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Franchising wave after integration
05 | 09 | 2007
In the context of Vietnam, s accession into WTO, franchising will become an important business model. Many big corporations in the world landed in Vietnamese market to find the opportunities for the brand name development such as KFC, Lotteria, Jollibee, Pizza Hut... Recently, the famous Australian coffee brand name Gloria Jean entered into Vietnamese market through franchising contract with Viet Lifestyle Company. What do these giants think about and how about Vietnamese entrepreneur action?

Gloria Jean is a global group with its headquarter in Australia. This is the group which owns the greatest franchise system in the world with around 800 points of reception of franchise in 30 countries such as Japan, the Philippines. Malaysia, Singapore.....In April/2007, Gloria Jeans Coffees opened the first shop in Ha Noi... This is the second coffee shop with the investment capital of 250.000USD that Viet Lifestyle - Vietnam-based an agent of trade franchise of Gloria opened after the first shop had inaugurated at the end of January/2007 in Ho Chi Minh City . Viet Lifestyle destines to open 5 shops in this year including four shops in HCMC and one shop in Ha Noi. The second coffee shop Gloria in the capital will be opened in next June. Besides, Gloria Vietnam will make the secondary franchise to a Vietnamese company in the middle of this year. Mr. Billy Sin- The Asian Business Manager of

Gloria Jean Group stated that: “Before entering into Vietnam, we had investigated carefully Vietnam market. We know that coffee is the export strength of Vietnam. Nevertheless, luckily, this does not influence much on our coffee products. Perhaps, Vietnam is good at robusta coffee and Gloria is excellent in arabica coffee that is the product we desire to develop... On the other hand, Vietnam is developing and is a potential market for investors. We researched many market in the Asia South-East region including Thailand, Malaysia..... and realized that these markets were similar and had a development potentiality. This is a suitable time to penetrate into Vietnamese market. For me, time has a decisive significance for the success of the trademark like Gloria Jean.

KFC and Lotteria developed in over 30 shops in nationwide. In April/2007, Lotteria opened the shop in Ha Noi. Pizza Hut is preparing to open the second franchise shop in Sai Gon. Jollibee- a kind of fast food of the Philippines which was made franchise by Tan Viet Huong Company in Ho Chi Minh City was asked in turn at supermarkets, trade centres in Ho Chi Minh City. Many big corporations in the world landed into Vietnamese market to find the opportunities for brand name development. “Giants” in the “world foodstuff village” Mc Donalds, Starbucks Cafe, Seven-Eleven, Wallmart plan to set foot into Vietnam market... Mr. Han Guang Chou - Deputy General Manager of the Hans Singapore Pte.Ltd - a famous brand name in sweet cake, coffee, fast food in Singapore knew that: “ Hanss standardized stages, ready for exporting into Vietnam. The partners of Hans will be assisted in marketing, advertisement, especially in the initial phase.

Tools for keeping the market share

Many Vietnamese enterprises plans to extend to the promising world market

such as the U.S, EU or Japan. This form both helps enterprises to penetrate into the great market with low cost and is the way to protect the trademark of Vietnamese enterprises in foreign markets.

Trung Nguyen coffee company which is one of the first enterprises grasps this form of business. To date, Trung Nguyen brand name has been present in 64 provinces, cities all over the country with over 50 officially confessed coffee inn. This brand name has been present in Japan, Cambodia, Singapore, and Thailand. At present, the G7 Mart mode of Trung Nguyen is regarded as the breakthrough in the implementation of trade franchise with the aim to compete with foreign distributors to dominate retail market.

Kinh Do joint-stock company is also a successful enterprise with this model. with the network of 150 distributors and over 30.000 retail outlets all over the country. Many enterprises doing business in foodstuff in Ho Chi Minh City are planning to open the fast food shop, afterwards, it will made franchise , the two leading enterprises are Kinh do and Vissan

“XQ-Silk by hand embroidery painting” company made franchise successful their trademark in the U.S with the price of 100.000USD. Foci fashion brand name in out of 48 current fashion shops there were 35 shops to make trade franchise. In 2008, it is projected that Foci would multiply 100 shops in nationwide. A long -term objective of Foci is to build the world-class fashion brand name.

Pho 24 which is a string of Vietnam pho inns was formed in July in 2005. Pho 24 brand name built 35 outlets in 3 regions: the North, the Centre, the South and 3 outlets in foreign countries ( 2 in Indonesia and 1 in the Philippines ) and it is expected to open 80 outlets in 2007 and 100 outlets in 2008, in which it made trade franchise 8 outlets. Singaporean enterprises intend to seek Vietnamese partners for trade franchise. As a result, in the coming time, Pho 24 will extend the trade name to Singapore, Thailand, Malaysia, Taiwan, Hong Kong, Korea and Japan. To date, Pho 24 has been present in the U.S, Indonesia, Korea, and Australia.

How to understand and implement the term “franchise”?

In addition to implementing independent business activities, individuals and enterprises select a simpler way to start business that is the accession into a system of trade franchise. With the average growth of 20%/per year, at present, Vietnam has the enormous potential to become an attractive market for the trade franchise. Vietnamese companies started taking part in the concessive system of big corporations in the world.

For many people, this is the first time they have participated in this strange business form, it is considered as a form of safe investment and business expansion. Nonetheless, in effect, there is much risks and challenges. In order to integrate successfully, a prerequisite for Vietnam enterprises is to understand, research advantages and disadvantages of this specific business form before reaching an investment decision.

