Franchise Market in Vietnam
Franchising in Vietnam Page 1 of 5
Franchising in Vietnam
Le Anh February 2011
Summary The franchising model is popular and well-suited to a developing economy like Vietnam. Rising incomes and an emerging middle class are generating growth in consumer-driven sectors. There is considerable demand for lifestyle-oriented products and services, as well as growing interest in western-style food and beverage concepts. Franchising first took hold in Vietnam in the 1990’s with the appearance of well-known foreign fast food chains like KFC, Lotteria, and Jollibee. With the passage of several franchise laws and decrees, franchising businesses have become more widespread in recent years, with a number of well-known foreign and domestic franchise brands operating in the market. And while Vietnam’s entry into the World Trade Organization in 2007 heralded the opening of the retail sector to foreign investment, the slow and bureaucratic approval process for retail licenses has made franchising an attractive alternative to market entry. The market is still relatively small and competition is heating up as more brands enter the market. However, growth prospects are bright as local investors become more familiar with franchising and are increasingly exposed to successful franchise concepts. This is especially true in the urban centers of Hanoi and Ho Chi Minh City, where incomes are significantly higher than the national average. The franchise sector in Vietnam is poised for continued growth not only in traditional sectors of fast food but also in other such sector as retail, education, entertainment, health care, and lifestyle-oriented businesses. Market Demand Several factors contribute to the growth and attractiveness of foreign franchises in Vietnam, including: Per capita GDP and per capita incomes are on the rise, and incomes in the urban areas (such as Ho Chi Minh City, Hanoi, Da Nang and Can Tho) have seen significant growth. An emerging middle-class – with
Franchising in Vietnam
Le Anh February 2011
Summary The franchising model is popular and well-suited to a developing economy like Vietnam. Rising incomes and an emerging middle class are generating growth in consumer-driven sectors. There is considerable demand for lifestyle-oriented products and services, as well as growing interest in western-style food and beverage concepts. Franchising first took hold in Vietnam in the 1990’s with the appearance of well-known foreign fast food chains like KFC, Lotteria, and Jollibee. With the passage of several franchise laws and decrees, franchising businesses have become more widespread in recent years, with a number of well-known foreign and domestic franchise brands operating in the market. And while Vietnam’s entry into the World Trade Organization in 2007 heralded the opening of the retail sector to foreign investment, the slow and bureaucratic approval process for retail licenses has made franchising an attractive alternative to market entry. The market is still relatively small and competition is heating up as more brands enter the market. However, growth prospects are bright as local investors become more familiar with franchising and are increasingly exposed to successful franchise concepts. This is especially true in the urban centers of Hanoi and Ho Chi Minh City, where incomes are significantly higher than the national average. The franchise sector in Vietnam is poised for continued growth not only in traditional sectors of fast food but also in other such sector as retail, education, entertainment, health care, and lifestyle-oriented businesses. Market Demand Several factors contribute to the growth and attractiveness of foreign franchises in Vietnam, including: Per capita GDP and per capita incomes are on the rise, and incomes in the urban areas (such as Ho Chi Minh City, Hanoi, Da Nang and Can Tho) have seen significant growth. An emerging middle-class – with