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16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154
6th & 7th Floor, Me Linh Point Tower, 2 Ngo Duc Ke, District 1, HCMC, Vietnam
16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154
6th & 7th Floor, Me Linh Point Tower, 2 Ngo Duc Ke, District 1, HCMC, Vietnam
Hottest Franchising Trends for VietnamNovember 2, 2013
By Sean T. Ngo
16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154
6th & 7th Floor, Me Linh Point Tower, 2 Ngo Duc Ke, District 1, HCMC, Vietnam
• Sean T. Ngo, Managing Director
• Developed, operated Carl’s Jr. & other concepts in
Vietnam
• Exclusive partner of EGS for Vietnam and region
• MBA, University of San Francisco
• Clients from USA, Singapore, Hong Kong, Japan and
Vietnam, including: Denny’s®, Rocky Mountain
Chocolate Factory®, Texas Chicken®, Manhattan
Fish Market®, Kenny Roger’s Roasters®, Mrs. Fields
Cookies®, U-Swirl®, Fuddruckers®, The Vitamin
Shoppe®, Rita’s Italian Ice®, The Melting Pot®, Dulce
Cafe®, and more
About Us
16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154
6th & 7th Floor, Me Linh Point Tower, 2 Ngo Duc Ke, District 1, HCMC, Vietnam
Edwards Global Services• Edwards Global Services (EGS), founded
in 2001, has assisted over 40 companies export into over 30 countries
• EGS was awarded the 2011 Presidential “E” Award for Exports by U.S. Dept. of Commerce Secretary Gary Locke in Washington, D.C
• The “E” Awards are the highest recognition any U.S. entity may receive for making a significant contribution to the expansion of U.S. exports
• EGS is the first franchise sector service company to receive this national award
16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154
6th & 7th Floor, Me Linh Point Tower, 2 Ngo Duc Ke, District 1, HCMC, Vietnam
• I.M. Singer & Co – 1850
• Beginning of 20th Century – Motor vehicle
industry, soft drink bottlers
• 1930s midst of depression– Howard
Johnson (25 Howard Johnson roadside
stands)
• 1940s and 50s – Holiday Inns, Sheraton,
McDonalds, Burger King, Kentucky Fried
Chicken, etc.
History of Franchising
16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154
6th & 7th Floor, Me Linh Point Tower, 2 Ngo Duc Ke, District 1, HCMC, Vietnam
A franchise exists only when
1. You permit someone to use your name;
2. You permit someone to use your system of
operation or marketing programme;
3. You receive a payment of a fee, lump sum
or on-going fee
Franchising can be business format,
product, process or manufacturing
What is Franchising
16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154
6th & 7th Floor, Me Linh Point Tower, 2 Ngo Duc Ke, District 1, HCMC, Vietnam
• Increase brand value
• Rapid growth
• Low capital requirements
(investments in new outlets & staff)
• Royalties and other fees
• More control of brand, system, quality
than other growth methods
(distribution, licensing)
Benefits to Franchisors
16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154
6th & 7th Floor, Me Linh Point Tower, 2 Ngo Duc Ke, District 1, HCMC, Vietnam
• Reduced control
• Profit sharing
• Greater commitment to operating
support
• Problem franchisees
Disadvantages to Franchisors
16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154
6th & 7th Floor, Me Linh Point Tower, 2 Ngo Duc Ke, District 1, HCMC, Vietnam
• Relatively quick start-up time
• Proven system or business model
• Training, management system
available
• Reliable supply lines, economies of
scale
• Name recognition & goodwill
• Assistance, guidance from franchisor
• Benefit from franchisor’s
improvements
Advantages to Franchisees
16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154
6th & 7th Floor, Me Linh Point Tower, 2 Ngo Duc Ke, District 1, HCMC, Vietnam
• Can be expensive
Franchise fee
Royalties
Advertising
Training
Supplies
• Supply chain requirements
• Reputational risk (both parties)
• Lack of total control (both parties)
Disadvantages to Franchisees
16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154
6th & 7th Floor, Me Linh Point Tower, 2 Ngo Duc Ke, District 1, HCMC, Vietnam
The Average Franchisee
– Owns 1 outlet
– Has been in business for 3 years
– Spends 8.5% of sales on promotions
– Has US$58,000 in after-tax profit
– Has made average investment of US$155,000
The Average Franchisor
– Owns 13% of total system outlets
– Franchises 87% of total system outlets
– Has 75% of franchisees own 1 outlet
In the US
16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154
6th & 7th Floor, Me Linh Point Tower, 2 Ngo Duc Ke, District 1, HCMC, Vietnam
The Average Franchisee
– Has exclusive rights to develop the area or
region (e.g. Vietnam, Singapore, Thailand,
Southern China)
– Franchisees own and develop multiple units
– Franchisees tend to have successful business
track record
– Franchisees tend to be more corporate entities
than individuals
Internationally
16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154
6th & 7th Floor, Me Linh Point Tower, 2 Ngo Duc Ke, District 1, HCMC, Vietnam
International Franchising
Countries No of
Franchisors
No of
Franchisees
Annual Sales
(Billions US$)
No of Jobs
Singapore 350 2,300 n.a. n.a.
