Analysts also forecast that the franchising market would grow strongly after Vietnam enters the World Trade Organization.

Franchised businesses first appeared in Vietnam in 1990s with the advent of high-profile international fast food and beverage chains including Kentucky Fried Chicken (KFC), Dilmah, Lotteria and Jollibee.

KFC restaurants in Vietnam increased to 17 early this year from 14 shops in 2005 and the operator schemed to reach 100 in 2010.

As a form of business operation, franchising is growing at a rate of about 20 per cent annually, with a total of 70 companies now operating under both international and Vietnamese brands, according to trade officials.

Last year alone, the franchising market witnessed a strong surge of 30 percent, with more than 530 new franchisees and the transfer of 800 brands including 100 local brands.

According to global franchisers, Vietnam has all the hallmarks of a marketing haven for franchises: a young market, high economic growth and stable politics.

Foreigners excited

McDonald’s Restaurants from the US plan enter Vietnam late this year – after Vietnam becomes a full WTO member, awaiting Vietnam’s legal frame for franchise operation.

The US Yum Brands-run Pizza Hut restaurant chain, one of the world’s top ten franchisers is also taking final steps to enter the Vietnamese market, according to the Ho Chi Minh City Trade and Investment Promotion Center.

Big brand names in Singapore such as Charles & Keith shoes, Celia Loe Chapter 2 and fast food traders Bread Talk, Cavana, and Koufu surveyed the Vietnamese market last year and plan to seek Vietnamese partners to franchise.

Many business people were interested in the franchising model, a new business activity which could help newcomers reduce risk while supporting quick expansion for established companies.

Additionally the Vietnamese government has passed the Franchising Decree, which would help bolster franchising businesses in Vietnam.

Luong Van Ly, deputy director of the HCMC Department of Planning and Investment, said his office received numerous proposals from investor groups from the US and the EU to organize conferences to study the local market.

Many experts suggested franchises are an effective way for local enterprises to hold market share and expand activities, but businesses themselves seem to think otherwise.

A representative of HCMC supermarket chain attributed low participation in franchising by local businesses to poor management capacity.

He added that the domestic enterprises preferred to gain ownership of big brand names if they expected to benefit from the franchise model.

Additionally, to trade franchises, parent companies must standardize business practices to attract buyers. In fact, many domestic companies do not yet have the capacity to do so.

But local businesses that forged ahead with the model have yielded success in the local market, including Trung Nguyen with 1,000 franchised coffee shops, Nam An Group with 15 franchised noodle restaurants, and Nha Vui with home design centers.

Local companies have also had some success in franchising their names to overseas markets, including Trung Nguyen Coffee, Pho 24 restaurant and AQ silk.

Reported by Nguyen Hang – Translated by Ha Viet