Pho Hoa
When a tiny Vietnamese restaurant serving only
noodle soup opened in San Jose, California, in 1983, its customer
base was as focused as its menu. Company leaders had little advertising
budget and were uncertain of success. But word traveled quickly
in the Vietnamese community of the tasty noodle soup—a traditional Vietnamese dish called pho (pronounced
fuh). The soup is considered soothing; a dish that brings harmony
to the body. Hoa (pronounced huh-ah´) means
“harmony” in Vietnamese, and thus the owners named
their restaurant Pho Hoa.
Just over 20 years later, Pho Hoa is the
largest Vietnamese restaurant chain in North America with a
customer base that extends well beyond Vietnamese diners.
“The first restaurant was just a mom and pop store,”
says Trang Huynh, marketing and franchise manager. “The chain
really started to grow in 1990 as other Asian groups—Koreans,
Philippinos, and Chinese—were introduced to pho. Then came
the Hispanics and Caucasians. We see huge potential in those
segments.”
That potential has Pho Hoa changing its
strategies relating to growth, customer service, menu, and
atmosphere. The chain has almost 90 stores worldwide (both
company-owned and franchised), with 33 in the U.S., 12 in Canada,
and 42 in Asia. Leaders are focused on growing within the U.S.
market, where thus far restaurants have been located in Asian communities.
“About 60 percent of our customer base
is Asian,” Huynh says. “Caucasians now make up 30 to
40 percent, but we want that number to be much higher. We are trying
to locate our newest stores in mainstream areas.”
Three factors seem to be driving interest in
pho: price, a filling meal runs about $6 or $7; flavor, the richly
flavored beef stock combines soft white noodles and a choice of
a variety of beef cuts; and health, Pho Hoa markets itself as a
“Health Conscious Choice.” The soup is nutritious and
relatively low-fat, depending on the chosen meat.
“You can compare us in price and speed to
McDonald’s,” Huynh says. “By locating in mainstream
areas, we think Caucasian customers will think either quick, or both
quick and healthy—that’s what we offer.”
Pho Hoa
CEO: Binh Nguyen
HQ: Sacramento, California
Year Started: 1983
Annual Sales: + $62 million
Total Units: 89
Franchise Units: 61
Pho Hoa is considered fast-casual but has
limited table service. Because the soup stock, noodles, and
meat choices are pre-prepared, customers receive their food within
three minutes of ordering.
“One of the changes we are having to
make as we move into the mainstream market, is the way we train our
waitstaff,” Huynh says. “Our employees are used to
serving Vietnamese customers—saying, ‘Here is your
meal, thank you.’ You don’t talk much. Typical American
customers expect you to talk more to show friendliness and customer
service. We’re having to train our servers to make small
talk.”
Pho Hoa has made menu additions to broaden its
customer base and increase dinner traffic. Pho Hoa serves 60
percent of its meals at lunch and 40 percent at dinner. Huynh says
chicken and pork chop rice plates were added to serve hearty dinner
appetites. Seafood pho and chicken noodle soup also add variety,
but traditional pho continues to account for 70 percent of orders.
Not only has the menu changed, but the newest
Pho Hoa restaurants, which typically are 3,000 square feet, have
a different look. “Our existing stores are very Vietnamese. The
new stores have improved lighting and modern furniture more in line
with other new quick-casual stores,” Huynh says.
Pho Hoa sees its competition as “mom and
pop pho restaurants,” but, Huynh says, Pho Hoa’s large
size and 20-year history are a competitive edge when it comes to
attracting new customers trying pho for the first time. “We
can offer the same quality but from a trusted name.”
Why It Bears Watching: Pho Hoa is the largest
Vietnamese restaurant chain in North America, with 45 stores across
the United States and Canada. Already well known among many Asians,
company leaders are focused on becoming a fast-growing chain, popular
among mainstream
U.S. diners. The corporate stafsf is expanding to
include professionals from diverse backgrounds with big-business
experience. “We are at a turning point,” says Trang Huynh.
“We are not a small company anymore, which requires a new way of
doing business. I was hired from a large European telecommunications
company.”
Pho Hoa is consolidating franchise operations
this year to improve support, training, purchasing, and brand
awareness. Growth is expected to accelerate in the following year,
with a goal of 30 to 40 more stores worldwide in the next five
years, and more aggressive growth in the United States. Huynh says
locations in Europe and South America might be in the future. Annual
store revenues average $800,000, with a 30 percent profit margin.
Huynh says this year’s consolidation should improve
profits.
