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Number of Franchises in S. Korea Steadily Increasing, Says FTC

01 Mar 2020 - Fried chicken restaurants comprised majority of franchises, but also had highest closure rate

An analysis of the franchise industry at the end of 2019 by South Korea’s Fair Trade Commission (FTC) found that the total number of franchises in the country is steadily increasing. The most popular category of restaurant franchises was fried chicken restaurants, clocking in at about 25,000, but that category also had the highest closure rate, at 10.6%.

The FTC said on Feb. 26 that there were a total of 254,040 franchises around the country in 2019, the first time the figure had topped 250,000. Franchises are divided into three sectors: restaurants (such as fried chicken restaurants and coffee shops), services (such as beauty parlors and laundromats) and wholesale and retail (such as convenience stores). Since 2016, the number of franchises has grown by about 5% a year, but in 2019, the rate of increase slipped to 4.3%, from 5.4% the previous year.

Restaurants were the sector with the most franchises (122,574), accounting for 48.2% of the total, followed by services at 29.5% (75,046) and wholesale and retail at 22.2% (56,420). The category of restaurants with the most franchises was fried chicken restaurants, with 25,188 outlets around the country, followed by coffee shops, at 15,036 outlets. But the average sales at fried chicken restaurants and coffee shops were below 300 million won (US$248,344), while average sales at fast food restaurants and bakeries were above 400 million won (US$331,126). Fried chicken restaurants and coffee shops were also the categories with the highest closure rates, at 10.6% and 10.3%, respectively. The high closure rate reflects the high number of franchises and their comparatively low sales.

Across all sectors, convenience stores accounted for the largest number of franchises, with 42,712 around the country. Convenience stores have an average yearly turnover of more than 500 million won (US$413,907) with a closure rate of 6%.

The Hankyoreh