US restaurant chains eye franchises in Vietnam

J. Marc Mushkin, senior vice president of International Development of Pollo Tropica, a chain popular for its grilled chicken, said Vietnam has one of the highest rates of chicken consumption in the world.

This appealing potential haslead to Pollo Tropica eyeing a venture into the Vietnamese market, Mushkin said.

“We have chains in eight countries, but Vietnam is the first Asian country we want to enter,” he said.

Another member of the US delegation was the restaurant chain Round Table Pizza, which has recently reached a deal with the Mesa Group to open its first franchise in Vietnam in Q1 next year.

The chain said it is taking advantage of the rapid growth of the fast food industry in the country, adding that it is targeting to open 20 stores countrywide.

Round Table Pizza has posed many high requirements for its franchise partner, including importing all raw materials from the US, as well as having Vietnamese staff trained by their US counterparts.

Focus Brands Group, another visiting corporation who owns popular brand names such as Carvel’s, Cinnabon, and Moe’s Southwest Grill, said it will offer strong support to Vietnamese partners as long as they have suitable store premises.

Seeking major partners

Scott Lehr, deputy chairman of the international development of the International Franchise Organization, said that US businesses have planned to develop their brand names and operation outside the US.

“The current troubled national economy provides a golden chance for them to reach beyond the country border,” he said, adding that Vietnam, and other Asian countries, are their first choice.

Most of the businesses visiting Vietnam hold a positive view on the Vietnamese market.
Phil Crimmins, president of the international division of Applebee's International, said it will take one to two years for a franchisor and franchisee to reach an agreement on their cooperation.

“But these meetings over an extended time period will help the parties build up trust and forge a solid relationship,” he said.

“What is important is that we build relationships.”

However, the US franchisor may face problem in pricing when operating in Vietnam.
Lehr of the IFO said that prices of the US franchise restaurants in Vietnam will not be cheap.

“But if consumers want to enjoy the globally-branded services, they will accept such high prices,” he said.

He said many US brands faced such hindrances 15 years ago when they first entered the Chinese market.

“But things are now totally different. We just need time.”

Tran Tinh Minh Triet, CEO of the franchise consultancy Best Fortune, said that 90 per cent of international franchises in Vietnam are in the food and restaurant sectors.

Franchises in these sectors have a higher rate of success compared to other sectors such as education or retailing, Triet said.

He said that US franchisors often seek experienced partners with strong financial ability and comprehensive knowledge of the domestic market.

“[The US franchisors] are not targeting the small and medium enterprises,” Triet said.

“The average investment for a franchise can be as much as several million US dollars.”