Franchising: 'manage' or let the market decide?

April 25, 2023 - 09:52
In Việt Nam, franchising is becoming popular in business, especially in popular products such as lemon tea, milk tea.
A student buys milk tea at a franchised shop of Mixue brand. — Photo

HÀ NỘI — The explosive growth of beverage brands, especially milk tea, in Việt Nam proves the attractiveness of a market of one hundred million people and is a result of the franchising business activities.

However, how to manage quality of a chain of stores is a problem.

In Việt Nam, franchising business is becoming popular, especially for products such as lemon and milk tea.

A recent report by Reputa, a data collection and analysis company, shows that in the field of food and beverage (F&B), milk tea continues leading the list of drinks that receive the most discussions on social networks, accounting for nearly 40 per cent of all consumer discussions, followed by tea, juice and coffee.

Some brands, such as Dingtea, TocoToco, Tiger Sugar, Phúc Long, and Gong Cha, have developed early in Việt Nam and have a large market share.

For Mixue, a Chinese brand with two main ice cream and milk tea businesses, although it has just been presented in Việt Nam for about five years, its growth rate is quite fast.

On the company's website, updated to April 11, Mixue has reached 1,000 stores in Việt Nam.

Facing the exciting picture of this sector, economic experts believe that franchising is a quick and effective solution for new businesses entering the market by applying established business models.

More specifically, Quang San, an expert in the field of branding, said that the Vietnamese market is very attractive to not only domestic enterprises but also foreign investors due to its good purchasing power.

With a small amount of capital, from VNĐ500 million (US$21,150) to VNĐ1 billion, many people could own a shop without having to worry about building a brand.

For the beverage industry, specifically milk tea, he assessed that the product's life cycle was very short, so businesses often sped up the building of chain stores.

“Because the recipe is simple, in the context of fierce competition, other businesses will also jump in, so it is very difficult to maintain a position in this field for a long time,” San shared with VietnamPlus online newspaper.

Let the market decide for itself

It can be seen that the Vietnamese beverage market, especially milk tea, is a potential market with dozens of competing brands.

However, many people think that businesses have not yet reached the professionalism of the franchising model.

Associate Professor Dr Đinh Trọng Thịnh, lecturer at the Academy of Finance, said that franchising is a form of direct investment and this is a model that has existed for a long time in foreign countries.

Accordingly, the brand owner must comply with the franchising contract law, at the same time strictly control the production stages and processing technology and directly inspect the production process for which they have registered the copyright in the host country.

In Việt Nam, this model has only developed within the last 10 years. Although some businesses have focused on controlling the chain system, from layout to recipe, many are almost just selling brand names, leaving franchisees to handle themselves, which makes product quality not be ensured.

In order for this field to develop, the expert said that the most important thing is to manage quality, ensuring it is true to the original business.

Sharing the issue of the distance of selling points, Lê Việt Nga, deputy director of the Ministry of Industry and Trade’s Domestic Market Department, said that businesses could do things that are not prohibited by law.

That businesses opened consecutive stores next to each other depended on the decision of their owners, she said.

An official of the Việt Nam Directorate of Market Surveillance said that except for conditional business items which must follow the planning such as petrol and oil, other items would be decided by the franchisor and the franchisee.

However, he also emphasised that those doing business following market rules without competitive advantages would eliminate themselves.

The chain quality management needs the role of business owners, when the quantity is large, it will be difficult to follow up, he added. — VNS