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Fast food chains see increasing losses

Many fast food chains, from fried chicken to pizza, have been incurring losses.

While fried chicken is the favorite fast food for youth, pizza is favored by Vietnamese families. More fried chicken and pizza chains have opened in recent years.

Pizza Hut, Al Frescos’s, Pepperonis, Domino’s Pizza and the Pizza Company all operate in Vietnam.

They spend big money to expand networks and increase the number of shops to gain bigger pieces of the pizza market, which has estimated value of several hundred million dollars, according to Euromonitor.

However, the crowded pizza shops on weekend evenings do not mean big profits. Pizza chains can either make a modest profit or take a loss. After many years of existence, the owners of the chains still have to pump capital to maintain operations.

Pizza Hut is an example. The brand was brought to Vietnam by IFB Holdings and Jardine Restaurant Group in early 2007, kicking off the race in the business field.

However, like Jollibee and Lotteria, Pizza Hut has been bogged down in losses, with the accumulative loss reaching VND334 billion by the end of 2017.

In 2017, the chain reported profit of VND16 billion, but it mostly came from other activities. Prior to that, it reported a loss of VND79 billion and VND28 billion, respectively, for 2015 and 2016.

Analysts noted that Pizza Hut’s gross profit margin is surprisingly low, similar to KFC, a fried chicken chain. The figures were 9.4 percent in 2015, nearly 16 percent in 2016 and 17 percent in 2017, which were even lower than that of small shops.

As a result, though Pizza Hut’s revenue was huge, at VND580 billion, the gross profit was modest.

The Pizza Company, the second largest pizza chain, if considering the number of shops, is also facing the same situation.

Obtaining revenue of VND41 billion in 2015 and VND142 billion in 2016, the company’s reported losses were even higher than Pizza Hut, at VND25 billion and VND62 billion.

In 2017, when The Pizza Company’s turnover increased by twofold to VND300 billion, the loss also increased to VND114 billion. The accumulative loss of the chain had reached VND263 billion by the end of 2017.

Another big player in the market is VFBS, which manages fast food brands of IPP Group.

The company which runs Burger King, Domino’s Pizza, Popeyes and Dunkin’ Donuts, gained revenue of VND204 billion in 2015 and VND303 billion in 2016.

However, it reported losses of VND34 billion and VND25 billion for two years.

US$1=VND22,000