One investor makes an offer to the founders of Banh Mi Ma Hai: "We will invest VND5 billion (US$205,000) for 36% of your equity."
Within a span of eight years Nhut and Hai have gone from selling on the streets to pulling in big investors.
Their business model has shown that sidewalks are not necessarily just a place to eke out a meager living but can produce million-dollar businesses that attract investors as much as trendy start-up tech companies do.
The sidewalk economy is the unofficial name given to all business activities that occur on the streets and are categorized into three kinds: retail storefront, street vendor and fixed stall.
Nhut and Hai’s stall fell under the third kind, but is now considered part of the formal economy.
A brilliant 22-year-old graduate from HCMC’s University of Economics with an opportunity to work for a multinational company was how Nhut might have been in 2015.
But despite warnings from his family he decided to begin his career on the sidewalk.
He partnered with Hai, a senior of his at university, to create the "Banh Mi Ma Hai" brand.
Nhut had more than 10 years’ experience of helping his mother sell banh mi in his hometown, An Giang Province.
All the duo had when they started were eight carts in District 10and 30 students looking to earn a small income by working for three hours every morning.
They invested VND3 million in each cart, an amount they would go on to recover within two months after selling more than 100 loaves of banh mi every day.
Theirs was the epitome of a small business in the informal economy: no registration, no company seal, no labor contract, and no taxes.
They faced the problem all street vendors do: they were not allowed to conduct business on the sidewalk. According to the Law on Road Traffic, streets and sidewalks are for use only for traffic purposes. Street vendors and sidewalk stalls face fines.
Inevitably, the urban order management team became an adversary of the two young entrepreneurs.
"Every month without fail we would pay a fine at the ward office to get back our carts and then continue selling," Nhut recalls his first days in the business as he gradually became a familiar face to the District 10 urban order management team.
As one of the first banh mi street sellers with consistent branding, Nhut and Hai had the vision to redefine street food and the sidewalk economy.
But they realized their business lacked legitimacy in the eyes of the law.
"The urban order team was doing its job, so of course I cannot complain," Nhut says.
Not only did they have to worry about fines, but also had to deal with street gangs demanding protection money.
Knowing they would continue to harass him for more if he paid them once, Nhut refused to pay them anything.
Some unsavory gang members also came to hover around them. Their intimidating aura meant customers no longer stopped by and the duo’s workers were also reluctant to continue selling.
They decided to give up that location and focused on selling near schools and offices.
Within a year the two young entrepreneurs had added 40 carts to their fleet. With the number of employees climbing into the hundreds, Nhut and Hai decided to formalize their business by registering a company.
From running everything on their own, they decided to switch to a franchising model to increase the scope.
In some places local authorities urged them to take in poor franchisees to help them earn a living.
Nhut and Hai’s sidewalk banh mi business by now had a presence in over 37 provinces, with nearly 500 carts providing jobs to thousands of people.
Communal economic area
Though sidewalks have been buzzing with economic activity for more than 100 years, an official legal framework for conducting business on them has never existed, says Dr. Nguyen VanDang, a specialist on public management from the Ho Chi Minh National Academy of Politics.
In a research article written by Tran Nguyen Chan in 1929, when HCMC was Saigon-Gia Dinh, it was pointed out that mobile business activities had cropped up all over the city. Wherever there was a street, there was a sidewalk economy, it added.
The French who ruled Vietnam during this period tried to control this by passing laws on rightful, orderly behavior in cities, including banning street vendors and allowing police to confiscate anything sold on the sidewalks.
Against all odds, the sidewalk economy has endured for over a century since, becoming one of the most important aspects of the informal economy.
Official statistics related to it are lacking, but a study done by the General Statistics Office of Vietnam in 2017 estimated that street vendors and small personal businesses on sidewalks contributed 11-13% of the country’s GDP.
Dr Dang points out that this economic contribution is what makes it difficult for authorities to deal with street vendors. They cannot recognize economic activities on the sidewalk since they go against the ostensible purpose of streets and sidewalks, but they cannot get rid of them either due to the economic benefits they provide.
Most street vendors are not trained or well educated, and so it is difficult for them to find jobs in a traditional workplace.
The city-based Institute for Development Studies estimates there are 20,000 street food vendors with nearly 25,000 workers in HCMC.
Sidewalks are a refuge for many workers who have been laid off, and Nhut knows this better than almost anyone.