Australia 708 52,000 46.7 700,000
China 1,900 87,000 2.9 110,000
Germany 810 3,900 22.3 330,000
Hong Kong 90 2,320 n.a. n.a.
Indonesia 261 2,000 n.a. n.a.
Japan 1,000 200,000 145.0 n.a.
Korea (South) 1,300 100,000 0.840 500,000
Malaysia 187 6,000 5.0 80,000
Philippines 700 4,000 1.7 100,000
Thailand 150 n.a. n.a. n.a.
United States 1,400 350,000 1,000.0 9,000,000
16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154
6th & 7th Floor, Me Linh Point Tower, 2 Ngo Duc Ke, District 1, HCMC, Vietnam
Franchise Business
Start-Up Costs
(With
Franchise Fee)
Franchise FeeRoyalty
(% of sales)Advertising
Term
(yrs)
AIR DivisionDesigner
FurnitureS$70,000 S$20,000 2.5% NA NA
Burger KingFast Food
RestaurantUS$290,000 US$50,000 4.5% NA 20
Calfarme
Washroom
Hygiene
System
NA S$40,000 12% NA 10
Cool Station Bubble Tea S$85,000 NA NIL NA 2
Dennis Wee
Realty
Real Estate
AgencyNA
S$10,000 /
S$15,0004% / 3% NA 2 / 3
EzyShop-
AnyWhere
Online
Convenience
store
S$168,000 S$40,000 5% NA 5
Fish & CoFish & Seafood
RestaurantNA S$100,000 4% 0.5% 10
Singapore Franchise Fees (2005)
16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154
6th & 7th Floor, Me Linh Point Tower, 2 Ngo Duc Ke, District 1, HCMC, Vietnam
Franchise Business
Start-Up Costs
(With Franchise
Fee)
Franchise Fee
Royalty
(% of
sales)
AdvertisingTerm
(yrs)
GNC
Vitamin &
Nutritional
Store
US$133,000 US$40,000 6% NA 10
Hilton Hotels
& Resorts
Upscale
Hotels &
Resorts
US$33,000,000 US$85,000 5% NA 10
House of
Sudanese
Food
Indonesian
RestaurantS$350,000 S$50,000 4% NA 3
It’s Just
Lunch
Dating
ServiceUS$86,000 US$25,000 9% NA 10
KFC
Fast Food
Chicken
Restaurant
US$300,000 US$25,000 4% NA 20
Kumon
Centre
Math &
Reading
School
US$10,000 US$1,000
US$30 /
Student /
Month
NA 2
Singapore Franchise Fees (2005)
16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154
6th & 7th Floor, Me Linh Point Tower, 2 Ngo Duc Ke, District 1, HCMC, Vietnam
Franchise Business
Start-Up Costs
(With Franchise
Fee)
Franchise
Fee
Royalty
(% of sales)Advertising
Term
(yrs)
McDonald’sFast Food
RestaurantUS$280,000 US$45,000 12.5% NA 20
Pasta
FrescaPasta Restaurant NA US$30,000 5% US$10,000 5
Quickly Bubble Tea S$105,000 S$25,000 5% NA 2
SHINES
Education
Language /
Education SchoolUS$100,000 US$50,000 10% NA 5
Siam
KitchenThai Restaurant S$350,000 S$120,000 5% 3% 7
STAR
Bookstore
Chinese Rental
BookstoreS$70,000 S$10,000
S$100 /
MonthNA 3
SubwaySandwich
RestaurantUS$100,000 US$10,000 8% 3.5% 20
7-Eleven
24-Hr
Convenience
Store
S$140,000 Varies Varies NA 15
Singapore Franchise Fees (2005)
16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154
6th & 7th Floor, Me Linh Point Tower, 2 Ngo Duc Ke, District 1, HCMC, Vietnam
Average Range
Present outlets owned 26.4 % 0 – 88.1 %
Percent outlets franchised 74.25 % 12.1 – 100 %
Franchise fee $ 28,559 $ 5,000 – $ 122,500
Royalty rate 5.58 % 2 – 12 %
Advertising fee 3.48 % 0 – 15 %
Term of contract 13.79 years 5 – 20 years
Total number of outlets 2,652 104 – 13,604
Key Statistics - Franchisors
Source: Spinelli et al 2004
16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154
6th & 7th Floor, Me Linh Point Tower, 2 Ngo Duc Ke, District 1, HCMC, Vietnam
Source: IFA
Economic Impact
16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154
6th & 7th Floor, Me Linh Point Tower, 2 Ngo Duc Ke, District 1, HCMC, Vietnam
Source: IFA
Economic Impact
16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154
6th & 7th Floor, Me Linh Point Tower, 2 Ngo Duc Ke, District 1, HCMC, Vietnam
Retail & Franchising in Vietnam
In 2006, Government issued Decree No. 35/2006/ND-CP, specifically aimed at regulating franchising in Vietnam
Franchising growth rate of 30% well suited to Vietnamese, who are traditionally entrepreneurial
Many franchise operations are in F&B, but has potential in other sectors
According to latest government figures, there are only 100+ franchise systems in Vietnam
Franchising is developing in coming years in food & beverage, education, healthcare, services, and retail fashion
16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154
6th & 7th Floor, Me Linh Point Tower, 2 Ngo Duc Ke, District 1, HCMC, Vietnam
Famous Brands in Vietnam
16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154
6th & 7th Floor, Me Linh Point Tower, 2 Ngo Duc Ke, District 1, HCMC, Vietnam
Golden Opportunity
100+
16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154
6th & 7th Floor, Me Linh Point Tower, 2 Ngo Duc Ke, District 1, HCMC, Vietnam
“ The franchisor and the franchisee
knowingly and voluntarily enter
into a long term interdependent
relationship, each depending on
the other for its success”
(Spinelli et al 155)
Franchisor – Franchisee
Relationship
16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154
6th & 7th Floor, Me Linh Point Tower, 2 Ngo Duc Ke, District 1, HCMC, Vietnam
Franchisor: Centralized
economies of scale
Franchisee: Local
entrepreneurial intensity
1. Established site acquisition
criteria.