In normal practice, trade franchise is regarded as a commerce activity, in which, franchisor side will send business model, goods trademark, business service, trick and symbol to the franchisee side. Uniform franchise offering circular is allowed to exploit business on a certain geographic space and pay the franchise cost and the percentage of the periodical turnover for the franchisor side in the given duration.

As a first step, the franchisee must be bound by the clauses of UFOC. According to

the regulations of the contract, the franchisee is only allowed to do business in a certain geographic space and must apply the mode of business which is transferred by the franchisor. Specifically the franchisee needs to pay special attention to some rights that they benefit and some issues which is easier to emerge as follows:

The distribution right

The franchisee signing the franchise contract is to purchase the product distribution right in a certain territory scope. The franchisee is not allowed to concess again this right for the other side if it is not agreed by the franchisor as well as not separated from the system to implement

the business ideas.

Viet Lifestyles company - an agent of the trade concession of Gloria Jean in Vietnam, only Vietnam Gloria makes the second concession for the other company when it is admitted by Gloria Jean

The product and customer

When taking part in the franchise system, commonly, the franchisor will become the input product supplier for business activities, the franchisee, of course, will have the traditional customers of the system

. Technical support, training and marketing activities

Trung Nguyen coffee company will supply coffee with different varieties for the overall system with the concessionary price, the customers that is loyal to Trung Nguyen coffee aromatic flavor can enjoy in over 1000 Trung Nguyen concession shops inside and outside the country

The prestige of a link in the franchise system will decide on the prestige of the whole system, especially, for the newly developed franchise system. Thus, one of issues that the franchisor specially concerns is the training activity, the management experience

transfer. This helps establish a stable foundation for the franchisee to implement the pro-profit business activities and keep the prestige of the product brand name.

According to Dr. Ly Qui Trung - The managing director of Nam An company - Pho 24. The selection of the partner to buy franchise (trade franchise) is very important, it must choose the partners that are excellent in the management, governance as well as loyal to the system.

Pho 24 decides on applying a form of business formula franchise, in which, the partner side that buys franchise is made franchise to use brand name and instruct and train elaborately the organizational way, handling, kiosks management.....Organization, training , also is prepared step by step to transfer and support effectively for the partner side to buy franchise.

The training programme for the partners of buy franchise Pho 24 including the duration of the training lasts from 2 to 3 weeks at the training centre of the group taking the form of theory training and immediately practicing at pho operating shops. The partner that buys franchise is made the requirement to send at least a management worker, a kitchen worker and a representative of the owner to the centre to train free of charge. After that, these workers will partake of a team of the corporations experts to train the remaining workers of franchise shops. Experts in the group will be present at the franchise shops after and before the opening days 3 days at a minimum

To be licensed

The franchisee is allowed to distribute goods, brand name service, trademark, forms of advertisement or commercial symbols, at the same time, have the right to get access to data on business activities of the franchise system, information technology secret, the product marketing, customer service for the highest results

.

Pho 24 is a chain of the superior inns and on the development of Vietnam thanks to the product quality and specific business model, easier to extend. Long - term strategy of the company is to multiply continuously the model of pho inn in Vietnam and foreign countries through a form of franchise sale and business cooperation. In the first two years of 2005-2007, through the first pho inns, Pho 24 focuses mainly on establishing the synchronism in steps of business production. The aim of pho 24 is to set up a stable base for the long - term franchise strategy in the future. On the other hand, Pho 24 singles out the direction which focuses on the quality and the depth of business model in general and business franchise model in particularly.

Payment

The licensed franchisee will take the control over the business activity of the franchisee, franchise fee and loyalty fee periodically calculate by the percentage of turnover. Two kinds of fee are regarded as the paid cost for the right taking part in the relationship of the right reception and use the system and brand name of franchise people. Therefore, the franchisee is not regarded as real businesspeople because they are not independent of business activity implementation ways. If it depends completely upon the system, the franchisee is affected by the system risks. To overcome this, it requires the franchisee to balance the limitations in a line.

To be licensed to use the brand name and operating formula of a pho 24 inn with the synchronous standard, the partner who buys the franchise must pay the initial cost for the owner of pho24,s brand name ( only pay once ) plus to the monthly fee. the monthly cost is the use cost (rent cost ) of brand name, trademark, other supportive service such as promotion, advertisement , marketing, training , consultancy from the owner of pho 24 in 5 years of the business franchise contract.

Keeping an eye on the brand name counterfeit

Due to the quality of the counterfeit goods, the brand name does not reach the standard, mistaken for customers, and influence seriously on the prestige of the franchisor and the turnover of the franchisee. This makes the franchisors get ready for the participation in the copyrights violation lawsuits

In order to the close legal procedures in the beginning, Pho 24 has invested considerably in the trademark registration steps inside and outside the country and lawyers helps to draw out the sample franchise contracts

According to the recent statistics of Trung Nguyen coffee company, there have been hundreds of counterfeit coffee shops of Trung Nguyen that were out of control.

Brand name character

The disputes which arise in the transfer contract are the popular phenomena. In reality, there is not any sample contract for kinds of franchise. Specifically, those are the aggregation of kinds of contract or each contract. The trend of the franchisor is to take control over the united business process; the franchisee wants to keep their character. This conflict itself is the origin of non-transferral disputes, in vain the contract, the contract punishment.

One of the important strategies of the construction of pho 24 brand name is to consolidate the stability and synchronism of a chain of pho inn. Particularly, for the dish quality, the service quality, the interior decoration, the staff uniform, signboard, tools and equipments which are very small. Building a common culture through the classes of company (the centre office, the company shop, franchise shop)



Hoang Ngan (www.agro.gov.vn)
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