Vietnam’s franchise market is gaining momentum

Vietnam’s franchise market is gaining momentum, illustration photo

PT Mitra Adiperkasa, one of Indonesia’s largest retailers, is focusing on Vietnam in its overseas operations. The retailer holds a licence to market well-known foreign retail brands, including Starbucks and Zara.

Mitra Adiperkasa made waves in Vietnam in 2017. As a crucial part of its Indochina strategy, the company launched Zara in Hanoi, and Massimo Dutti, Pull and Bear, and Stradivarius in Ho Chi Minh City to add to its flagship Zara store in the southern city. Sales have been nothing short of spectacular. The two Zara stores in Vietnam were ranked among the world’s top-performing stores in terms of sales achievements in 2017.

Following this successful trend in its Vietnam business, Mitra Adiperkasa is looking for opportunities to penetrate the country’s booming food and beverage (F&B) market. One of the brands that the company is seeking to launch in Vietnam is the automated sushi restaurant Genki Sushi, a franchise that operates under its subsidiary PT Agung Mandiri Lestari.

US-based pizza chain Little Caesars also believes this is an ideal time to enter the Vietnamese market.

Bill Schreiber, vice president of international development at Little Caesars, is optimistic about the market’s prospects. Vietnam’s pizza consumption is growing by over 7 per cent a year, indicating that there is an appetite for pizza among Vietnam’s developing consumer class.

“With brands such as Pizza Hut, Domino’s, and The Pizza Company already experiencing rapid growth in Vietnam, we believe consumer demand for pizza will continue to grow as the younger generation becomes even more familiar with this type of international food,” Schreiber said.

Little Caesars is currently finding local partners to set up its pizza chain in Vietnam. The company will enter the Vietnamese market in one of two ways: the company can either have one franchisee in charge of the entire country or two franchisees, one in the north and one in the south, to ensure the firm develops in these two markets simultaneously.

Data from the Ministry of Industry and Trade (MoIT) shows that 10 foreign firms have registered to franchise in Vietnam since the beginning of 2018. The latest brand to join this group is JYSK, a Danish retail chain selling many products, including mattresses, furniture, and interior décor. JYSK has entered into a franchise agreement with Neat Clean Vietnam JSC, with its first store in Hanoi opened in October 2015.

Another newcomer is the Swedish café chain Wayne’s Coffee. It has signed a master franchise deal with Vietnam Oman Investment JSC, for expansion throughout Vietnam. The first café was opened in Ho Chi Minh City last June. Mats Hörnell, vice president of Wayne’s Coffee, said that the opening in Vietnam represents a milestone in the brand’s history, marking its first appearance in the Southeast Asian region.

“It is a first step to show our concept in a culture that is new to us,” said Hörnell. “If it turns out to be successful, we will definitely open more cafés in Vietnam. It also gives us a platform for further establishment in neighbouring countries in the region.”

There were more than 206 foreign brands registered in Vietnam as of May this year, according to the MoIT. Sean Ngo, CEO of VF Franchise Consulting, expects that some 30-40 foreign franchise brands will enter the market this year.

“We expect to see growth in the franchise sector as a whole,” said Ngo, noting that more international franchises want to penetrate the market to capitalise on the fast-growing demand in F&B, education, retail, and various other services.

Vietnam is ranked ninth among the top 12 most valuable markets for international expansion, as identified by the members of the International Franchise Association.