McDonald's Steps into Vietnam

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Finally, Vietnam is going to get the first McDonald's Corp. (MCD) franchised outlet in 2014. The opening came in the wake of the signing of a development deal between McDonald’s and its franchisee partner, Henry Nguyen, the owner of Good Day Hospitality.

The world’s largest hamburger chain has granted a license to Henry Nguyen to run a store in Vietnam’s economic hub, Ho Chi Minh City, making the country the 38th market to boast a McDonald’s store in the Asia-Pacific region.

Henry Nguyen has superior local market knowledge and has a proven track record of venturing into the premium retail industry within the Southeast Asian market. The franchisee is hopeful about its association with a global brand like McDonald's and expects to spread its menu offering successfully among brand-conscious consumers in the country.

According to the World Bank, Vietnam’s growth rate is expected to be 5.5% in 2013 as compared with Singapore’s growth rate of 5%. With higher disposable income, Vietnamese population is now trending towards spending more on branded food items. We believe that McDonald's seeks to fully capitalize on this emerging opportunity.

Another major American fast food chain, Yum! Brands, Inc. (YUM), has also made its presence felt in Vietnam more than a decade ago with its KFC and Pizza Hut outlets. Further, in order to ramp up its presence in the international market, other two U.S.-based restaurateurs Domino's Pizza, Inc. (DPZ) and Burger King Worldwide, Inc. (BKW) entered the Vietnamese market in 2010 and 2011, respectively. 

McDonald's already has a presence across seven South-East Asian countries, including Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand, through nearly 1,000 outlets. The brand is gaining popularity with consumers across Asia as the company continuously expands its store base outside the U.S.

This Zacks Rank #3 (Hold) company is investing heavily in the Asian market, which has a high growth potential owing to the relatively low per-capita consumption and burgeoning middle-class population with a rising income level. In the Asia-Pacific region, China remains a market of immense potential where management aims for 2000 units by the end of 2013.  We believe that this region will drive significantly larger business growth for the company, gong ahead.

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