When to join a franchise?

Franchising is an emerging business model in Vietnam. According to “International Franchise Association – IFA”, franchising is “a contractual relationship between a franchisor and a franchisee; where the franchisor maintains an ongoing relationship with the franchisor’s business in activities such as providing business know-how and training, the franchisee operating under a trade name, knowledge or business processes owned or controlled by the franchisor, and the franchisee will invest capital in the business from its own resources”.

Franchising can be classified in many different ways such as traditional franchising – business model franchising, product franchising – production process franchising, “strong” franchising (the franchisor has tight control over operations). business activities, usually in the field of F&B) – “weak” franchising (the franchisor only provides the right to use the brand or trademark to do business in a certain area, without strict control) .

There are three basic franchising methods:

1. Direct Franchise: The franchisor enters into an individual franchise agreement with a single-unit franchisee. The grantor has direct control over each franchisee and does not have to share the income stream.
2. Master Franchise Agreement: The franchisor grants a master franchisee the right to grant a sub-franchise in order to develop the grantor’s business model in a specific area within a period of time. certain time.
3. Area Development Agreement: The developer is obliged to open a store system (instead of granting a secondary franchise) in a specified area within a specified period of time.

Franchising is a business activity that must bring benefits to both parties (win – win); Normally, a potential franchisee will evaluate the possibility of bringing a “superior profit” of receiving a franchise compared to not receiving a franchise to decide whether to participate in the franchise or not.