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Fast food chains incurring losses

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Foreign fast food chains have been in Vietnam for more than 10 years and have annual revenue of trillions of dong. But many of them continuously take losses. 

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Foreign-owned fast food chains have been present in Vietnam 

 

Lotteria tops the list of brands incurring losses, with an accumulative loss of VND433 billion by 2017, nearly equal to the company’s charter capital. Its finance report showed that high sale costs led to continuous losses.

Jollibee came to Vietnam one year after Lotteria and incurred the loss of VND400 billion, a little lower than the charter capital of VND409 billion.

They both have a high gross profit margin, approximately 50 percent, and high spending on sale costs.

With charter capital of VND200 billion, McDonald’s has incurred a loss of VND500 billion after four years in Vietnam.

Other fast food chains such as Pizza Hut, The Pizza Company, Burger King, Domino’s Pizza and Popeyes have also been taking losses. 

KFC, after a long period of both taking losses and making profits, unexpectedly reported profit of VND103 billion in 2017.

Golden Gate is considered a big player in the fast food market with its brands Ashima, Huton, Vuvuzela, isushi, Gogi and Sumo BBQ. Golden Gate saw a galloping rise in the number of customers in the last eight years, from less than 1 million in 2008-2009 to 4 million in 2016.

In the same year, revenue reached VND2.626 trillion, a sharp increase of 42 percent in comparison with the year before and the post-tax profit was VND229 billion, a growth rate of 49 percent. 

In recent years, its revenue was high, but the ROS (return on sales) was at 8-9 percent per annum only.

According to Hoang Tung, the founder of Pizza Home, five Pizza Home shops exist in HCMC, but all of them have shut down. In Hanoi, Pizza Home retains only five most profitable shops after restructuring.

“Of course, we want to scale up business in large cities, but this depends on business results,” he said.

High costs

Tung said after the boom period, the market reorganized. Some chains shut down shops they had opened in Hanoi, while others were unable to expand their networks as initially planned. This was attributed to high sales costs.

Tung confirmed that the expenses on materials, retail premises and workforce to run fast food chains are higher than in other sectors.

Lai Tien Manh, a branding expert, said the food & beverage market in Vietnam is attractive with an annual two-digit growth rate.

US$1=VND22,000

 

Source: VNS

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