Fast food market readies for new great war

VietNamNet Bridge – The information that Starbucks Coffee and The Johnny Rockets are now at Vietnam’s door, ready for the penetration into Vietnam, has heated up the fast food franchising market.

Some months ago, a Gloria Jean’s Coffees shop on
Dong Khoi – Nguyen Thiep Street
had to shut down because of the overly high retail premises rental.

Vietnam is a lucrative market

In some more days, on the streets in Vietnam, where there are a lot of fast food shops bearing the US brands KFC, Subway, South Korean Lotteria, Filipino Jollibee, a new chain of shops with the brand “The Johnny Rockets” would arise.

Steve Devine, Chair of Johnny Rockets, said that the group has decided to penetrate the Vietnamese market under the mode of franchising after four years of surveying the market.

At the ceremony on declaring the cooperation with CB Richard Ellis Vietnam (CBRE) in HCM City held recently, Mr Steve Devine said that The Johnny Rockets plans to open 10 shops in the next 10 years in Vietnam.

Meanwhile, the US Starbucks Coffee is completing the final step before officially entering the Vietnamese market, slated for 2013.

However, Starbucks Coffee seems to take cautious steps with its business plan in Vietnam. Unlike other fast food brands, Starbucks Coffee does not intend to enter Vietnam through the franchising, but it would team up with a Vietnamese partner to set up a joint venture.

However, the presence of Starbucks Coffee would be certainly the big threat to The Coffee Bean & Tea Leaf, Gloria Jean’s Coffee, Highlands Coffee and Trung Nguyen Coffee – the well known coffee brands existing in Vietnam.

Vietnam has emerged as an attractive franchise market for the US big guys. KFC of the US Yum Brands Group is a typical example. The brand entered Vietnam in 1997 and it only began making profit in 2004. However, the chain has been developing very rapidly since then.

To date, KFC still has been leading the fast food market in Vietnam with 100 shops open in nearly all big cities. It is expected that KFC would have 116 shops by the end of the year.

Meanwhile, Lotteria, a subsidiary of South Korean Lotte Group, after opening 100 shops in 2011, has announced that its number of shops would rise to 200 in the next five years.

Though many big names have been present in Vietnam, but the market is still big enough for new comers. Therefore, analysts believe that the giants in the fast food sector would, one after another, flock to Vietnam in the near future.

If so, the Vietnamese market would witness a cutthroat competition among the existing giants like KFC and Lotteria, and the new comers, who are all redoubtable rivals.

Vietnam has opened its market door to franchising, but this remains the playing field for foreign brands so far. Lawyer Ho Huu Hoanh, Director of Viet Franchise Center, affirmed on Dau tu that the biggest barrier now is not the legal framework. He said the franchisers still need to consider the infrastructure conditions and seek suitable partners.

Most of the existing fast food chains are gearing up to enlarge their network this year.

Subway, for example, plans to open two more shops in October and December 2012 in HCM City, according to Bui Le Bich Tram, marketing Director of the company.

Big challenges ahead

According to the Ministry of Industry and Trade, in 2011, the total fast food sales in Vietnam reached 870 billion dong, up by 30 percent over 2010. The market is being controlled by foreign brands such as KFC (the US), Lotteria (South Korea) and Jollibee (the Philippines).

Franchisers should be informed that though Vietnam is really a lucrative market, they would meet big challenges when entering Vietnam.

Some months ago, a Gloria Jean’s Coffees shop on Dong Khoi – Nguyen Thiep Street had to shut down because of the overly high retail premises rental.

Meanwhile, Pham Viet Anh, a branding advisor to Left Brain Connectors, said on Nhip Cau Dau tu that it would be really difficult to localize the products to fit the taste of local people.

Complied by C. V