After finding success with an unusual strategy
of launching a pizzeria in an area where pizza was relatively
unknown, India’s Pizza Corner is ready to grow aggressively
and internationally. Target markets include small towns in India,
along with Colombo, Sri Lanka, and Beijing, China.
Parent company Global Franchise Architects
(gfa) opened Pizza Corner in India, in December 1996. “After
considerable market research, GFA decided to launch it from
Chennai, the bastion of conservatism, the land of idlis and
dosas,” says CEO Anoop Sequeira. Idlis are steamed cakes of
rice and lentils, while dosas are light rice batter pancakes. Both
are staples in southern
India, yet Sequeira points out that Pizza Corner
has found its place despite a culture of strong eating traditions.
“There were other pizza chains that had
made an entry into India around the same time but their presence
was predominantly in northern India,” Sequeira says.
“In Chennai, the population was not accustomed to eating out
or the home delivery concept. And our first campaign was to educate
the market on the pronunciation of the word ‘pizza.’ Our
strategy has paid off since Pizza Corner still continues to hold
the first-mover advantage in the south.”
Reaching out to families, providing both good
food and entertainment, also has been key to Pizza Corner’s
success. “We have play areas for children ages 3 to 8 that
are not only fun and entertaining for the kids, they also give
parents time off to relax and enjoy their meal,” Sequeira
says.
The restaurants are designed to cater to all
age groups—“Our customer base is the pizza eater
between 5 and 55,” Sequeira says—with each location
themed to create a signature identity. Themes vary from sports to
Hollywood.
“Our restaurants also have see-through,
glass kitchens, which highlight our emphasis on hygiene and
cleanliness [and] also let our customers see what is being
prepared. Our crew has a lot of fun tossing pizzas and entertaining
those who are watching.”
The fun is a bonus, Sequeira says; the real
focus is on quality food. “The emphasis is always on creating
authentic pizza. We believe in the goodness of the basic ingredients.
All the meat we serve is 100-percent halal.”
Pizza Corner serves Italian, Sicilian, and
Desi pizzas. The Desi line features traditional Indian flavors,
including a highly spiced and aromatic sauce.
Pizza Corner
CEO: Anoop Sequeira
HQ: Bangalore, India
Year Started: 1996
Annual Sales: N/A
Total Units: 30
Franchise Units: 5
“We have had pizza experts from the
United States who have assisted us on product improvisation and new
introductions,” Sequeira says. “We use only the most
modern and sophisticated American conveyor ovens to bake our fresh
dough.”
Pizza Corner has dine-in restaurants with
seating for 40 to 160, delivery outlets with limited seating, and
express outlets
located in high traffic areas including shopping
malls, fuel stations, and event centers.
The time is right for a rapid expansion,
Sequeira says, because India’s retail sector is growing.
“The advent of malls and multiplexes complements our business
strategy.”
Pizza Corner has grown steadily over the past
eight years and now has thirty stores in eight
cities—Bangalore, Mysore, Chennai, New Delhi, Gurgaon, Noida,
Hyderabad, and Pondicherry.
“Our immediate expansion plan is to open
30 additional outlets across India through franchising,”
Sequeira says. “We will be launching in Beijing and Colombo
by April.” Sequeira adds that while the impact of
December’s tsunami was expected to slow business in some
areas, Pizza Corner plans to move forward with the planned
expansion.
In preparation for growth, Pizza Corner has
spent the past year consolidating operations and improving support
for supply chain, distribution, and logistics. The company also
is focusing its marketing on two core groups—first, the
corporate sector that has served Pizza Corner well. However,
perhaps more critical to future growth are children, Sequeira says,
“who are playing an increasingly dominant role in the
decision making of families.”
Why It Bears Watching: Pizza Corner has turned
southern India’s population of once conservative diners on to
one of America’s favorite foods. A risky decision to open an
American pizzeria in 1996 has grown into a profitable chain of 30
stores in 8 cities, many of which see 1,000 customers a day, according
to CEO Anoop Sequeira.
“Our revenues have been increasing
substantially year after year at about 18 percent at existing
stores in the past few years,” Sequeira says. A focus on
improving efficiency has increased the bottom line. “We have
started clocking about 24 percent net profit.”
Having had success growing in markets
untouched by large chains, Pizza Corner leaders plan to continue
the chain’s growth by way of small towns. Internationally,
stores are planned in Sri Lanka and China. Sequeira says China
has the potential for about 20 Pizza Corner outlets. The United
Arabs Emirates could be the next destination, with talks underway
about a store in Dubai.
This column
originally appeared in the March 2005 issue of
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