and sustainability when all enterprises need to be a digital enterprise any way by 2030.
- Just as a case study, I invested into a franchise brand called 25FIT early 2020 and during the pandemic we scaled from 2 to 40 studios. I hope that says a lot about the potentiality despite the pandemic and now that Vietnam re-opens the market and very soon green lanes for international visitors.
How about the potentiality for Vietnamese franchises to expand overseas? Can we hear your opinion on this issue?
I just spoke at 2 big events organized by the ASEAN franchise & retail-chain federation in KL and the 16th Indonesian Franchising & Licensing Summit last week and I can see hope in everyone’s eyes for bilateral development. I think opportunities are always there, especially now with all the free trade agreements in place.
During the pandemic, 2 of the companies I am involved in, Arkki which provides creative education from Finland and FaiFo - a e-tailor franchise system have signed international Master Franchise Agreements with Canada, Singapore, and Myanmar. I believe as entrepreneurs we donot stop developing business and obviously in this era when business means regional or global. The opportunities are there. Whether we can grasp them is another issue.
I think Vietnamese brands and franchise systems are late comers to the game and need a lot of help to professionalize, to build solid business and support foundation for franchisees before we can franchise successfully overseas because it is not just about signing a franchise agreement. Signing is only the starting point of either a miserable life or an enlightened one, all depending upon your capability to grow and lead. And this capability I think need to be further and strongly enhanced for Vietnamese enterprises.
Do you have any advice to the potential foreign franchisors who want to enter Vietnamese market? What should they foresee and anticipate in planning their market entry strategy to hopefully franchise successfully in Vietnam?
After 20 years of international franchise development over 4 continents, I have to say it is the same for all markets. 3 keys:
A strong partner in market development. A lot of the time people look at partners with strong financial background. True that is super important, but money does not solve all business issues. Without a strong management team, without proper understanding and strategy to scale, the percentage of failure is 50%, not 20% as stated by the academic theory of franchising. People tend to negotiate real hard on franchise and royalty fee but tend to forget the meat and bone of this business lays in efficient and optimized operation of the franchisee business after acquiring the rights.
During and after the pandemic, you really need to regit your models as the next-gen business model which is O2O, omni-channel, multi revenue stream, lower Capex and higher ROI.
Digitalization of internal processes. How do we launch new markets via 100% online training is an example.
If your model remains unchanged after the past 2 years, I am very sorry to say that we have a problem in franchising it to any market, not just Vietnam. And I am not talking about turning to selling groceries and veggies temporarily to stay afloat. I am talking about real business model innovation.
Having nearly 20 years of experience in the franchise business, Ms. Van, can you share with us your story of how you entered into this challenging yet fascinating field?
I have been on all sides of the fence in franchising. I have been a master franchisee for various brands, not only in Vietnam but also in the ASEAN. I have worked as global franchise development manager for listed corporations scaling their international franchise brands from 6 to 70 countries. I am now an investor with a portfolio of 24 companies, half of which uses franchising to scale as franchisors.
After all that colorful journey, I think franchising and licensing is one of the best methods to scale fast especially internationally, especially for SMEs and startups. Recently we have seen tech startups scaling through franchising and licensing as well which makes it fascinating. When you master this field, it is for life and no matter what the economic or global situation is, franchising is there to stay to scale businesses. Besides, franchising is the business of people. It requires high EI, requires empathy, people skills, and a generous heart to share success and not sharing risks with others. That’s one of reasons why I am passionate about this industry. If you don’t love people, don’t step into this industry.
Over the years, the requirements for franchising in Vietnam have been changed from time to time. Nevertheless, from your experience, what do you think are the most challenging requirements, both legal and practical, for doing franchise business in Vietnam?
Legal wise I think we have not seen any development as the courts have no precedents of disputes in franchising. I hope there would be more disputed brought to court so that the legal framework will have more practical adjustments.
- Operation wise I think there’s so much hype and not enough understanding about the opportunities and challenges brought about by this industry: margins, supply chain, import tax, qualified and dedicated team ect. Really, if you don’t have the right heart and focus on making your franchisees succeed, you become a terminator, not a franchisor.
- For anyone who wants to look at Vietnam now as a franchise destination, I believe you these may be stuff that keeps you up at night:
* Your Vietnam-oriented next-gen business model
* Digitalization of internal support
* More work, less $$$
* Agile approach to collaboration
* Industry talents
Considering the current "new-normal" situation, do you think the franchising trend and interest would be changed to other segments, other than F&B, education or retail? Do you have any advices to local companies or startups who want to join the franchise industry?
Besides F&B which is always an all-time favorite in franchising, during and post pandemic I think there is a shift within the market towards the following sectors:
Medical care: E-doctor, digital health, tele-health, tele-medicine, preventive measures...
Essential goods: Innovative delivery of essential goods
Health & wellness (physical & mental): Including f&b, supplements, immune booster, gyms, yoga, ect.
Beauty & personal care
B2B services: Training, coaching, business transformation, functional outsourcing…
Education, personal development
Digital entertainment: I invested into an AR-powered kind of entertainment using the Netflix model, so now you can go fishing with your buddies online for real.
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