Franchise restaurants boom in Vietnam

Popular global franchise brands like Little Caesars, Jumbo Group, The Boiling Crab, and Element Fresh have all sat down with Vietnamese partners in preparation for their entry into the 94-million-strong market.

Presently, Vietnam is home to 71 foreign restaurant franchises, including ‘big players’ like McDonald’s, Starbucks, Burger King, and BBQ Chicken.

A restaurant franchise in Ho Chi Minh City.

Most of these franchises are currently flourishing in the country’s largest hubs of Hanoi and Ho Chi Minh City, but others are beginning to target growing cities such as Da Nang and Hai Phong to further cement their foothold.

William Schreiber, vice-president of international development for US pizza chain Little Caesars, said he had traveled to Vietnam 15 times in search of opportunities to ink franchising deals with local businesses.

The third-largest pizza chain in the US, Little Caesars already has over 5,000 locations in 18 countries, but Vietnam is looking like the first country in Southeast Asia to earn a franchising deal with the company.

Recently, Singaporean seafood restaurant group Jumbo also partnered with a Vietnamese company to launch the franchise locally, having made successful entrances in China and Japan.

Other popular franchises like Grimaldi’s Pizzeria, Boiling Crab and Presotea have announced their intention to open stores here.

A KFC restaurant in Hanoi.

A lucrative business

With prices that target middle-income earners, restaurant franchises are becoming increasingly popular with the younger generation in Vietnam as a go-to place for dining, hanging out with friends, and meeting with business partners.

Vietnam-based Golden Gate Group, one of the first in the country to conduct business with foreign franchisors, has until now successfully imported and operated 22 restaurant franchises ranging from barbecue, hot pot to beer clubs.

In 2016, the firm reported revenue of VND2,628 billion (US$115.77 million), a 524% growth rate on 2013.

With its current network of 201 locations across Vietnam, it is estimated that the firm will reach 400 locations by as early as 2018.

According to Hoang Tung, owner of the Vietnamese pizza chain Pizza Home, the cost of franchising a popular brand can amount to VND1 billion (US$44,000), not to mention a percentage of revenue paid regularly to the franchise owner.

People line up outside Vietnam's first Starbucks restaurant in Ho Chi Minh City on its opening day, February 1, 2013.

A cut-throat race

Despite the overwhelming number of success stories in Vietnam, in reality many brands have been forced to depart the market after finding themselves falling behind in a dog-eat-dog environment.

Examples include fast-food restaurant Subway and coffee houses such as Gloria Jean's Coffees, The Coffee Bean & Tea Leaf and N.Y.D.C.

“Not many Vietnamese franchisees have the experience to run restaurant franchises on a large scale, which often results in fatal mismanagement once the number of locations reaches the hundreds,” an official from the Ministry of Industry and Trade asserted.

“They still have a lot to learn from foreign restaurateurs.”