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McDonald’s opening 1st location in Vietnam

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Posted: Sunday, July 21, 2013 4:30 am | Updated: 2:57 pm, Mon Aug 19, 2013.

For many in Vietnam, the question has been fraught with impatience and even concern.

Why isn’t there a McDonald’s there?

Decades after the Vietnam War, and years after the Communist-run country re-engaged with the world, Vietnam will pass another symbolic milestone as a contributor to the global economy when its first McDonald’s opens next year in Ho Chi Minh City.

Oak Brook, Ill.-based McDonald’s Corp. already operates around the globe. Getting to Vietnam has taken a little more time, but there was little doubt one of the world’s most recognizable brands would take on another developing country with a growing middle class.

For Vietnam, McDonald’s Corp. is turning to a partner with a uniquely American experience: Henry Nguyen, a private equity investor with a medical degree and MBA from Northwestern University who worked at the Golden Arches as a teenager.

Nguyen was born in Vietnam and fled with his family as a toddler in the final days of the war, just before Saigon fell. He returned to the country more than 12 years ago and is a highly visible entrepreneur whose father-in-law, Nguyen Tan Dung, is the country’s prime minister.

Nguyen fondly recalls the french fries and hot fudge sundae he enjoyed on his first trip to McDonald’s as a 4-year-old. Ten years later, he was making fries and working the front counter.

“It’s a love affair with the brand that started as a young boy,” Nguyen said in a phone interview Tuesday from Australia.

Nguyen, 39, and McDonald’s believe rising disposable income and a young, urban population in the country of 90 million will spell success for the company in its 119th market.

“This current young generation is Vietnam’s golden generation,” Nguyen said. “They will be the ones leading the market and economic development, the ones who are going to change consumption habits.”

Nguyen said that while McDonald’s has had difficulty translating its cuisine in other parts of Asia like Japan, where consumers aren’t accustomed to touching their food, Vietnam was a French colony, and people there are used to bread and using their hands to eat.

And just because there isn’t a McDonald’s, Nguyen doesn’t think consumers there have much learning to do.

“More than two-thirds of the people here in Vietnam have heard of McDonald’s brand, and the vast majority think of it in very positive light,” he said. “It’s seen as an iconic global company with iconic food products like the Big Mac and Happy Meal.”

Nguyen’s bet is emblematic of a sea change underway in Vietnam, a country with which the United States shares a tragic history. The nation joined the World Trade Organization in 2007 and has eased restrictions on multinational corporations since then.

“It’s a market we’ve wanted to get into, and one of the things was finding the right partner,” said Mike Flores, vice president of global restaurant development at McDonald’s. “It’s also a market that long term, like all of our markets, we wanted to be fairly self-sufficient from a talent and supply chain standpoint, and I think we felt we had enough infrastructure geography that we could effectively get it off the ground and grow.”

Flores said McDonald’s has watched Vietnam’s highly educated young population and seen manufacturing investment being diverted from China, another country where the chain has seen success.

“As China has been building its middle class, manufacturing is moving more into Southeast Asia, and Vietnam is picking up the overflow,” he said.

Starbucks opened its first location in Ho Chi Minh City this year, which really raised questions about McDonald’s plans.

“I’ve had so many friends, colleagues and others ask, ‘Why isn’t there a McDonald’s here?’” Nguyen said.

Elizabeth Friend, consumer food service analyst at Euromonitor, said Vietnam has a $33 billion food service industry, making it the 20th-largest market in the world. Although Pizza Hut, KFC and Subway also have locations in Vietnam, chain restaurants only ran up $216 million in receipts last year.

“Maybe people haven’t caught on to chains,” she said. “But you can also see there is a huge untapped potential to move in and claim that market share.”

Disposable income has doubled in Vietnam since 2007, to nearly $1,000 per capita, Friend said, citing Euromonitor data.

(EDITORS: STORY CAN END HERE)

Nguyen, who founded Good Day Hospitality, a corporation that will run his McDonald’s franchise in Vietnam, has taken on an even more public life since marrying the prime minister’s daughter.

He expressed some surprise at media reports that seemed to link his McDonald’s deal to his family. He underscored that he’s been talking with McDonald’s about coming to Vietnam for more than a decade and said he was selected through a grueling search process, during which the burger giant sifted through hundreds of applications and interviewed more than 50 people or companies for the first franchise.

As the entrepreneur poised to introduce the Big Mac _ and the drive-thru concept _ to Vietnam, Nguyen said he understands he will face challenges, from nutrition issues to food safety to real estate and staffing. He was speaking from Sydney, where he and his restaurant team were going through training.

“I think about all of these challenges, and to me, it’s exciting,” he said.

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