Sunday, March 25, 2012

A year of changes | Look At Vietnam

A year of changes

March 24, 2012
Franchise business has become increasingly attractive.
Within only 10 days after inauguration, three Baskin-Robbins ice cream parlors sold out all imported volume which was expected for sale within four months. The return to Vietnam of this U.S. ice cream brand late last year seems to be successful.
Nearly 20 years ago, a Vietnamese-American who brought Baskin-Robbins to Vietnam had to quietly withdraw from the market after a period of ineffective operations. It was because there were few people at that time able to afford a glass of ice cream sold at a high price due to an import tax of up to 75%.
With this return, Vietnamese franchisee Blue Star Food Corporation has made careful preparations, including two and a half years for negotiations, conducting market research and looking for business premises, as well as an investment of around US$200,000-250,000 for each parlor. The success attained after a few days of inauguration has enabled Nguyen Thanh Nam, general director of Blue Star Food, to dream of opening 50 parlors in 2015 instead of 31 as committed. “We will open six more ice cream parlors this year,” Nam said.
Baskin-Robbins will have to compete with 15 existing ice cream parlors of U.S.-based Bud and others of local firms. However, ice cream is just a small aspect of international food firms coming to Vietnam through the franchise form. KFC is a name that is often mentioned as it appeared in Vietnam quite early with the opening of the first fast-food restaurant in 1997, but it only made profits eight years laters. Currently, there are 100 KFC stores nationwide with 20 million customers each year. If a customer spends around an average of VND80,000 when dining at its restaurant, KFC’s profit earned in Vietnam is not small at all.
And thanks to the attractive market, 10 firms with 19 brand names from the U.S. have recently come to Vietnam.
Phil Crimmins, president of the grill and bar restaurant chain Applebee’s, said he is seeking a local partner to penetrate the Vietnamese market. Running 2,000 restaurants worldwide, Applebee’s obtains revenue of US$4.7 billion each year. “It is now the right time for us to exploit the market based on such elements as economic growth and a large and young population,” said Crimmins.
Vietnam’s attractiveness in the food sector can be seen through the presence of many big names that came here long time ago and are still operating well such as KFC, Lotteria and Jolibee, or new names like Gloria Jean’s Coffees, Lee’s Sandwiches, Pizza Hut and Tous Les Jours.
However, whether McDonald’s follows a huge wave of big names entering Vietnam recently is still a question. According to unofficial sources, this firm will come, but it is hard to find a suitable partner. McDonald’s does not want to rent premises but wants to do property business. Besides, once entering the game, McDonald’s will open dozens of stores instead of a few small stores. Meanwhile, in reality, it is not easy to buy sites at ideal locations in the city’s downtown. Therefore, finding a Vietnamese partner meeting requirements of full understandings of food culture, financial capabilities and broad relationships in the real estate sector is not an easy task.
Beth Solomon, vice president of the Washington-based International Franchise Association, said that the association would bring U.S. firms active in sectors such as education and retail to Vietnam this year to seek partners and expand their franchise in the market. The U.S. and European markets have now become saturated, and such U.S. businesses have planned to explore new markets, especially in Asia, she said. The sooner they enter Vietnam, the more profit they gain, according to U.S. franchise firms.
Experts said Vietnam’s consumption power has become increasingly high with giant names planning to come here, making the market more and more interesting. Besides, the demand of Vietnamese consumers is changing, and insiders call this new demand a desire for high-class brand names which enterprises should not miss.
The franchise business is not at all new but still an interesting investment model as there are up to 90% of franchisees reporting success while only 10% has to stop operating, according to statistics of the International Franchise Association.
The year of 2013 is forecast to see a massive invasion of franchise firms into Vietnam who have finished seeking and negotiating with partners to exploit the large market with nearly 90 million people.
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