Yum brands bets on fast casual, Vietnamese

The company that brought you Pizza Hut and KFC is now bringing you… Vietnamese sandwiches?

Yum brands (YUM) opened a “banh mi” (a Vietnamese sandwich) shop in Texas over the weekend (called, creatively, Banh Shop) offering six types of Asian sandwiches plus rice and pasta bowls and salads. Prices start at just under $7 dollars – putting the chain on a higher pay scale than its YUM brethren.

The Banh Shop is the latest iteration of fast casual – the unstoppable dining trend that melds fast-food style service with customizable menus and higher end ingredients. Prices are higher than McDonald’s (MCD) or Burger King (BKW), but not as high as a sit-down restaurant.

For the past five years, fast-casual has seen traffic increase more than any other type of restaurant – up 8% in 2013. Chains like McDonald’s, meantime, have seen their sales slide – down 2.8% in the U.S. in August.

Yum’s latest bet on the fast casual sector indicates a few things. First – that fast-casual is here to stay and that for fast food juggernauts to continue to compete, they have to get in on the game.

“Yum brands, as an organization, has to think about ‘Where’s the next growth opportunity?’ And they are looking at banh mi and different kinds of the new Mexican-style fast casual as an opportunity and a possibility,” said Yahoo Finance Editor-in-Chief Aaron Task. “And why not? They should be experimenting with different types of formats."

This isn’t Yum’s first rodeo in fast casual. Their Taco Bell chain introduced a higher-priced Cantina Bell menu in 2012. Hedge fund titan David Einhorn went public saying he thought the new menu would eat into Chipotle’s (CMG) market dominance.

Chipotle, on the other hand, says sales weren’t affected, and Einhorn’s short of the stock was one of his worst-performers in the first quarter. But that doesn’t necessarily reflect on Taco Bell. Sales at the chain are up just 1% in 2014, but grew 3% last year.

The Banh shop means the fight for fast casual is moving beyond Mexican. In fact, Vietnamese may be the new Mexican. Once again it seems like Yum may be following Chipotle.

Long thought to be the godfather of the fast-casual movement, Chipotle opened a Vietnamese style concept restaurant called ShopHouse DC in 2011, and has expanded since then. The chain now has eight locations in the DC and Los Angeles metro areas and another two are slated to open soon.

In an interview with USA Today, Yum’s head of new concepts Christophe Poirier refused to comment on either Chipotle or ShopHouse, and insisted that Yum came up with its restaurant concepts from “a white piece of paper” and not competitors.

He told the paper, “We’re right at the cross section of Millennials’ expectations for fresh ingredients and the big trend of Southeast Asian cuisine.”

But Yum’s relationship with Southeast Asia isn’t as simple as that. The company is famous for its bet on, and success in, the Chinese market. But it has had a few big missteps there as well.

“They seem to have hit a wall in China,” said Task.

Same store sales growth in China is up 15% in 2014, but fell 20% last year following a food safety scandal that hit a number of foreign fast food chains operating in the country.

“I wonder if within China people are gonna say: Do I want to buy the American fast food or do I want to go to the local, the homegrown companies? Beause you know they’re coming.”

Yum Brands is set to introduce a second Banh shop in the Dallas area next month.