VietNamNet Bridge – The presence of McDonald’s, the world largest food service retailer, could force other key players in Vietnam’s fast-food market to restructure.

Nguyen Bao Hoang and McDonald's dreams

McDonald’s will launch its first Vietnam restaurant in Ho Chi Minh City at the beginning of next year after signing a master franchise agreement with Ho Chi Minh City-based Good Day Hospitality, founded by IDG head – Nguyen Bao Hoang.

“As a start, most of our food ingredients will be sourced through our existing network of global supply partners, so that we can focus on delivering the full range of menu items to our customers at all times. Our long-term plan is to work with more local suppliers to meet our needs in a sustainable way,” Liam Jeory, vice president of Corporate Relations of McDonald’s Asia Pacific, Middle East and Africa, wrote in an email to VIR.

The menu will include iconic McDonald’s favourites such as the Big Mac.

“We will explore the opportunity to evolve the menu over time based on local taste preferences,” said Liam.

Although a late comer, McDonald’s sees great opportunities ahead as they introduced the brand to the market, Liam said.

According to Euromonitor International, the world’s leading market researcher, Vietnam witnessed a 26 per cent growth in fast food. KFC is the market’s leader with 15 per cent market share while Lotteria ranked second. Other key players include hamburger specialist Burger King, Pizza Hut, Domino’s Pizza, and Popeye’s Chicken, together with Jollibee from the Philippines.

Facing with the entry of such an iconic brand, BBQ Chicken as well as many key players would have to work to retain their customer base, said the Korea based-brand’s BBQ Chicken’s PR manager Do Thi My Hanh.

“McDonald’s is so famous that Vietnamese consumers automatically pay attention to its presence even before they came to Vietnam,” said Hanh.

Also expressing high appreciation for McDonald’s, VietMac RiceBurger’s CEO Nguyen Thanh Duong said the market would explode in terms of fast-food brands when the market size swells.

“The McDonald’s opening ceremony is likely to be even more extreme than what we saw with Starbucks last year, who has had the longest queue of customers waiting to be served to date. However, VietMac has no fear because the company has a different market with Vietnamese flavoured products, and we’ll concentrate on serving students and tourists,” said Duong from VietMac.

Lawyer Ho Huu Hoanh of Vietfranchise-DSLaw, a franchise expert, said that McDonald’s would face no difficulties in expanding franchise chains in Vietnam but they had advantages compared with the opening periods for KFC, Lotteria and Jollibee.

“Firstly, Nguyen Bao Hoang of Good Day Hospitality has experience in expanding many franchise brands in Vietnam. Secondly, the early entry of KFC, Lotteria, Jollibee, Burger King and Starbucks is a good reference for McDonald’s. Thirdly, after 2014, when the WTO’s commitments on retail take effect, many international brands will come to Vietnam via franchising because this is a safe investment and doesn’t involve direct capital fund. Finally, in the context of economic woes, retail food providers, entertainment and education will be bright spots compared with other sectors,” said Hoanh.

“McDonald’s may be very successful in the US and Europe does not mean they will easily operate well in the new market of Vietnam,” said Hanh from BBQ Chicken.

McDonald’s is the world’s leading global foodservice retailer with over 34,500 locations serving more than 69 million customers in more than 100 countries each day. More than 80 per cent of McDonald's restaurants worldwide are owned and operated by franchise.

Source: VIR