U.S. Fast food franchisers and chains have recently discovered a largely untouched market in Asia; Vietnam. The country of 90 million people is one of the last nations along the Pacific Rim without maturity for companies like McDonald’s. McDonald’s opened its first restaurant in Vietnam on Saturday. The grand opening resembled that of a posh nightclub, complete with techno music and velvet ropes keeping back excited patrons, including expatriate Americans such as the Shipleys from Fort Wayne, IN. The fast food giant already has locations in over 100 countries worldwide. KFC has been in the country since 1997, but 2010 marked the first time U.S. companies aggressively began doing business there.
McDonald’s named Henry Nguyen, the son-in-law of the prime minister, as the franchisee. Henry Nguyen began his tenure with McDonald’s as a restaurant crew member while a student in the United States, where his family fled at the end of the Vietnam War. He then went to on to receive degrees at Northwestern and Harvard.
Many young Vietnamese are curious about Western cuisine and culture, so it is no surprise that the McDonald’s opening has been actively discussed on Vietnamese websites in recent weeks. The country has a soaring middle class, and most of its 90 million citizens were born after the Vietnam War ended, in 1975. Vietnam’s per capita income rose by over 50 percent to $1,550 between 2008 and 2012. Vietnam’s fast-food industry is growing fast. Revenues were $535 million in 2013, a growth of 14.5 percent from 2012.
One reason why McDonald’s waited as long as it did to open its first Vietnamese location is the company’s long-standing policy of caution. Entering a new market is always risky, and the Oak Park, IL. based firm waited for the right moment. A recent recession drove Vietnamese real estate prices down to the point of affordability before it bought its first location in Ho Chi Minh City.
According to British market research firm, TNS Global, the Vietnamese now have incomes that offer not only sustainability, but genuine opportunity for growth and profit. Ralf Matthaes, regional managing director of TNS, states that the Vietnamese consumer is not necessarily attracted to fast food for the wonderful taste. He states that going to McDonald’s is more of a treat, that they are looking for something more aspirational.
Coupled with this surge in economy, is Henry Nguyen’s ability to navigate around the laws and regulations which are often vague enough to allow corrupt politicians to take advantage of foreign investors. As American author Bill Hayton states, having the second-most-powerful man in the country as one’s father-in-law helps greatly.
Since opening its first branch in Vietnam, KFC has done well. According to its parent company, Yum! Brands, Vietnam is now home to over 130 locations, and to more than 30 Pizza Huts, also owned by Yum! Brands. Baskin-Robins and Dunkin’ Donuts recently opened a total of 18 branches in the country, while Starbucks opened three. For his part, Henry Nguyen plans an average of 10 restaurants per year for the next decade.
U.S. Based companies have profited from their initial ventures into Vietnam. If those firms can establish themselves during strong Vietnam’s economic periods, they should survive the lean times and become staples as they have in other Asian countries.
By Ian Erickson