The Keys to Profitable Franchise Investing

Experts advise franchisees who want to make a profit to choose a model that suits their needs and make the most of partner support.

Recently, franchise models such as milk tea, coffee, spicy noodles, and cuisine have been springing up "like mushrooms after the rain", despite the difficult economic situation.

However, Chairman of Go Global Holdings Nguyen Phi Van - an expert with 30 years of experience in the franchising field - believes that this model is not for everyone. "There are still investors participating in the franchise model who suffer heavy losses," Ms. Van said at the workshop Understanding correctly to invest in successful franchising, on May 27.

According to Ms. Van, the reason why investors fail is because they lack understanding about franchising, so they choose the wrong model. On the other hand, many people rely entirely on their partners without learning about the operating model.

To avoid mistakes, Ms. Van points out three keys to successful franchise investment. First, participants choose an investment method that suits their ability and commitment. 50% of success comes from understanding yourself and the rest comes from discipline and commitment.

Ms. Van cited an example of an investor who wanted to franchise a convenience store model but the time they spent on this store was only two hours per day. Meanwhile, this group of business models has up to 1001 things to do. Therefore, if they do not spend time and effort to understand them and operate them, no matter how much money they "pour" into the franchise model, the investor will still fail.

The next key is that investors need to take advantage of the resources and support of the franchisor. According to Ms. Van, the franchisor has a team of professional human resources and marketing. Each department has a person in charge and a clear process. Therefore, when participating in this chain, investors need to regularly discuss and work directly with each department of the partner. In case of risks, you need to consult and support from the partner to gain more experience and handling direction.

Finally, Ms. Van believes that each person must clearly understand their investment taste to choose a brand that suits their own needs. At the same time, all parties should be collaborators, not complainers and disputers.

If you don’t like risk, investors should choose brands with a long history. This model often requires long negotiations and high costs. In case investors like adventure and creativity, they should choose young brands. This model is easy to negotiate and has low investment costs.

Ms. Nguyen Phi Van - an expert with 30 years of experience in the franchising field and also the Chairman of Go Global Holdings Company. Photo: Thi Ha — Ms. Nguyen Phi Van - an expert with 30 years of experience in the franchising field and also the Chairman of Go Global Holdings Company. Photo: *Thi Ha*

Sharing the same view, Mr. Tran Nhat Vu, Chairman of the Phuc Tea milk tea chain - with 135 branches nationwide, with a profit margin of 18-28% on revenue - said that the secret to successful franchising is that businesses must understand how to choose a sustainable brand and fulfill the role of a franchisee well.

At Phuc Tea, there are 3 models according to the needs of each partner group. The group with the ability to operate can choose to invest in opening a cart or standard model. The group without the ability to operate can choose the financial investment model (invest capital and receive interest of 10-12% per year).

In addition, according to Mr. Vu, the needs of Gen Z are constantly changing, if only focusing on one "nail" formula, it will not survive, so the company must constantly update and catch up with new domestic and international consumption trends. In addition, investors must be diligent in learning and accumulating experience from exhibitions and specialized seminars in the context of the fragmented franchise market in Vietnam.

Mr. Nguyen Duc Hung, founder of Napoli Coffee - a unit with 3,000 franchise stores - also said that in the context of economic difficulties, to maintain and make profits, franchisors and investors need to balance costs and sell products according to each "trend wave".

Franchising is a major contributor to the national GDP if properly invested. In Singapore, the franchising industry contributes 3% to GDP, in the US it is 5.1%, in Australia it is 9% and in Canada it is 10%. In addition to GDP, this is also an industry that creates large jobs and labor for the economy.

In Vietnam, the food industry is considered one of the most potential industries to follow the franchising path thanks to its high differentiation advantage and consumer expectations. Vietnam, with its traditional dishes that are increasingly known to international customers such as pho, bun, banh cuon, banh mi, is facing a golden opportunity to step out into the world through a suitable model.

According to statistics from the Ministry of Industry and Trade, in 2022, there will be 18 foreign franchise brands entering or renewing contracts to enter Vietnam. During the two years of the pandemic, the number of brands entering or renewing contracts to continue staying in the market was 26 in 2021 and 22 in 2020.

Thi Ha

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