KFC, Lotteria, Jollibee and Gloria Jean’s Coffees have opened restaurants at good places in HCM City. McDonald’s and Starbucks, two leading fast-food names of the US, are forecast to be next. Meanwhile, Vietnamese firms are still outsiders.

KFC is speeding up its coverage of Vietnam: 13-15 restaurants per year. It currently has 38 fast-foot restaurants in Vietnam and it will be 100 in the next three years.

Along with KFC from the US, Lotteria, a fast-foot brand of the Republic of Korea, has a firm foothold in HCM City with restaurants located at good positions. So far, Lotteria has 35 restaurants in Vietnam.

At present, Lotteria is still suffering losses to expand its network while KFC has earned profit after eight years waiting for the change of habits of Vietnamese people. The lowest price for a ration of KFC is VND33,000 ($2) compared to VND15,000-20,000/ bowl of pho, but many people still pay for KFC food.

Pizza Hut, another giant from the US, isn’t missing this opportunity. The two first Pizza Huts in Vietnam, worth around $500,000 each, have appeared in HCM City. Pizza Hut plans to have 20 restaurants in Vietnam by 2010, mainly in HCM City.

Not only fast-food and restaurants, foreign companies have begun to franchise in other fields. Gloria Jean’s Coffees, a coffee brand of Australia, which is only behind Starbucks (the US) for fame in the world market, has opened a café in HCM City and another in Hanoi but it has franchised the restaurants to the Khai Silk 2 Restaurant Group of Vietnam.

World of Sport, the largest brand of Singapore for sportswear, has been in Vietnam for two years with six shops. The company that has franchised this brand revealed that it planned to suffer losses for the first two years but actually, the time was only one year.

LJ Hooker, a quite strange name from Australia, which specialises in real estate franchising, has opened an office in HCM City.

Two other notable affairs are the franchising deals between Best Denki, Japan’s leading electronic retail groups, and Carings electronic supermarket chain of Ben Thanh Trade and Marketing Company and the East Media Holdings Incorporation and Phuong Nam Cultural Joint Stock Company for Walt Disney shops.

According to an investor consulter, McDonald’s, the famous fast-food brand of the US, will open its first restaurant in Hanoi this year’s end.

Host is the outsider, why?

Until now, not many local companies could directly buy franchising from big brands. KFC or Pizza Hut brands are franchised to Singaporean or Malaysian companies. In the case of Lotteria, the parent company does the work itself in Vietnam.

Nguyen Phi Van, Executive Manager of Gloria Jean’s Coffees in Vietnam, said that because of shortage of financial capability and management experience in franchising, it is very difficult for local companies to enter the eyes of global brands like McDonald’s, Starbucks or KFC.

An expert in franchising analyses that investment in each restaurant of McDonald’s is not less than $1 million, around $500,000 for one of Pizza Hut, $300,000-400,000 for a Lotteria and around $200,000 for KFC restaurant. The total investment would be very large for most small- and medium-size enterprises of Vietnam.

According to the expert, such a restaurant must have revenue of over VND20 million ($1,250) per day to have profit. However, the biggest challenge is management and quality control to meet the standards of the parent firms.

McDonald’s is not in Vietnam now because it has not found a suitable partner for franchising. Similarly, Lotteria doesn’t franchise its brand to a Vietnamese company yet though it planned to do this task after opening 30 restaurants in Vietnam.

Franchising is attractive but very difficult to exist. The case of Chicken Town is an example. Chicken Town restaurants appeared in late 1990s and it was successful with fried chicken. However, those restaurants disappeared quietly after a period of time because it sold other kinds of fruit and broke up the standard model of franchising.

The shortage of good sites for opening fast-food restaurants is another influencing the success of fast-food franchising model.

Source: Tuoi Tre