F&B businesses reluctant to embrace franchising

July 09, 2024 | 16:57
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Despite franchising being a hallmark choice in the F&B sector both domestically and internationally, many enterprises remain hesitant to adopt this model. While some brands have established their names through franchise chains, others have chosen to steer clear.

According to the 2023 Franchising Economic Outlook, the quick-service restaurants (QSRs) and full-service restaurants category account for over 67 per cent of all franchise employment, with QSRs anticipated to have witnessed the strongest industry growth of 2.5 per cent in 2023 compared to all other sectors in franchising.

The food and beverages (F&B) market value in Vietnam is projected to rise by 10.92 per cent in 2024 compared to 2023, reaching over $26 billion, according to Kirin Capital, a private equity firm.

Furthermore, it reports that independent F&B outlets will continue to dominate, holding 93.9 per cent of the market share by 2027, reaffirming the supremacy of this business model.

F&B businesses reluctant to embrace franchising

Le Thai Hoang, CEO of Thai Market, a Thai restaurant chain with locations in Ho Chi Minh City, Hanoi, and Danang, believes franchising is not the only path to success.

"For a full-service restaurant like Thai Market, with a complex menu and unique operational management and customer service standards, franchise partners may struggle to adhere to our principles," Hoang said.

"As a result, our brand could suffer due to irresponsible franchisees."

Consequently, Thai Market's CEO has opted for a strategy focused on brand reputation and targeted growth. Ho Chi Minh City is its primary development hub, with expansion plans also targeting major cities like Hanoi and Danang.

Similarly, Rau Ma Mix, a beverage brand established in 2019, has thrived without franchising.

Despite having 60 stores in prime urban locations like Ho Chi Minh City and Binh Duong, founder Le Thanh Dat remains cautious about franchising.

"At Rau Ma Mix, the production and logistics processes are tightly controlled, from preparation to store delivery, ensuring quality. Not all partners have the dedication needed to operate effectively," Dat said.

Perhaps the biggest lesson on the pitfalls of franchising comes from the budget milk tea brand Mixue.

In less than four years, over 1,000 stores have sprung up nationwide, with one appearing every kilometre in Hanoi. This oversaturation has diluted customer traffic, leading to losses for many franchisees who are struggling to break even.

Nguyen Thuy Chi, a Mixue franchisee in Long Bien district, said, "Initially, the store performed well due to limited competition. But now, we face competition not only from other ice cream and milk tea brands but also from other Mixue outlets, some just a kilometre away."

When a brand expands too quickly through franchising, it risks losing its quality and finesse that add to the customer experience.

Brands that fail to analyse the market prudently may get swept up in competition trends, ultimately disadvantaging franchise buyers.

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By Hoang Minh

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