Restrictions set for new convenience store outlets

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Restrictions set for new convenience store outlets

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Following rules restricting the opening of new bakery, chicken, pizza and coffee franchises earlier this year, the Fair Trade Commission unveiled a new regulation for the opening of convenience store outlets yesterday.

Chains will not be allowed to open a new franchise outlet within 250 meters of an existing outlet.

Bakery and coffee shop franchises have been prohibited from opening new stores within a 500-meter radius of an existing store, and pizzerias must stay at least 1,500 meters away.

The regulation is less strict on convenience stores because there are more of them and they get more traffic.

“Consumers go to convenience stores far more often than bakeries or coffee shops,” said Lee Dong-won, director of the FTC’s franchise division.

The FTC is trying to protect the individual franchisees from being harmed by overaggressive expansion by the chain.

The measure came after the number of convenience store outlets of the top five franchises has risen steadily to 24,000, more than double the number in 2008.

The top five franchises are, in size order: CU, GS25, 7-Eleven, Mini Stop and Buy the Way.

The number of Seven Eleven stores jumped threefold to 5,820 compared to 1,995 in 2008. It opened the most stores, 1,205, this year.

CU opened the second-most, 1,061, after changing its name from Family Mart in June.

As the convenience store market becomes saturated, the average sales of individual stores of top five franchises have been declining in the past three years. The average annual sales fell to 482 million won ($449,229) last year from 533 million won in 2008.

“We hope that profits and rights of individual store owner are protected through these measures so that both licensees and franchise headquarters can have firm ground for shared growth,” said Lee.

Although officials at the major chains said they would obey the new regulation, they didn’t like it.

“Unlike other franchise stores, we pay for interior construction and even electricity bills for individual stores to guarantee their profits,” said an official at CU. “It is regretful that the regulatory body will force unilateral rules while we are putting our own effort to help storeowners.”

An official at GS worried that overall growth of stores will be hampered and pledged that the company will put more emphasis on improving marketing strategies at each store for better sales.

By Lee Sun-min [summerlee@joongang.co.kr]

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