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Foreign Fast Food Chains Stagnate as Locals Still Prefer Street Food

Most foreign fast food chains in Vietnam have fallen short of their initial projections, as burgers and fries can’t compete with the vibrant culture of local street food.

The Vietnam Investment Review stated that despite Burger King's ambitious US$40 million investment plan from 2012, the chain has closed five restaurants in Saigon, Hanoi and Da Nang, citing “sub-optimal location[s].”

Initially, Burger King anticipated opening 60 locations, though five years later they have reached only 25% of their goal.

Even McDonald’s is falling behind their projections. They planned to open ten new locations a year for ten years, but since their Vietnamese launch in 2014, only 15 sets of golden arches have opened nation-wide.

"In the short term, hamburgers cannot become a popular choice for Vietnamese consumers," Nguyen Manh Tu, business development director of Blue Kite Food and Beverage Services Company Limited, the owner of Burger King's local franchise, told the news source.

This is a concept that foreign chains are slowly beginning to understand and implement. Unlike in some neighboring countries, Vietnamese are so attached to their rich and diverse street food culture that they are unlikely to be won over by anything else.

“Western places appeal to families, but the problem is once the novelty has worn off local people would prefer more Asian choices,” said Katrin Roscher, a researcher at Decision Lab, in a Forbes article.

American sandwich chain Subway is perhaps the epitome of western fast food failing to win over local palates. The franchise arrived in Vietnam in 2010 with the aim of launching 50 outlets by 2015. However, at the moment there are only six Subway restaurants in the country, all located in Saigon. Elsewhere in the region, it currently has around 200 locations in Singapore, 100 in Thailand and 40 in the Philippines.

Many contributing factors have led to the chain's dismal growth, but a rather obvious reason would be due to the ubiquity of a much cheaper local alternative: bánh mì.

KFC has a distinct advantage in the country, as they first came to Vietnam in 1997. They led the charge in tailoring their menu to local tastes by incorporating rice into their fried chicken meals.

Other companies with more recent launches have still had success by finding ways to hold local attention. Starbucks, for example, opened in Vietnam in 2013, and many predicted they would not be able to compete with local favorites like Trung Nguyen and Highlands Coffee.

However, by re-branding its coffee shops as a luxury experience, they were able to draw young people in; and, by offering other beverages like hot chocolate, tea and juice, it mattered less that their Arabica beans weren't the Robusta beans locals love so dearly.

Still, with a fast food meal retailing at roughly 400% the cost of a bowl of phở, fast food chains are going to need to offer something more innovative to capture the hearts and palates of the Vietnamese.

[Photo via uqinvietnam]


Related Articles:

Vietnam’s First McDonald’s Has Served More than 400,000 Customers

McDonald's Faces Stagnant Growth in Vietnam As Local Fast Food Fad Cools Down

Vietnam's Fast-Growing Middle Class a Juicy Target for Foreign Brands


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