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Why Mc Donald's Flopped in Vietnam

Failure of Global Food franchise giants exposes the social dynamic in preference to convenience and familiarity.  Native and local habitats show due diligence when purchasing food, in earnest, during work commute, meal times and dining out.  Cost plays a significant part in the staying power financially, especially Vietnam.

Thriving elsewhere, global giants Burger King and Mc Donalds presence dominate globally in western society.  The possible market infrastructure already in tenure suggests that the respective global success should immediately translate to other regions or countries regardless of societal dynamics, nuances and mediocrities.

In accordance with the 'if it isn't broke, don't fix it' rule of thumb, placing Burger King and Mc Donalds has already proven formulae for an accomplished establishment, having done so began the franchise's slow descent into a permanent receeding quarterly eventually into a permanent perpetual decline.

What was missing from the business equation was a total understanding of the local knowledge,  demographics and prior knowledge to the respective country's habitual spending patterns.  With this set back in miscommunication was hindering the market.

Let's get down to the nitty-gritty.

When the topic of fast food comes to mind, you would recognise global chains such as Burger King, KFC and Mc Donald’s, to name a few.  Dominating this world over with multiple franchises of each chain respectively.  According to this youtube clip, Burger King is known to have more than 16,000 locations serving in 100 nations.  Mc Donald’s has been fruitful in their ventures sporting over 36,000 in over 100 nations, in special mention of one here in New Zealand within a decommissioned aeroplane and also one-half way around the world, located in the Vatican City. (Business Insider, 2018). 

This contributes to the fast food business of more than three-quarters of a trillion dollars per year in the world. (IBIS World, 2019).

If so,

Why come as far as to make such a statement as to say that fast food outlets are failing in Vietnam?  Here’s why Mc Donald’s and Burger King are failing to find a mass following in Vietnam.

The Genesis.

CNBC (CNBC, 2018) published a youtube clip states that there was initial hype attesting to the strong beginning for fast food in an already saturated, food vendor market, where Mc Donald’s begun its debut in Vietnam 2014 having anticipation for the very first bite of a highly prized Big Mac, fated people hours waiting in ques around meal times who now, have slowed down the pace for products.  Since 2014 Vietnam has today 17 stores with it’s closer competitor, Burger King yielding 13 stores with it’s very first of its chain opening on the year 2011.

Strange how New Zealand has a total of 167 (Mc Donalds, n.d.) as of 2017, Auckland has 55 locations are listed, Palmerston North has three.  This gives way to wonder as to what may be the cause of such intrigue as to why Vietnam fails to capture the attention of the Vietnamese market gave the astonishing popularity and stronghold in dominance of the global market for fast food, having been previously met with success when expanding into Asian countries like China and Japan, where the production and installation of multiple storefronts and chains throughout their respective countries have been met with little to no difficulties and responded to the market with considerable profit margins. 

Japan has Burger King’s growth excel from 12 restaurants in the year 2008 to 98 in the year 2017.

China has ranked second out of all foreign fast food in mainland behind KFC and ranked fourth is Burger King.

So why not Vietnam?

Mc Donald’s envisioned a plan to have 100 stores opened in 10 years from the date the first store opened in 2014, as of 2018 the company has only compiled a total of 17.  The story can also be said for Burger King, the company invested $40 million dollars in Vietnam in 2012 in hopes to open a total of 60 restaurants in four years by 2016 according to Vietnam Business Review but as of 2018 a total of 13 Burger King stores within the country. (Vietname Investment Review, 2017)

So what happens if you have a hankering for a Big Mac?

You’ll have to acknowledge why fast food chains are so successful.

“Fast-Food in the States is Popular because you can get it now. 

Vietnamese food is the same thing, if you go to the street vendors you can get your bowl of pho or bahn mi also maybe even faster than Mc Donald’s.

So that kind of defeats the value proposition of fast-food in Vietnam”

Hao Tran

Co-Founder Vietcetera

(CNBC, 2018)

Seemingly what is part of the problem is that the fast food giants underestimated their local rivals as the Vietnamese diners are spoiled for choice in top-tier cities like Hanoi or Ho Chi Minh City, gluttony of options which makes it tough for international fast food chains to break soil and establish a holding within the Vietnamese community, gradually making it harder to compete.

“For the Vietnamese we have our banh mi sandwiches and those sandwiches are sold on the streets at rock bottom prices compared to Mc Donald’s and Burger King”

Andrea Nguyen

Chef and Author

(CNBC, 2018)

According to the European Commission, Vietnamese consumers dedicate a sizable portion to the likes of food, and of that money at large, 78% of that cash is spent locally, local vendors, street stalls and kiosks being a lot more economically friendly to the purse strings.  Just 1% went towards fast food restaurants in Vietnam.

Vietnam houses a booming food sector boasting over 540,000 outlets with over 430,000+ outlets are local street vendors and food kiosks which makes this option more readily available and an easier choice for selection.

