Hottest Franchising Trends For Vietnam1

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 Vietnam
November 2, 2013
By Sean T. Ngo

About Us
• 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

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

History of Franchising
• 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.
What is Franchising
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
Benefits to Franchisors
• 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)
Disadvantages to Franchisors
• Reduced control
• Profit sharing
• Greater commitment to operating
support
• Problem franchisees

Advantages to Franchisees
• 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
Disadvantages to Franchisees
• Can be expensive
- Franchise fee
- Royalties
- Advertising
- Training
- Supplies
• Supply chain requirements
• Reputational risk (both parties)
• Lack of total control (both parties)
In the US
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
Internationally
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

International Franchising
Countries No of No of Annual Sales No of Jobs
Franchisors Franchisees (Billions US$)
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

Singapore Franchise Fees (2005)
Start-Up Costs Royalty Term
Franchise Business (With Franchise Fee Advertising
(% of sales) (yrs)
Franchise Fee)
Designer
AIR Division S$70,000 S$20,000 2.5% NA NA
Furniture
Fast Food
Burger King US$290,000 US$50,000 4.5% NA 20
Restaurant
Washroom
Calfarme Hygiene NA S$40,000 12% NA 10
System
Cool Station Bubble Tea S$85,000 NA NIL NA 2
Dennis Wee Real Estate S$10,000 /

NA 4% / 3% NA 2/3
Realty Agency S$15,000
Online
EzyShop-
Convenience S$168,000 S$40,000 5% NA 5
AnyWhere
store
Fish & Seafood
Fish & Co NA S$100,000 4% 0.5% 10
Restaurant

Start-Up Costs Royalty
Term
Franchise Business (With Franchise Franchise Fee (% of Advertising
(yrs)
Fee) sales)
Vitamin &
GNC Nutritional US$133,000 US$40,000 6% NA 10
Store
Upscale
Hilton Hotels
Hotels & US$33,000,000 US$85,000 5% NA 10
& Resorts
Resorts
House of
Indonesian
Sudanese S$350,000 S$50,000 4% NA 3
Restaurant
Food
It’s Just Dating
US$86,000 US$25,000 9% NA 10
Lunch Service
Fast Food
KFC Chicken US$300,000 US$25,000 4% NA 20
Restaurant
Math & US$30 /
Kumon
Reading US$10,000 US$1,000 Student / NA 2
Centre
School Month

Start-Up Costs Royalty
Franchise Term
Franchise Business (With Franchise Advertising
Fee (% of sales) (yrs)
Fee)
Fast Food
McDonald’s US$280,000 US$45,000 12.5% NA 20
Restaurant
Pasta
Pasta Restaurant NA US$30,000 5% US$10,000 5
Fresca
Quickly Bubble Tea S$105,000 S$25,000 5% NA 2
SHINES Language /
US$100,000 US$50,000 10% NA 5
Education Education School
Siam
Thai Restaurant S$350,000 S$120,000 5% 3% 7
Kitchen
STAR Chinese Rental S$100 /
S$70,000 S$10,000 NA 3
Bookstore Bookstore Month
Sandwich
Subway US$100,000 US$10,000 8% 3.5% 20
Restaurant
24-Hr
7-Eleven Convenience S$140,000 Varies Varies NA 15
Store

Key Statistics - Franchisors
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
Source: Spinelli et al 2004

Economic Impact
Source: IFA

Economic Impact
Source: IFA

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

Famous Brands in Vietnam

Golden Opportunity
100+

Franchisor – Franchisee
Relationship
“ 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)

Transactions Analysis
Franchisor: Centralized Franchisee: Local
economies of scale entrepreneurial intensity
1. Established site acquisition 1. Locate site that fits criteria.
criteria.
2. Design building blueprint 2. Initiate local contractor
specification. bidding.
3. National contracts for inventory 3. Onsite installation of
and equipment specification and equipment and inventory
purchasing. management.
4. Centralized training of 4. Onsite training of franchise
franchisee management. employees.
5. Detailed marketing plan 5. Placement of promotions in
template for radio, print media, local media
and television promotions.

Selecting the right franchise
• 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 cont.
• 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

Key Challenges for Franchisors
• 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

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
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.
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
Q&A

6th & 7th Floor, Me Linh Point Tower 16 Collyer Quay
2 Ngo Duc Ke, District 1 Hitachi Tower, Level 18
HCMC, Vietnam Singapore 589154
Tel: (84 8) 3520 2838
Tel: (65) 6818 9980
Fax: (84 8) 3520 2800
Fax: (65) 6818 9602
sean@vietnamfranchises.com
phuonghoang@vietnamfranchises.com teckkim@vietnamfranchises.com
www.vietnamfranchises.com


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16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154

16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154

16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154

16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154

A franchise exists only when

Franchising can be business format,

16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154

16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154

16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154

Cool Station Bubble Tea S$85,000 NA NIL NA 2

Dennis Wee Real Estate S$10,000 /

16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154

16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154

Quickly Bubble Tea S$105,000 S$25,000 5% NA 2

16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154

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

Source: Spinelli et al 2004

16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154

16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154

16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154

Franchising growth rate of 30% well

16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154

16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154

16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154

16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154

16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154

16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154

16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154

16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154

16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154

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