McDonald’s Opens Store in Vietnam

According to Bloomberg:

The world’s largest restaurant chain starts service in Ho Chi Minh City Feb. 8. The first branch in Vietnam’s biggest city will have 350 seats, said Henry Nguyen, owner of McDonald’s local partner Good Day Hospitality.

Nguyen, son-in-law of Prime Minister Nguyen Tan Dung, said expanding the chain to at least 100 branches within a decade was an achievable, if tough, goal.

As some proof of the prospects for U.S. consumer-based companies in modest-sized nations in the developing world, Vietnam had gross domestic product (GDP) of $142 billion in 2012. And GDP rose more than 5.2% in 2013. Vietnam has 92 million residents, according to the CIA Factbook. While GDP per capita is only $3,800, as in many developing nations that figure is rising.

McDonald’s expansion opportunities have dimmed as its store count has ballooned. Comparable store sales worldwide dropped 0.1% in the fourth quarter, and they rose only 0.2% for the full year. There are signs that McDonald’s is struggling is Asia, which has offered so many other U.S. companies growth opportunities. McDonald’s reported when it issued year-end earnings:

APMEA’s fourth quarter comparable sales declined 2.4%, and operating income declined 8% (up 1% in constant currencies), reflecting weakness in Japan and relatively flat performance in China and Australia. To strengthen results in this key growth segment, APMEA is focused on accelerating growth across all dayparts with everyday affordability, locally-relevant menu items, expanded conveniences and new restaurant openings.

Due in part to this weakness in Asia, McDonald’s global revenue rose only 2% in its fourth quarter to $7.1 billion, and operating income was flat at $1.4 billion.

McDonald’s continues to press into China, because the People’s Republic has been among the markets in which it has traditionally been successful over the past decade. However, McDonald’s faces harsh competition there from both Chinese fast-food operators and its global competitors. As McDonald’s scurries to improve prospects, Vietnam, and other emerging nations with large populations and rapidly expanding GDPs, could become its new platforms for expansion.