‘Cost-effective’ franchise restaurants with a high proportion of delivery are being hit hard by high prices and increased delivery fees. The number of Mom’s Touch stores closed as of August this year increased by 68.75% compared to the same period last year, and the handmade burger brand Frank Burger closed 30 stores, a 130% increase from last year. There is an analysis that low-priced franchise stores are being pushed to their limit.
According to the Seoul Metropolitan Government’s commercial district analysis service on the 1st, the number of fast food franchise stores in Seoul in the second quarter of this year was 2,491, a 5.82% decrease compared to the same period last year (2,645). This trend is steeper than the decline rate of all fast food restaurants (3.65%), which combines regular restaurants and franchise restaurants. It is interpreted that the closure of restaurants facing management difficulties is accelerating as delivery fees rise amid prolonged high inflation.
Baedal Minjok, Korea’s largest delivery platform, raised its brokerage commission by 3 percentage points from 6.8% to 9.8% on the 9th of last month. Instead of raising the brokerage fee, Baemin decided to lower the delivery fee borne by business owners from a maximum of 3,300 won to 2,900 won, but restaurant owners are protesting, saying, ‘There is nothing left.’ This is because the increase in brokerage commission rates is greater than the reduction in delivery fees, increasing the costs that business owners must bear.
Mr. Park, in his 40s, who runs a chicken and pizza franchise in Seodaemun-gu, Seoul, said, “If I sell a menu item priced at 19,000 won, I get deducted about 5,800 won for delivery brokerage fees and rider fees.” “There is only about 3,000 won left,” he said.
Low-priced franchises with a high proportion of delivery sales are under greater burden. Mom’s Touch, which accounts for an average of 40% of sales from delivery, closed 27 stores between January and August of this year, a 68.75% increase compared to the same period last year (16 stores). Frank Burger, a hamburger franchise that advertises ‘good prices,’ closed 30 stores during the same period, an increase of 130.77% compared to the previous year (13 stores). An official in the restaurant industry explained, “Low-price franchises with low customer prices operate on a multi-unit basis, so the fee increase applied to a single delivery service is bound to be a greater burden.”
Delivery fee, food price increase domino effect
There are quite a few cases of people opening up stores to close down their business. According to the online store direct transaction platform ‘Assa Store Exchange’, as of the 1st, 64 Pizza Nara Chicken Princess stores were up for sale across the country. Of the 559 stores nationwide, 11.45% are waiting to change hands. As even transferring a store is not easy, some franchise owners are giving up their key money and looking for a transferee.
In line with the increase in delivery fees, movements to increase food prices are also becoming visible. Starting from the 28th of last month, Hosik Two Chickens raised the price of a set of two chickens ordered through delivery apps by 8.6% from 23,000 won to 25,000 won, saying, “The reality is that the profit and loss structure of affiliated stores is seriously threatened due to the increase in delivery app fees.” “We could no longer bear it and inevitably adjusted the sales price only for delivery apps,” he explained. this year
KFC
, Popeyes and others have introduced a dual pricing system in which delivery menus are priced more expensively than those at stores due to the burden of delivery app fees.
Lee Eun-hee, a professor of consumer studies at Inha University, pointed out, “If the dual pricing system for delivery apps spreads, it will create a vicious cycle in which consumers reduce their delivery orders and self-employed people are hit again.”