1. Locate site that fits criteria.
2. Design building blueprint
specification.
2. Initiate local contractor
bidding.
3. National contracts for inventory
and equipment specification and
purchasing.
3. Onsite installation of
equipment and inventory
management.
4. Centralized training of
franchisee management.
4. Onsite training of franchise
employees.
5. Detailed marketing plan
template for radio, print media,
and television promotions.
5. Placement of promotions in
local media
Transactions Analysis
16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154
6th & 7th Floor, Me Linh Point Tower, 2 Ngo Duc Ke, District 1, HCMC, Vietnam
• What business do you want to operate in?
• Pay attention to competition
• Is there long-term growth potential?
• Franchisor should be
Known brand, preferably in Asia
Track record/proven performance
Detailed operations & marketing support,
continuous training
New product development
Clear roles & responsibilities
Sufficient company-owned stores
Meet financial return requirements
Selecting the right franchise
16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154
6th & 7th Floor, Me Linh Point Tower, 2 Ngo Duc Ke, District 1, HCMC, Vietnam
• Is franchise in Asia or planning to?
• Higher franchise/royalty fees not always bad
• Is franchising a strategic fit?
• Ask for and review the FDD
• Interview other franchisees
• Are you a rule follower or maker?
• Franchisors search for franchisees who are
passionate about their business
• You must like working with the franchisor
Selecting the right franchise cont.
16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154
6th & 7th Floor, Me Linh Point Tower, 2 Ngo Duc Ke, District 1, HCMC, Vietnam
• Entrepreneur Magazine Survey (2007)
1. Good people skills
2. Coachable
3. Sufficient capital
• Adequate supply chain
• Affordable real estate
• Strong commercial law
• IP protection and enforcement
Key Challenges for Franchisors
16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154
6th & 7th Floor, Me Linh Point Tower, 2 Ngo Duc Ke, District 1, HCMC, Vietnam
India's Hari Puttar
• In 2008, a court in Delhi
rejected a lawsuit filed by
Warner Bros against the
makers of a Bollywood film Hari
Puttar
• In 2007, an Indian court
allowed West Bengal group to
create a copy of Hogwarts
School of Witchcraft &
Wizardry, rejecting a petition
from author J.K. Rowling
16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154
6th & 7th Floor, Me Linh Point Tower, 2 Ngo Duc Ke, District 1, HCMC, Vietnam
Yunghe
• Yunghe is a Taiwanese
franchisor of soybean milk
with nearly 400 units
• In 2009, Yunghe received
news that its trademark
had been preemptively
registered in Hong Kong
by a mainland Chinese
• Yunghe won back its trademark rights to the
Yunghe name in Hong Kong.
16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154
6th & 7th Floor, Me Linh Point Tower, 2 Ngo Duc Ke, District 1, HCMC, Vietnam
KFC China?
• As reported on CBS
News in 2011 in
Beijing
• Owner changed
name to UFO for
fear KFC would sue
• Shortly after local
authorities forced
owner to remove
logo completely
16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154
6th & 7th Floor, Me Linh Point Tower, 2 Ngo Duc Ke, District 1, HCMC, Vietnam
Q & A
16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154
6th & 7th Floor, Me Linh Point Tower, 2 Ngo Duc Ke, District 1, HCMC, Vietnam
6th & 7th Floor, Me Linh Point Tower2 Ngo Duc Ke, District 1HCMC, VietnamTel: (84 8) 3520 2838Fax: (84 8) 3520 [email protected]@vietnamfranchises.com
www.vietnamfranchises.com
16 Collyer Quay
Hitachi Tower, Level 18
Singapore 589154
Tel: (65) 6818 9980
Fax: (65) 6818 9602