Franchising in service sector poised to boom
Franchises acting upon F&B growth
Global franchisers, retailers eye VN

At a Co.op Food franchisee in HCM City. Vietnam offers huge opportunities for convenience store franchisers. — Photo courtesy of Saigon Co.op

According to experts, Vietnam has all the requisite elements for the retail and franchising industry to boom such as a large consumer base, rapidly rising incomes and a generation of young and educated professionals.

Speaking at a seminar on Building an International Franchise Model held in HCM City last week, Yun Ju Young, managing director of GS25 Vietnam, said the country is among the fastest growing retail markets in Asia, with convenience stores recording strong growth in recent years.

The South Korean convenience store chain GS25 has around 14,000 stores in its home market, 80 per cent of which are franchised.

“There is a high convenience store density in Korea. So we have to look for business opportunities in new markets like Vietnam.”

Vietnam, with a population of nearly 100 million, has around 2,000 stores, meaning there is still great potential for growth, he said.

Vietnam also has policies facilitating foreign investment, he said.

In Korea, convenience stores are not allowed to open within 15 metres of another, but in Vietnam there is no such restriction, he said.

“GS25 estimated the opportunity in the Vietnamese market to be 50 times higher than in South Korea.”

According to analysts, convenience store franchises will be a new profitable business model because costs are lower than in other sectors while management is easier.

Yun said other convenience store chain franchises from Japan, Taiwan and other countries also want to enter the Vietnamese market.

In addition to foreign franchisers, Vietnamese retailers have also stepped up their franchising efforts.

Saigon Co.op for instance is franchising its Co.op Food convenience store in HCM City and other cities and provinces and targets opening 100 new stores this year.

Nguyen Phi Van, founder and chairwoman of Retail & Franchise Asia, said Vietnam is rated highly by the International Franchise Association as a franchise market.

For the next three years it would continue to attract international brands, especially from its region, she said.

However, many franchises did not succeed and pulled out of the Vietnamese market since they ran their business following the traditional model without applying digital technology, she said.
Retail franchises can no longer follow the traditional model, she said.

In advanced countries, they apply artificial intelligence and virtual reality in franchising and are very successful, and businesses in Vietnam cannot ignore this trend, she said.

Experts said franchisees need to change their mindset because some local businesses still consider franchises as a way to make money quickly by using other people's brands.

This is a completely wrong approach and risks creating a crisis for the franchise systems, they warned.

VNS