VietNamNet Bridge – High ranking executives of the US
McDonald’s came to Vietnam in 2012, a signal showing that the giant was eyeing
the Vietnamese market. And it has become more obvious that the fast food chain
will enter the Vietnamese market.
If Starbucks is thought to create
a new face to the Vietnamese coffee market, then the presence of McDonald’s is
believed to force the rivals like KFC, Jollibee or Lotteria to reconsider their
business plans. It’s simply because McDonald’s, with the shops in 119
countries, is really a powerful empire to confront with.
In August 2012, local newspapers
caught the attention from the public when reporting that senior executives of
McDonald’s were here in Vietnam to seek suitable partners for a franchising
contract.
No strong commitments were made
after the working visit, but the US fast food chain left some noticeable
information that it would officially be present in Vietnam in two years, and
that it would open 100 McDonald’s shops in Vietnam, of which the first one
would be in HCM City.
In late February, the news that
McDonald’s was negotiating with three Vietnamese partners heated up the fast
food market.
According to Dr Ly Quy Trung, the
big brands like McDonald’s, Burger King, or 7-Eleven rarely conducts
single-unit franchise, while they prefer area development franchise.
There has been no information
about how the negotiations have ended up and who of the three McDonald’s would
choose. It is also likely that McDonald’s would franchise to at least two
Vietnamese partners, one in the north and one in the south, because it would be
difficult to find a Vietnamese business which can bear the high fee of becoming
the franchisee of McDonald’s for a long time.
At present, Lotteria is still
leading the domestic fast food market with 146 shops, while KFC has 134 and
Jollibee 30. However, KFC has higher growth rates and turnover.
A report of Euromonitor showed
that KFC led the fast food industry in Vietnam in 2011.
Who could be the partners of
McDonald’s then? It’s obvious that the businesses or individuals who have the
plan to become McDonald’s partners need to be very rich. It’s simply because
McDonald’s is a big brand name with high value which would set up very high
requirements.
Regarding the franchising fees,
analysts say the initial fee would be no less than $45,000. Besides, the
franchisees would have to pay a lot of other kinds of fee.
In general, analysts say, there
are two kinds of expenses to bear, the pre-operation expenses, and the expenses
to be spent during the operation. It is estimated that the total investment
capital for every McDonald’s shop, which includes the franchising fee, premises
rents, equipments and interior decoration, could be between $214,000 and $2.1
million.
According to McDonald’s, more
than 88 percent of its franchisees have more than one shop. And it’s highly
possible that the Vietnamese franchisees would also do that, because large
chains of shops not only can increase the presence of the brand in the market,
but also bring higher turnover to them.
After paying the initial
investments to set up a shop, franchisees would have to bear over 20 types of
expenses, including the service fee, which is four percent of the turnover, to
be paid to the franchisers, and the advertisement fee, which is at least four
percent of turnover.
No official statement has been
made about the Vietnamese partners. However, Doanh Nhan Saigon has quoted its
sources as saying that the three partners are CT&D, Son Kim Group and a big
name in the field of venture investments.
TBKTSG
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