HO CHI MINH CITY - Meet Ly Qui Trung, the
bold new face of Vietnamese free enterprise.
Hailing from a once-influential family in the
former South Vietnam, and later displaced and
impoverished by the communist takeover in 1975,
Trung has emerged 31 years on as one of Vietnam's
most visible young capitalists.
Trung, 39,
is the founder of the Nam An Group, the holding
company behind the Pho24 fast-food chain, one of
Vietnam's most successful home-grown franchises.
Armed with a PhD in business administration from
Australia and a drive to get rich quick, Trung
opened the first branch of Pho24 in 2003 in Ho Chi
Minh
City with the aim of feeding into the city's
fast-growing foreign-tourist market.
Pho24's unique blend of pho (beef
noodles) and air-conditioned McDonald's-style
dining proved equally popular with the locals, who
now represent more than half of his clientele.
At the time, Trung says, he took a big
commercial risk. His bright-light retail concept
was so foreign to Vietnam's often nondescript
family-run restaurant scene that his landlord
asked his family, friends and business associates
to dine frequently at the first Pho24 restaurant
over concerns that his renter would go belly-up.
Since that rocky beginning, Pho24 has
grown into one of Vietnam's largest fast-food
chains, with 24 restaurants nationwide and plans
to open another 73 across the country by the end
of 2008. Trung says each of his stores sells an
average of 350 bowls of pho per day at
about US$1.50 a bowl. He plays coy when asked
directly about Pho24's profits and revenues, but a
back-of-the-napkin calculation shows he's earning
somewhere between $4.5 million and $5 million a
year.
Now he has multinational ambitions
for the chain: Trung is leveraging Pho24's local
success into global expansion plans, with one
branch in Indonesia, concrete plans to open
restaurants in Manila and Singapore this year, and
designs eventually to establish branches in South
Korea, Japan, Australia, China and the United
States.
"Our group has successfully turned
pho from a rough street dance into an
elegant ballet," said Trung, a part-time painter,
in a recent interview with Asia Times Online. "Our
restaurants are modern but keep Vietnamese
authenticity and serve a traditional, healthy
dish."
The Nam An Group's elegant
corporate headquarters in Ho Chi Minh City cut a
contrast to the colonial holdover feel of Hanoi,
and clearly speak to the young entrepreneur's
sky-is-the-limit ambitions.
The Nam An
Group currently manages eight different brands of
restaurants, cafes and ice-cream parlors
throughout Vietnam, including Maxim, Paris Deli,
Ciao Cafe, Terrace Cafe and Ibox. The group will
bring the Gloria Jeans Coffee Shop operation to
Vietnam, and plans to open five more franchise
restaurants by the end of this year - on top of
Pho24's rapid expansion.
Foreign
franchise invasion As Trung reaches out,
global franchises are rushing in.
Last
year, 530 foreign and local brand names were
franchised and another 811 franchises were
transferred into Vietnam, according to the
National Department of Intellectual Property
(NDIP). Foreign fast-food franchises are slowly
finding their place alongside the country's
traditional shophouse vendors, including the likes
of KFC, Jollibee and Dilmah (a teahouse chain).
Global brands such as McDonald's,
Starbucks, Gloria Jeans, Pizza Hut and Dairy Farm
are readying to make inroads once Vietnam accedes
to the World Trade Organization (WTO), which is
likely to happen next year. IKEA, Tesco and
Wal-Mart have also reportedly examined the market.
Trung views coolly the coming foreign
invasion, asserting that his superior
understanding of local market conditions coupled
with the latest foreign management techniques will
maintain his budding franchise's competitive edge.
"If Vietnamese entrepreneurs don't seize
the day, one day all the young people will go to
KFC or McDonald's. They'll be addicted," he said.
For foreign franchisers, however, there
are still plenty of hurdles. So far, the growth of
franchising in Vietnam has taken place in a
regulatory vacuum, relying on general contract law
and regulations of loosely related issues, such as
the licensing of intellectual property rights and
technology transfer, for legal guidance. Oddly,
franchising is considered a form of technology
transfer under current Vietnamese regulations.
Last June, the Communist Party-led
National Assembly passed a new commercial law,
which notably includes eight articles that broadly
deal with franchising issues. Foreign franchise
representatives, however, say the new law is
hardly comprehensive and does not adequately deal
with dispute settlement, payment issues or
contract termination between franchisers and
franchisees.
Legislators are currently
drafting a new Intellectual Property Law to bring
Vietnam's trademark and copyright regulations in
line with international standards, as mandated by
the WTO. This has been a major point of discussion
with the US, which is aggressively lobbying to
ensure that its various franchises have a soft
landing in Vietnam.
