Ties with franchisees key to success

Friday, May 05, 2017 08:50

A panel of business people about the franchising business at a seminar held in HCM City on May 4. — VNS Photo

Building a strong relationship with franchisees is the basis for success in the franchise business, delegates said at a seminar in HCM City yesterday.

Nguyen Phi Van, chairwoman of Retail and Franchise Asia, said franchising was a common strategy that companies choose when expanding their business.

Franchsing in the food and beverage industry has developed strongly in Viet Nam, especially in the fast food segment, she said.

Before starting a franchise, businesses need to evaluate their financial efficiency and the feasibility of their target market.

They should also build a good internal labour force so they can effectively support their franchisees.

There are six development phases involved in a relationship between franchisors and franchisee, according to Van.

They include the “glee phase” (when franchisees are pleased with franchisors); “fee” (franchisees experience practical business operations and feel pressure of expenditures); and “me” (franchisees feel they have explicit knowledge of trading and think that the management role of franchisors is no longer important and does not contribute much to their success).

The next phase is the “free” phase in which franchisees do not want to be managed. This is the period in which the franchise relationship can break down if the two sides do not have ways to retain their relationship, she said.

If they pass the “free” phase, they will come to the “see” phase (the two sides will sit down and admit each other’s value and find ways to build a better relationship for mutual benefit).

The last phase is the “we” phase, which is the peak in the relationship, when the two sides combine their strength to develop their brand.

Franchisors must understand the various phases in developing the businesses and adopt support plans and training programmes for franchisees in each phase, Van said.

To have a sustainable franchise, businesses need to understand that the most important aspect in a franchise is building a good relationship, she said.

To make sure the franchisor and franchisee relationship does not break down, the two sides must adhere to the terms of the franchise agreement, she said.

Le Thi Ngoc Thuy, director of IP Plus Group, which franchises Viva Star coffee brand, said the company entered into a franchise business in 2013 and has 63 franchised Viva Star coffee shops plus two of its own. Some disagreements arose when franchisees tried to intervene to deeply in the management of franchised shops and did not agree about maintenance fees, she said.

Lawyer Ho Huu Hoanh said franchisors should clearly state their franchise policies, fees and other terms in their agreements so that franchisors can avoid disputes later.

Regarding difficulties faced by franchisees, Hoang Son, a franchisee of the US Smoothie Factory, said it faced difficulties in sourcing raw materials for the Smoothie Factory’s product formula in Viet Nam. The two sides gradually solved the problem, with the franchisor helping his company import materials from the United States, he said.

Huynh Ngoc Hoa, a franchisee of Viva Star Coffee, said the franchisor typically uses a common management process for its entire franchise chain, but should consider adjusting it to suit each region.

Franchisors should collect feedback from franchisees to better develop the franchise system, he said.

The seminar is part of a series of seminars included in the Vietnam Retail and Franchise Show 2017 to be held at HCM City’s Saigon Exhibition and Convention Centre from June 1-3. — VNS

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