Ones to Watch
By Sabrina Davis
QSR Online | Quality and Speed for Restaurant Success
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 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.