Fast Food Giants Still Holding Off on Cambodia

Hungering for more at the tail end of his career as an executive with the domestic Cambrew beer company, 56-year-old Teh Sing found he had a taste for a solo business venture-and some fried chicken.

International fast food giant Kentucky Fried Chicken, Teh Sing thought, was a perfect fit for increasingly modern Phnom Penh, where four Lucky Burgers and the recent success of two Pizza Company restaurants have found a market large enough to support them.

Teh Sing, a Malaysian national, was sure KFC would be more than ready to explore opportunities in Cambodia, he said last week. But when he looked into opening a local branch in January 2006, KFC sent word that Cambodia, it felt, still wasn’t quite ready for its brand of fried chicken.

In the five years since the initial franchise buzz that followed Dairy Queen to Phnom Penh International Airport in late 2002, a few regional chain restaurants have trickled into Cambodia, but the country still remains isolated from behemoths like McDonald’s and KFC that have set up shop in neighboring countries.

Contacted by e-mail last week, representatives from McDonald’s, 7-Eleven and KFC’s parent company Yum International all said they have no immediate plans to open branches in Cambodia.

Liam Jeory, vice president of corporate relations for McDonald’s, said the firm is focused on the 118 markets worldwide where they currently operate, and are not looking to expand at this time.

“Eventually, we will take some steps to open restaurants in markets where we do not currently have a presence and will give consideration to Cambodia and other Southeast Asian markets then,” he wrote in an e-mail.

Margaret Chablis, who works in public relations for 7-Eleven, said by e-mail that they periodically assess regions where they do not have stores according to criteria including: “the current economic and political climate, allowable hours of operation, certain demographic data, supplier distribution channels, product availability and continuity, trademark and intellectual property protection,” and other legal regulations.

“At the present time, 7-Eleven is not pursuing a new international license in Cambodia,” she said.

KFC’s Yum International said they “have not made any decision at this point in time to enter Cambodia.”

Some business experts think the larger international chains are staying away because their presence relies on the guarantee of quality local produce-something that Cambodia’s agricultural sector cannot yet ensure.

Others say the country is more politically stable than it was a decade ago and that with a growing middle class, there should be a market for bigger franchises.

Black Canyon coffee shop and Pizza Company restaurants, both of which are Thai-based franchises, have planted roots in Phnom Penh in recent years to varying levels of success. And now Swensen’s-the old fashioned Western-style ice cream parlor where “Happiness Never Melts”-is also on its way.

It’s probably just a matter of time, some say, before larger chains set up shop. However, if the experience chains like Black Canyon serves as a guiding barometer, an international fast food frenzy in Phnom Penh may still be a few years off.

Michael Holland, international franchise director for Black Canyon, wrote in an e-mail that while he remained “upbeat about the prospects for Cambodia,” the chain’s first Cambodia venture in Paragon shopping mall “has not lived up to the potential that it seemed to have.”

The store’s success has been “satisfactory” and Black Canyon is “hoping to open more outlets in Cambodia, but we’re not in any huge hurry,” he wrote.

“[T]here are other markets nearby with bigger potential,” he added.

The Express Food Group, which owns the local branches of Pizza Company and the soon-to-open Swensen’s, has been more inspired by Pizza Company’s success, according to EFG’s Phnom Penh operations manager Virak Tep.

“It’s been two years and Pizza Company is still the talk of the town,” he said, adding that the number of customers has continually increased since opening in the Sorya Shopping Center. On weekends, customers eagerly wait to be served in long lines at the counter, he said.

Virak Tep said that EFG had initially planned on introducing Swensen’s at the same time as Pizza Company in 2005, but that franchises were still very new to Cambodia so they decided to start with one and then “wait and see.”

Now confident, EFG is planning for Swensen’s to hit the ground floor of Sorya in mid-September, complete with marble table tops, red leather seats and over 20 flavors of ice cream.

A single scoop will go for about $1 and a classic sundae for about $1.60.

Tim Smyth, managing director of Indochina Research, said Swensen’s does not represent a radical shift in the kind of franchises that are already interested in Cambodia, but it may contribute to a trend.

“Swensen’s is more of the same-franchises that rely on refrigerated goods that are easy to move in and out of the country,” he said.

“Something the arrival of Swensen’s might do is make [larger chains] think they’d better take another look sometime soon,” he said.

More prominent franchises like US-based fast food chain Wendy’s, McDonald’s and KFC require “fresh produce grown to a certain quality and a consistent, reliable supply,” he added.

Commerce Ministry Secretary of State Chan Nora believes the arrival of Swensen’s is evidence of major progress.

“The arrival of a US company means that all sectors of the country have improved. If they didn’t see us as improved, what do they need to come here for?” he asked.

Bretton Sciaroni, president of the International Business Club, said the arrival of Swensen’s should give franchises a boost in Cambodia.

“What is happening is that a foundation is being laid which makes it possible for other franchises to come in the future,” he said, adding that the recent arrival of regional chains like Suki Soup suggests the trend may be picking up.

Swensen’s was founded in San Francisco, California in 1948 and its direct association with the US will help make it a status symbol for customers, Sciaroni said.

“For the last 10 years, Cambodia has been re-introduced into the world economy,” he said. “When internationally-recognized brands show up here it’s important because we are moving toward the mainstream…moving toward normalcy.”

Cheap Sopheak, marketing supervisor for Cambodia’s Lucky Market Group, which runs Lucky Supermarket and Lucky Burger, thinks fast food restaurants like KFC and McDonalds are still five or 10 years down the road.

Lucky Burger holds the unique reputation of being the first “burger joint” to arrive on the scene, having been operational since 1997, he said.

Chea Sopheak thinks McDonald’s would have to set up shop and stay for a while in order to pick away at the special place Cambodians have in their hearts for Lucky Burger.

“McDonald’s is a brand that is famous abroad. But in Phnom Penh some people don’t know,” he added.

(Additional reporting by Prak Chan Thul)

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