In addition, there is nearly 80,000 full-service Vietnamese restaurants and almost 22,000 bars and cafes, so this is to say that the saturation of the food market was already present.  Where there was such wealth of local cuisine and other stores, of them, counted fast food chains 7000 outlets only.

Fast food chains are severely outnumbered in Vietnam what may contribute to this in part is because of the severed diplomatic ties between the US and Vietnam, after the United States withdrew forces from Vietnam following the war in 1973, all diplomatic relations were severed between the two countries in 1975 it wasn’t until 1995 that the United States and Vietnam mended fences and opened the door for trade.

“If you know anything about like the history of Vietnam like the last 30 to 40 years there was a lot of growth, but only really in the last 20.

A lot of store fronts are literally just people’s homes.

They’ll live upstairs and they’ll just convert the downstairs into any sort of street vending option”

Hao Tran

Co-Founder Vietcetera

(CNBC, 2018)

Just in recent years, 1997, KFC was one of the first American brands to settle to open on Vietnam soil but an already crowded and vendor saturated market proved difficult to move past more than 10 stores opening in 7 years.  KFC sought to beat the slow loss and change the menu to entice the locals and appease their taste buds.  Introducing unique company branded food items such as KFC Chicken rice and the KFC shrimp burgers and today 130 KFC stores are now existing in 21 Vietnamese cities harbouring the cost didn’t serve as a deterrent and customers didn’t mind as it was considered a premium and validating the move as a success.

High prices aren’t just for KFC, it’s competitors Burger King and Mc Donald’s also suggested the same, premium rates compared to local vendors who can feed twice as many for the price of theirs compared to the fast food chains. (Numbeo, 2019)

“Average people would say, about 2-3 dollars for their lunch, that’s about it, you know.

And 2-3 dollars is quite a lot.

Average people tend to go out in groups, then once in a while they would probably use McDonald’s and then all the other days its Vietnamese food on the street”

Iny Tran

Owner

Royal Saigon Restaurant

(CNBC, 2018)

This adds to the problems these global giants are having to face and it’s because the way food is offered in Vietnam, the culture of cuisine that westerners find at restaurants is solo based being you order what you see and like from the menu and partake accordingly, however the culture based within Vietnam not only caters to that avenue but more so towards family-style serving experience.  It is hard to sell to a crowd, a single serve item at the price that could afford a portion doubling and size and many of it’s kind in one visit, as a burger isn’t intended to share.  To do so, many would go considerably hungry.

“There are basically two rules, the first rule is you need to be able to share the food.

Second rule is it, needs to be chicken.

When you look at the burgers.
It’s not chicken.

It’s not terrible.

And I think it’s just not a cuisine that is exciting to them, to the Vietnamese”

Thue Thomasen

Founder

Decision Lab

(CNBC, 2018)

With the growth in other places, it doesn’t look as if the fast food chains are on the cusp of a rise any time soon as more and more Vietnamese customers are retreating from the fast food stores each year dropping significantly and the rise of street food vendors in favour of convenience and savings.

Not all fast food chains have failed to appeal as chicken is a local favourite, this would look favourably on KFC and Pizza Hut as these both share something in common, the chicken factor as well as the shareability, out of smaller presence in the market of fast food, KFC and Pizza Hut are the dominating two.

Don’t count out McDonalds and BK yet, Each has their own way of combating their structure to suit the local pallets of Vietnam, McDonald’s has grilled pork rice with egg and B.K. followed with Fish rice combo but experts still, warn that it would take a more calculated move ahead to balance out the crowded food market space as the popularity of fast food in Vietnam is losing its edge resulting in a slow but steady decline.

McDonald’s and Burger King will have a difficult road in front of them in terms of their future in Vietnam but only time will tell.

References

Business Insider. (2018, October 10). Briefing. Retrieved 7 3, 2019, from Business Insider: https://www.businessinsider.com.au/mcdonalds-restaurants-around-the-world-2018-10?r=US&IR=T

CNBC. (2018, September 14). Why McDonald's Flopped in Vietnam. Retrieved 7 6, 2019, from Youtube: https://www.youtube.com/watch?v=l9pthhpd7So

IBIS World. (2019, April). Global fast food restaurants industry - Market Research Report. Retrieved 7 5, 2019, from IBIS World: https://www.ibisworld.com/industry-trends/global-industry-reports/hotels-restaurants/fast-food-restaurants.html

Mc Donalds. (n.d.). Macca's Team. Retrieved July 3, 2019, from Mc Donalds: https://mcdonalds.co.nz/about-maccas/organisation

Numbeo. (2019). Cost of Living in Vietnam. Retrieved July 2019, from Numbeo: https://www.numbeo.com/cost-of-living/country_result.jsp?country=Vietnam

Vietnam Investment Review. (2017, 06 27). Corporate. Retrieved July 2019, from Vietnam Investment Review: https://www.vir.com.vn/foreign-fast-food-chains-show-underwhelming-performance-in-vietnam-50194.html