After Starbucks, McDonald’s will come

Published: 07/03/2013 10:48

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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.


Vietnam, Starbucks, fast food, franchising, contracts

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.

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