Tips for F&B biz in Vietnam
"In recent times, there has been a noticeable surge in Korean restaurant companies looking to establish a presence in Vietnam. Ranging from individual entrepreneurs to renowned corporate franchise establishments, it seems they are drawn to Vietnam as an alternative market amidst the intense competition in Korea. Despite my limited experience in the restaurant industry, I offer insights on navigating successful ventures in Vietnam.
Prospective investors often begin their market research in Vietnam by visiting popular Korean eateries. After sampling dishes in bustling restaurants, they may express confidence, envisioning success based on the apparent popularity. However, this sentiment echoes that of many industry insiders who have explored Vietnam over the past decade. An easily identifiable pitfall lies in identifying issues and proposing solutions, yet encountering challenges in their implementation due to foreign contexts.
[Common fallacies leading to pitfalls]
Typically, restaurant ventures in Vietnam initially target Korean residents or tourists, gradually expanding to include local Vietnamese clientele. However, numerous Korean restaurants have faced closure in prominent tourist hubs and densely populated Korean areas due to fierce competition. Many closures stem from excessive price reductions to attract customers, leading to unsustainable business models reliant on temporary discounts. Even established eateries struggle to withstand price wars, often shuttering when new competitors emerge.
For businesses prioritizing taste over price competitiveness, significant considerations arise. Replicating Korean flavors in Vietnam proves challenging due to differences in water and ingredients. Unless Korean owners personally oversee cooking, hiring Korean chefs becomes necessary. However, relocating chefs from Korea incurs significantly higher labor costs, including housing, visas, and licensing expenses. Efforts to mitigate these costs through training local talent face hurdles, with Vietnamese chefs often departing after brief tenures. While well-trained, they may adapt methods, hindering efforts to achieve desired flavors. Additionally, despite Vietnam's perception of affordability, sourcing familiar ingredients proves difficult, mirroring the variability in freshness and pricing experienced with Korean suppliers.
Relying solely on Korean-speaking interpreters for ingredient sourcing overlooks the complexities of identifying reliable suppliers in Vietnam. It's imperative to recognize that securing quality ingredients requires more than a few phone calls, underscoring the importance of comprehensive sourcing strategies."
[Redefining the Korean Taste]
Even with secured skilled Korean chefs and a robust supply chain of fresh, cost-effective ingredients through bold investments, we must be daring enough to let go of the notion of Korean taste when targeting Vietnamese customers. Despite Vietnam being the birthplace of the Korean Wave in ASEAN and Vietnamese people's fondness for Korean cuisine, including their homemade kimchi, the taste of Korea as perceived by Koreans differs from the preferences of Vietnamese patrons. Entrepreneurs who sampled food at a Korean restaurant managed by a Vietnamese owner often remarked, "This isn't authentic Korean food." Some enthusiasts, brimming with motivation, vowed to win over Vietnamese palates with true Korean flavors. However, fewer Vietnamese patrons prefer the so-called 'true Korean taste' than one might assume. While there exists a distinct taste associated with Korean cuisine, many find it challenging to embrace altered flavors. It's worth recalling that 'Iced Americano,' beloved by Koreans even in sweltering conditions, is not recognized as coffee in Europe and is absent from many cafe menus. Assumptions derived from Korean norms may not hold true abroad.
Even seasoned experts in the restaurant industry often overlook fundamental aspects when venturing into Vietnam, such as securing trustworthy Vietnamese employees. While hiring employees in Korea presents its challenges, finding suitable candidates favored by Korean managers proves even more daunting in Vietnam. Communication poses a significant hurdle. While a Korean interpreter may be available, employing one who accurately conveys 50% of your message can cost around 1 million won monthly. Moreover, during the initial stages of business, strict attendance management and assertive communication are crucial for maintaining discipline. However, nuances conveyed by a timid interpreter may be misinterpreted entirely. Even if fortunate enough to recruit sincere, dedicated employees, neighboring Korean competitors may offer slightly higher wages, enticing them away.
Furthermore, exorbitant commercial rent in Vietnam presents another formidable obstacle. Rental rates in central commercial districts of Ho Chi Minh City and Hanoi rival those of Seoul. According to a report from the Ho Chi Minh branch of Savills, a global real estate service company, as of October 2023, rents in central Ho Chi Minh City ranged from 800,000 to 3.3 million Vietnamese dong (approximately 44,000 to 180,000 won) per square meter. Even at the minimum rate, monthly rent for a 30-pyeong restaurant translates to 4.35 million won in Korean currency. Vietnamese buildings, characterized by narrow and deep structures, typically span 4.8 meters in width, often necessitating renting entire 2-3 story buildings to secure a desirable layout. Despite efforts to expand by renting multiple adjacent buildings, each under different ownership, challenges persist during restaurant operations, such as sudden interior alterations or the disappearance of one building entirely. Such predicaments are not exclusive to newcomers in the overseas restaurant business but also affect seasoned proprietors managing multiple establishments in Korea.
Running a business is inherently challenging, but international ventures pose additional complexities. Even seasoned experts in Korea may encounter difficulties starting a business in Vietnam solely driven by vague notions of the K-Food craze and low-income expectations, risking eventual troubles.
* This article does not only apply to Korean restaurant operators. This applies to all foreign restaurant operators wishing to enter Vietnam.