With a potential
market of more than 82 million people, annual
economic growth hovering around 8%, and total
domestic consumption of $21 billion in 2005, big
Western multinational distribution groups are
salivating for access to Vietnam's virgin markets.
"Vietnam is creating an emerging franchise
business climate that is catching up with
international standards," said Louis Nguyen,
managing director of Vietnam-based fund-management
firm VinaCapital.
Local
recipes When more foreign franchises take
the plunge into Vietnam, they'll find themselves
in direct competition with the budding likes of
Trung, who holds a significant first-mover
advantage.
Typical of Vietnam's new
generation of capitalist entrepreneurs, Trung's
was a tough road to success. When communist forces
seized Saigon in 1975, Ly Qui Trung's influential
family suddenly found itself on the wrong side of
history and had to start from scratch. His father
surrendered his position as information minister
and took up writing as a sports journalist. His
mother opened a modest street canteen with a
couple of tables and plastic chairs.
His
family scraped together enough funds to send Trung
to study in Australia, where he received his
bachelor's, master's and PhD degrees in
business-related fields. Upon graduating, he
returned to Vietnam and took a job as general
manager at an underperforming hotel. His plan to
convert half the hotel into an entertainment
center, festooned with restaurants and karaoke
lounges, helped turn that business around, he
contends.
In his mid-30s, Trung invested
the money he made while working at the hotel and
took out bank loans to establish the Nam An Group,
where he serves as managing director. Trung says
he and his family carefully studied the local
market before launching their Pho24 fast-food
concept. First, he purposely designed his
restaurants for easy replication, including
discreet Asian accents that distinguish his
outlets from Vietnam's sometimes grubby open-air,
family-run restaurants.
The investment
required to establish a new Pho24 branch is low,
ranging from $50,000-$60,000 depending on the
location. Still, the franchising concept hasn't
completely sunk in. Trung recently discovered that
one of his franchisees had decided to cut costs by
turning off the air-conditioning in his shop. He
says it took some prodding to convince his
profit-minded partner of the necessity of
uniformity - a concept that one would think would
have taken hold after 30 years of ironclad
communist control.
Trung also put plenty
of brain power into his brand. The Pho24 logo
reflects the number of different ingredients, 24,
and the number of hours, 24, required to prepare
each bowl of his signature beef-and-noodle soup.
One day he also hopes all his shops will be open
around the clock, that is, 24 hours a day.
Trung was particularly sensitive to
regional taste differences, something he believes
big global fast-food chains will likely overlook
when entering the market. To arrive at just the
right blend of northern and southern taste
preferences, Trung and family sought a culinary
middle ground, less salty than Hanoi's version of
the national dish, and less sweet and fatty than
Ho Chi Minh City's usual fare.
Trung said
they conducted taste tests every day for more than
a year to arrive at just the right recipe, which
is now a closely held, patent-protected trade
secret. "I can see that consumer behavior here is
changing so fast. Now locals want to pay more for
traditional all-day-dining food with cleaner and
better service, which makes me happy."
With Pho24's success, Trung is conducting
taste tests for expanding into other traditional
Vietnamese dishes, including spring rolls and
bun cha, for which he already holds
registered trademarks for possible chains of
Springroll24 and BunCha24.
In many ways,
Trung represents the archetype of Vietnam's
budding new generation of modern, yet traditional,
entrepreneurs: well educated, self-assured,
cultured, and more than willing to flaunt their
financial success. In his spare time, Trung
travels around Ho Chi Minh City in his new
Mercedes and paints portraits, which decorate his
office.
At the same time, he represents a
new generation of staunch Vietnamese nationalists
- albeit with a capitalist twist rather than
reverence for the revolution. "I would like
Vietnamese people to be proud of Pho24 and that
young people might say: 'Oh, that guy began as a
waiter and a receptionist, now he manages a chain
with a presence abroad,'" he said enthusiastically
in Australian-accented English.
Arguably,
that's already happening. In 2004, Trung won the
Australian government's prestigious Asia Executive
Award, and his growing fast-food empire has
stirred market appetite for his how-to thoughts on
capitalism. Trung has already published two books
on his Vietnam-specific franchising concepts, one
volume for the franchiser, and one for the
franchisee. While on the guest lecture circuit, he
often tells MBA (master of business
administration) students at Vietnamese
universities: "Be practical, think big, think of
Asia, don't copy, be original."
For Trung
and Pho24, so far that's been a good recipe for
success.
Karl D John is chief
executive officer of The TCK Group, a
Vietnam-based consulting group.
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