16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154 6th & …vffranchiseconsulting.com/wp-content/uploads/2013/11/... · 2013-11-14 · 16 Collyer Quay, Hitachi Tower, Level

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 VietnamNovember 2, 2013

By Sean T. Ngo



• 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

About Us



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



• 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.

History of 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

What is Franchising



• 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)

Benefits to Franchisors



• Reduced control

• Profit sharing

• Greater commitment to operating

support

• Problem franchisees

Disadvantages to Franchisors



• 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

Advantages to Franchisees



• Can be expensive

Franchise fee

Royalties

Advertising

Training

Supplies

• Supply chain requirements

• Reputational risk (both parties)

• Lack of total control (both parties)

Disadvantages to Franchisees



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

In the US



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

Internationally



International Franchising

Countries No of

Franchisors

No of

Franchisees

Annual Sales

(Billions US$)

No of Jobs

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



Franchise Business

Start-Up Costs

(With

Franchise Fee)

Franchise FeeRoyalty

(% of sales)Advertising

Term

(yrs)

AIR DivisionDesigner

FurnitureS$70,000 S$20,000 2.5% NA NA

Burger KingFast Food

RestaurantUS$290,000 US$50,000 4.5% NA 20

Calfarme

Washroom

Hygiene

System

NA S$40,000 12% NA 10

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

Dennis Wee

Realty

Real Estate

AgencyNA

S$10,000 /

S$15,0004% / 3% NA 2 / 3

EzyShop-

AnyWhere

Online

Convenience

store

S$168,000 S$40,000 5% NA 5

Fish & CoFish & Seafood

RestaurantNA S$100,000 4% 0.5% 10

Singapore Franchise Fees (2005)



Franchise Business

Start-Up Costs

(With Franchise

Fee)

Franchise Fee

Royalty

(% of

sales)

AdvertisingTerm

(yrs)

GNC

Vitamin &

Nutritional

Store

US$133,000 US$40,000 6% NA 10

Hilton Hotels

& Resorts

Upscale

Hotels &

Resorts

US$33,000,000 US$85,000 5% NA 10

House of

Sudanese

Food

Indonesian

RestaurantS$350,000 S$50,000 4% NA 3

It’s Just

Lunch

Dating

ServiceUS$86,000 US$25,000 9% NA 10

KFC

Fast Food

Chicken

Restaurant

US$300,000 US$25,000 4% NA 20

Kumon

Centre

Math &

Reading

School

US$10,000 US$1,000

US$30 /

Student /

Month

NA 2




Franchise Business

Start-Up Costs

(With Franchise

Fee)

Franchise

Fee

Royalty

(% of sales)Advertising

Term

(yrs)

McDonald’sFast Food

RestaurantUS$280,000 US$45,000 12.5% NA 20

Pasta

FrescaPasta Restaurant NA US$30,000 5% US$10,000 5

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

SHINES

Education

Language /

Education SchoolUS$100,000 US$50,000 10% NA 5

Siam

KitchenThai Restaurant S$350,000 S$120,000 5% 3% 7

STAR

Bookstore

Chinese Rental

BookstoreS$70,000 S$10,000

S$100 /

MonthNA 3

SubwaySandwich

RestaurantUS$100,000 US$10,000 8% 3.5% 20

7-Eleven

24-Hr

Convenience

Store

S$140,000 Varies Varies NA 15




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

Key Statistics - Franchisors

Source: Spinelli et al 2004



Source: IFA

Economic Impact



Source: IFA

Economic Impact



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+



“ 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)

Franchisor – Franchisee

Relationship



Franchisor: Centralized

economies of scale

Franchisee: Local

entrepreneurial intensity

1. Established site acquisition

criteria.

1. Locate site that fits criteria.

2. Design building blueprint

specification.

2. Initiate local contractor

bidding.

3. National contracts for inventory

and equipment specification and

purchasing.

3. Onsite installation of

equipment and inventory

management.

4. Centralized training of

franchisee management.

4. Onsite training of franchise

employees.

5. Detailed marketing plan

template for radio, print media,

and television promotions.

5. Placement of promotions in

local media

Transactions Analysis



• 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



• 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

Selecting the right franchise cont.



• 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

Key Challenges for Franchisors



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 Tower2 Ngo Duc Ke, District 1HCMC, VietnamTel: (84 8) 3520 2838Fax: (84 8) 3520 [email protected]@vietnamfranchises.com

www.vietnamfranchises.com

16 Collyer Quay

Hitachi Tower, Level 18

Singapore 589154

Tel: (65) 6818 9980

Fax: (65) 6818 9602

[email protected]

Documents

16 Collyer Quay, Hitachi Tower, Level 18, Singapore 589154 6th & …vffranchiseconsulting.com/wp-content/uploads/2013/11/... · 2013-11-14 · 16 Collyer Quay, Hitachi Tower, Level