Some F&B businesses are not interested in the franchise model

After four years of operation in Việt Nam, the Korean GS Retail convenience store brand GS25 currently has 200 stores in Việt Nam. — Photo courtesy of the company

Compiled by Thanh Hải

Franchise is becoming a popular business model in the domestic and international food and beverage (F&B) sector.

However, although many brands have made a name for themselves thanks to their franchise chain, many companies are still not interested in it as a business model.

According to a recent survey conducted by Vietdata, Vietnamese consumers are increasing their spending on eating out, up by between 5 and 10 per cent. About 14.9 per cent of customers are willing to spend more than VNĐ100,000 (US$4) for dinner every day, 3.5 times higher than in 2022.

A report by Kirin Capital on the outlook for the sector showed that the market value of Việt Nam’s F&B industry in 2024 is expected to increase by 10.92 per cent compared to 2023, reaching more than VNĐ655 trillion ($27.7 billion). To achieve this number, F&B businesses do not simply focus on providing meals and drinks but they must have creativity, flexible management and operations to overcome market challenges and competition.

One attractive way to do that is to follow the franchise model, also known as franchising, which is increasingly popular in Việt Nam.

Ten years after starting a business, the Má Hải Bread brand has become the largest franchised bread brand chain in Việt Nam, having about 1,000 franchise partners nationwide and with a franchise price of VNĐ7.5 million.

Co-founder of the Má Hải Bread brand Đoàn Văn Minh Nhựt said that the next goal is to expand the number of partners to 10,000. And after that it will be to offer the Vietnamese bread brand to the world, through franchising.

Recently, SIBA Food’s BAF Meat clean pork dealership model has been looking for franchise business partners, who can supply the necessary equipment, to offer pork from the BAF Meat brand.

Franchise is also a deep penetration strategy of foreign businesses for the ‘delicious piece of cake’ of Việt Nam’s F&B market.

After four years of operation in Việt Nam, the Korean GS Retail convenience store brand GS25 currently owns 200 stores, focusing mainly on the southern markets such as HCM City, Bình Dương, Vũng Tàu and Đồng Nai provinces. GS25 recently accelerated chain expansion through franchising by cooperating with HDBank who will support VNĐ1.6 billion per store for GS25 franchisees.

With the franchise strategy, the GS25 brand is gradually realising its goal of becoming the leading convenience store brand in Việt Nam with more than 2,000 stores after ten years in operation.

Ranked second in terms of market share in Việt Nam, after Pizza Hut, is Domino’s Pizza. Through the franchise model and managed by Vietnam Food and Beverage Services Company Limited under the IPPG Group, Domino’s Pizza currently has more than 50 stores in nine provinces and cities across the country, serving nearly ten million customers every year.

In April 2024, Domino’s Pizza accelerated its coverage in Việt Nam, appearing in Nha Trang City, marking a strong step forward in this brand’s plan to expand market share in the central region.

Many F&B businesses choose to stay out of the franchising ‘game’

However, in spite of clear advantages, the franchise business still has limitations that make many F&B businesses still stay out of this model.

Lê Thái Hoàng, CEO of Thai Market, a chain of Thai restaurants in many provinces and cities nationwide, said that for the development strategy of the Thai Market brand, franchising is not the only road to success.

According to Hoàng, he has tried franchising but found it ineffective and decided to stay out of this ‘game’.

“Full-service restaurants like Thai Market have complex menus and standards of management, operations and customer care services. It has complexity, professionalism, precision and high quality. As a result, our franchise partners will have a very hard time living up to our rules and operating principles,” said Hoàng.

The CEO of Thai Market has chosen instead a growth strategy in terms of brand reputation and zoning. Specifically, HCM City was chosen as a concentrated development location. In addition, it also aims to expand the brand, specifically in numbers of restaurant chains into big cities such as Hà Nội and Đà Nẵng.

Similarly, another brand that has participated in the rustic beverage segment since 2019, Rau Má (pennywort) Mix, is still making money, even though it does not participate in franchising.

With 60 specialised stores located in eye-catching locations in the central urban areas of HCM City and Bình Dương, the founder of Rau Má Mix Lê Thành Đạt has not yet decided to franchise the brand because the ingredients of pennywort and fresh milk do not contain preservatives, so the shelf life is extremely short. Some products only have a one-day expiration date.

Đạt added that the logistics process from production to shop at Rau Má Mix are strictly controlled, so not all partners have enough dedication to operate effectively.

“Large companies in the F&B industry do not enter the pennywort market because they do not find it attractive enough and doing business with fresh ingredients requires more attention than dry ingredients,” added the founder of Rau Má Mix. — VNS