Leveraging a franchise is one of the fastest ways to capture the investment market. Investors can take full advantage of advantages such as capital and human resources from partners to expand their business; at the same time, increase sales and profits from franchise fees, improve brand value and elevate the business. As it is also a business strategy with the lowest risk, businesses can save costs for branding, promotion and advertising.
- Concept
Franchising is a commercial activity whereby the franchisor permits and requires the franchisee to conduct the purchase and sale of goods and provision of services under certain conditions.
By receiving franchises from foreign enterprises, Vietnamese enterprises can be transferred reputable
brands and be able to learn and gain access to advanced business and the management methods of the world.
Franchising activities are growing strongly in big cities in Vietnam. Leading brands in this industry such as: Gongcha, Dingtea, McDonald’s, Haagen-Dazs, Pizza Hut, Burger King, Lotteria, BBQ Chicken… are strongly covering the franchise market in Vietnam in recent years.
According to the Ministry of Industry and Trade, as of June 12, 2020, Vietnam has licensed 262 foreign enterprises to franchise in Vietnam, including major foreign brands such as McDonald’s, Baskin Robbins, and Baskin Robbins (USA), Pizza Hut, Burger King (Singapore), Lotteria, BBQ Chicken (Korea), Swensens (Malaysia), Karren Millen, Coast London (UK), Bvlgari, Moschino, Rossi (Italy), etc. Most Franchises from foreign brands in Vietnam are fastfood chains, restaurants; retail furniture stores, cosmetics, other consumer goods, etc.; fashion; educations, etc.
Franchising is suitable and popular with investors who have just entered a market, have got less experience, and want to start a business…
The methods of franchising into Vietnam: the initial franchise and the secondary franchise need to be registered for franchising.
2. Limitations of franchising activities in Vietnam
Spontaneity and lack of professionalism: the trend of franchising in Vietnam is mainly in the model of level 1 franchising (also known as exclusive franchising). The franchisor will franchise for the franchisee to invest and conduct business on their own (building a chain system).
Very few international brands in Vietnam develop the market through the method of level 2 franchising (secondary franchising) when the level 1 partner continues to franchise each branch or region to the following partner.
Vietnamese enterprises lack capital, lack management, and control skills. They have not standardized processes and brands, have not planned strategies and business models that are suitable for international brands, so the implementation of a comprehensive franchise model still has many limitations and does not have high brand protection.
The uniformity in the franchise chain system of domestic franchisors is still low. Because the transfer has not yet a rigid procedure, the quality and business style between franchisees under the same brand are still different and not completely synchronized.
Some reasons for restricting commercial activities in Vietnam:
The franchising culture has been introduced to Vietnam
more strongly in recent years, so the adapting, developing and synchronizing process of businesses is still underway. Legal provisions on franchising are not strict and appropriate, while franchising regulations are general, formal and not specific.
Legal provisions also have overlaps and contradictions, causing difficulties in the application, management and settlement of disputes related to franchising activities.
Organizations that support franchising activities have not been paid attention to or improved in terms of the quality of training and human resources. Franchising activities have not been valued…
3. Certificate of technology transfer activities
Technology transfer means the transfer of ownership or the right to use part or all of a technology from the party having the right to transfer the technology to the technology recipient.
Technology transfer activities are increasing in number, helping to innovate production technology, improve the competitiveness of products, improve the level of skill of employees and increase labor productivity. On the basis of appropriate mechanisms and economic policy adjustments, trade relations are expanded, facilitating access to science and technology for enterprises.
According to the Ministry of Science and Technology, as for approved technology transfer contracts, the number of contracts in the industrial sector currently accounts for 63%, agricultural product processing and food processing 26% and medicine, cosmetic 11% (¹)
Through FDI activities, numerous new technologies have been transferred, and numerous new products have been produced in FDI enterprises; large numbers of officials and workers have been trained and retrained to update their knowledge in accordance with new requirements. FDI activities also have an impact on promoting domestic technology development in the context of market competition. Vietnam is making efforts to promote technology transfer from abroad.
The transfer of technology by foreign investors to individuals and organizations in Vietnam may be agreed upon through a technology transfer contract.
(¹) “The problem and solutions for technology transfer in Vietnam”, https://sokhcn.langson.gov.vn/node/13881.