New entrées amidst restaurant shake-up

July 16, 2020 | 09:00
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While the global restaurant industry is still struggling under the devastating effects of the coronavirus, Vietnam’s restaurants are trying to get back on its feet quickly, following the successful containment of the pandemic in the country.
1500p18 new entrees amidst restaurant shake up
Pizza Hut fans are only minutes away from a Ho Chi Minh City branch

Anhul Chauhan, CEO of Pizza Hut Vietnam, told VIR that NPC International’s recent bankruptcy filing in the United States will thankfully have zero effect on the brand in Vietnam. NPC International is one of many franchisees that operate Pizza Hut in the US whose businesses are completely separate from the brand’s operations outside of the US.

The Pizza Hut brand itself is owned by Kentucky-based Yum! Brands, Inc., which has a presence of over 50,000 restaurants in more than 150 countries and territories primarily operating the company’s restaurant brands of KFC, Pizza Hut, Taco Bell, and The Habit Burger Grill – global leaders of the chicken, pizza, and Mexican-style food categories.

In Vietnam, however, Pizza Hut is operated by Jardines Restaurant Group (JRG), part of Jardines Matheson Group. JRG also has Pizza Hut and KFC franchise rights in multiple Asian markets, with close to 1,000 stores across the continent.

According to Chauhan, Pizza Hut Vietnam has been one of the fastest-growing food and beverage (F&B) brands in Vietnamm, with 95 stores at present across the country. “Pizza Hut Vietnam has not had to close any stores permanently due to the COVID-19 crisis. As with all restaurant operators, we had to close restaurants temporarily for some time to follow the guidelines from the local authorities,” Chauhan said. “This had a significant impact on sales and profit during that period. We continue to see an ongoing effect on sales, especially in Ho Chi Minh City, due to lower customer spending and traffic.”

Fortunately, some negative impacts have been reduced for the group due to its balanced business model, with a significant portion of sales coming from its delivery and takeaway service. In Ho Chi Minh City and Hanoi, Pizza Hut has a very strong store network which means that customers can reach a Pizza Hut store in around eight minutes or less, regardless of where they are in the city. This also allows the chain to make and then deliver hot and fresh pizzas to the customer quickly.

As the spread of the pandemic has been controlled well in Vietnam so far, Pizza Hut aims to continue growing in the country. So far in 2020, the chain has opened four new stores with expansion in Hanoi, the northern province of Thai Nguyen, the Mekong Delta city of Can Tho, and Ho Chi Minh City.

Pizza Hut will open two more new stores this month, and aims to reach the 100 store mark before Lunar New Year 2021.

“As part of Jardines Matheson, we are backed by a very strong balance sheet with adequate cash, and have a long-term view on growth,” the Pizza Hut Vietnam CEO stressed. “We continue to believe that Vietnam is poised for medium- and long-term growth for our business. Our long-term vision is to have 400 stores across the country, and we continue to invest in building the foundation for this in 2020 and beyond.”

Sean T. Ngo, founder and CEO of VF Franchise Consulting, told VIR that while unfortunate, the collapse of Pizza Hut’s largest franchisee NPC International in the US was not surprising. “For the past two decades, Pizza Hut and brands like Domino’s have continued to decline due to high maturation and increasing competition. This trend, combined with the COVID-19 situation in the US, has been a fiasco and the situation continues to get worse, not better,” he said.

Similarly, Lion City, the Singaporean restaurant chain, is also feeling the pinch of the global health crisis. “COVID-19 was one of the worst things that could happen. Nobody is spared in retail, especially in F&B,” Lion City founder Harry Ang told VIR. “Our sales dropped below 50 per cent as people were afraid of going out for fear of being affected. Fortunately, the Vietnamese government did a good job. Our guests are coming back but not as before, as tourists and foreigners have not yet returned. They account for 30 per cent of our business turnover.”

Ang added that the group’s plans post-pandemic are very challenging. “We are starting to shrink with fewer outlets and unfortunately have had to cut staff, and we will build from there,” he said, adding that the chain expects to be back to normal by the second quarter of 2021.

In another case, Singaporean food and beverage corporation BreadTalk, which operates a chain of bakeries across Vietnam, has also been significantly affected. Its recent delisting from the Singaporean Stock Exchange is also a direct result of its sale to BTG Holdings. Its key markets of China, Hong Kong, and Singapore have all been hit hard.

Businesses that have been able to capitalise on take-away and deliveries have benefited the most during the crisis, including concepts that offer foods that can be easily delivered like pizzas and other types of fast food and popular beverages such as coffee and milk tea.

Ngo predicted that there will be an additional shake-out in Vietnam’s restaurant industry in terms of more exits of local and foreign brands, while at the same time there will be more players entering the field as they look to capitalise on consumers’ increasing demands for appealing and affordable F&B concepts that cater to an ever-growing eat-anywhere segment.

This is the reason, he added, why American brands such as Little Caesars Pizza and Thailand’s Mango Chilli, both of which VF Franchise is helping enter this country, are looking for qualified franchisees in Vietnam, even in these tough times.

By Ngoc Van

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