Novelty does not last: Golden Gate performance slipping

Golden Gate franchise group has been seeing slower performance

According to the financial report of Golden Gate, in 2018, the revenue growth of its restaurant chains including Vuvuzela, Sumo BBQ, and Gogi reduced compared to previous years while the profit margin turned negative. Notably, the company reported a consolidated revenue of VND3.97 trillion ($172.6 million), up 17 per cent on-year. Its net profit reached $269 billion, up 5 per cent on-year.

According to the representative of the company, while there was revenue growth, it was far lower than expectations. Golden Gate's growth speed in 2018 was at a record low since 2013, when the company's revenue grew by 30-50 per cent a year on average.

Besides, the profit margin decreased from 15 per cent in 2013 to 6.8 per cent in 2018.

Golden Gate explained that the slow growth came from not being able to find more attractive restaurant formats to create a breakthrough like they did with Vuvuzela and their other chains which were all first to the market.

Previously, Golden Gate reported an increase of 15 times in revenue within seven years only. As of the end of 2018, it owned 278 restaurants across the country. Almost all of these restaurants made profit, excluding new restaurants.

Restaurant franchises are considered having a short “life cycle” that peak in 3-5 years, thus in order to maintain and increase profit, the company will have to look for new products to lure in customers. However, last year, Golden Gate only launched two new brands, Hutong Sea Food and Hutong hotpot restaurant chains.

Although the business results in 2018 were not as high as expected, it still set the target of acquiring VND4.82 trillion in net revenue, up 21 per cent on-year with the after-tax profit of VND345 billion ($15 million), up 28 per cent on-year. Besides, the group plans to open an additional 80 restaurants.

In order to increase its profit margin, Golden Gate will decrease raw material usage and apply ERP managing system.