The time when their banh mi business received the most interest from potential franchisees was two years ago after the peak of the Covid-19 pandemic passed.
There was great interest again this year when companies laid off or furloughed workers amid falling demand for their products.
For customers, the sidewalk is a place where they can shop quickly, conveniently and cheaply, not to mention it is conveniently accessible to motorbikes, the main mode of transportation in Vietnam.
For foreign tourists, the bustle of activity they see on the sidewalks has become a unique feature of Vietnamese culture.
Tom Divers, founder of the Vietnam travel resource website Coracle, fell in love with the dynamic flow of life on the sidewalks when he first set foot in Vietnam 18 years ago. It was something he could never see in his native London in the UK.
"Forget all the landmarks that they say you cannot miss; street food is actually the most valuable tourism asset and the number one attraction for tourists in Saigon," he claims.
Whenever he invites his friends to HCMC, he delights in taking them to dinner on a sidewalk and wander around the maze of alleys off Su Van Hanh (District 10) Van Kiep or Phan Van Han (Binh Thanh District) streets.
It is a way to help strangers immerse in "the identity of Saigon," he says.
"Instead of trying to turn this city into Singapore or Seoul, you should improve on its inherent identity."
He cannot countenance a time when all the sidewalks are wiped clean of food and drinks stalls, and if that day does come, it will be a sad day indeed, he says.
HCMC will then lose its "most valuable attraction," and thousands of immigrant workers will lose their livelihoods, he adds.
Legitimizing the sidewalk economy
The love that foreigners like Divers have for street food and the ambition to grow that young entrepreneurs like Nhut have are not enough to provide legitimacy to the sidewalk economy.
"Reclaim sidewalks for pedestrians", and "clean up the sidewalks" are some of the slogans used in campaigns for urban order.
Once the campaigns wrap up, however, everything returns to what it once was.
"The endurance of the sidewalk economy makes all efforts to wipe it out unsuccessful," Dr Dang says.
He emphasizes that all extreme solutions that abruptly deprive some citizens of their only livelihood are doomed to fail. This can even create a rift in society and deepen social inequality, he warns.
The government does not earn anything from this informal economic segment, but yet has to spend large sums of money to mitigate possible repercussions such as traffic and food safety hazards and urban disorderliness.
Tran Linh Huan of the HCMC-based University of Law says the lack of management of the sidewalk economy means vendors have to pay unofficial "fees" to do business.
A survey done by HCMC’s University of Social Sciences and Humanities in 2019 of more than 100 street vendors in the downtown area found 22% of saying that at least once they had faced problems like having to pay for "protection," stealing and disputes with other vendors.
Last month, the Hoc Mon District police investigated two members of the Urban Order Management Team for allegedly confiscating vendors’ carts and then demanding bribes of VND0.5-3 million.
Vietnam is not the only country that has to tackle the sidewalk economy.
Research done by Prof Nurul Amin of the Asian Institute of Technology in Thailand found that many countries went through four stages in dealing with it: prohibition, restriction, permission, and support.
Dr Du Phuoc Tan of the Institute for Development Studies says HCMC entered the third stage in 2008 by allowing vendors to pay a fee to use the sidewalks on 172 streets.
But this cannot be implemented without the fees being spelled out unambiguously.
Thus, when the Law on Fees and Charges was passed in 2015 with many provisions that contradicted the decisions made by the city people’s committee, the policy hit a dead end.
But with no intention of giving up, the city plans to create a fee schedule for using sidewalks for doing business, and plans to make a start at the beginning of next year.
This is expected to fetch its coffers around VND800 billion a year.
According to Dr Dang, with the sidewalk economy remaining an essential part of the economy, this is a good solution.
Many cities in Asia have legitimized the sidewalk economy. The Bangkok Metropolitan Administration requires street vendors to register their business, pay a monthly fee and only sell outside of rush hour in crowded areas so as to not affect the traffic.
Singapore has opted to build a number of hawker centers to manage this type of business. The vendors have to obtain a license from the authorities, comply with food safety regulations and have a union to represent them.
As soon as Nhut learned of HCMC’s new fee policy, he planned on revamping his business model and developing a new product to seize this rare opportunity.
Once they pay the fee, he and his partners can do their business all day instead of having to close before 9 p.m. like in the past.
The sidewalk—where two generations of Nhut’s family have been selling banh mi and where he went from having a few banh mi carts to running a million-dollar business—is on the verge of being acknowledged by the law.
By Viet Duc