HCM City (VNA) - The Ministryof Industry and Trade (MoIT) has licensed 17 foreign enterprises specialising infranchises to operate in Vietnam so far this year, according to statistics fromthe ministry.

The franchise market features both domesticand foreign enterprises. The ministry said there were 213 businesses withhundreds of trademarks licensed for franchising in Vietnam over the lastdecade.

A series of world-famous brands in the fields of fast food, hotel, restaurant,cosmetics and clothes have been rapidly entering the Vietnamese market, with expandingscale.

These brands include McDonald's, Baskin Robbins, Pizza Hut, Kentucky FriedChicken, Burger King, Swensen’s, Lotteria, Tous Les Jours, BBQ Chicken,Warehouse, Topshop and Coast London.

According to economic expert Le Dang Doanh,franchising helps businesses fully tap capital and human resources from theirpartners to expand, thus increasing sales and profits from franchise fees toimprove the value of their brands and their position in the market.

This is a very smart way of mobilising capital and human resources from foreigninvestors, Doanh added.

Not only bringing great benefits tofranchisors, this model also minimises the risk to franchisees, he noted.

Thanks to the prestige of big franchisors, products of small- and medium-sizedenterprises are consumed a lot and known by consumers. Through the model, thesebusinesses can save huge amounts of money that they would spend on advertisingand promotions.

Experts said franchising in Vietnam will rampup in the next three years, especially brands from the Southeast Asian countriesas Malaysia, Singapore, Thailand and the Philippines will have the advantage oflogistics and transportation.

Representatives from Malaysia’s Franchise Association said foreign investorsneed to be aware of everything involved in the Vietnamese market.

Malaysia has a franchise law, and its businesses that bring their nationalbrands abroad receive much support from the Malaysian government, they said.

Foreign businesses are investing to bring their brands abroad, however, this hasnot yet developed in Vietnam.

At present, Vietnamese brands that have or intend to apply the franchise includeHoa Huong Duong tea, Trung Nguyen coffee, Pho 24, Highlands Coffee, Tuan Map Bread,and Viva star coffee.

Statistics from the MoIT show the number of Vietnamese businesses involved infranchising, and those licensed to operate in the field abroad is modest at onlythree enterprises.

Nguyen Phi Van, founder andchairwoman of Retail & Franchise Asia, said with the increasing integrationand the rapid progress of bilateral and multilateral trade agreements,Vietnamese enterprises have no choice but to improve their operation and theirproducts’ quality to compete with same brands in the region.

She said Vietnamese dishes using local materials have potential in thefranchise industry for food.

Health services, salon and repair services will be the trend of franchise inthe coming time, she noted, adding that the model requires enterprises toinvest in plans and resources before the franchise progress.

Franchising began in Vietnam in the1990s with the introduction of well-known fast food chains like KFC, Lotteriaand Jollibee. It began in regional countries like Malaysia, Singapore andThailand in the 1980s.

The Vietnamese franchise market is still new,and local businesses do not have much understanding of or experience with it.  

More Vietnamese businesses are exploring newbusiness opportunities available via franchising. Nevertheless, there are risksa franchisor should investigate before engaging in business in Vietnam.

On the other hand, Vietnamese franchisees needto be knowledgeable about the business as well as seek consultancy fromindustry experts to avoid risks.

Doanh said Vietnamese businesses need to liftthemselves through investing and use of technology to improve the quality sothey can compete.-VNA