Big biz ban in bakeries, food shops

Companies in the food industry with over 5 trillion won ($4.59 billion) in assets will be prohibited from launching new stores in most parts of Korea to give smaller companies a better chance.

Bakery franchises in particular will not be allowed near existing mom-and-pop bakeries.

According to the National Commission for Corporate Partnership yesterday, big companies will only be allowed to open new stores in new commercial buildings near new residential areas with more than 3,000 apartments, or shopping centers of new cities of more than 3.3 million square meters (815 acres). The regulations begin in April.

Giant food conglomerates like Lotteria and CJ Foodville will be restricted along with medium-sized players like Nolboo, Won Grandma, Bonjuk and Saemaeul Sikdang. Nolboo and Won Grandma are the two largest bossam, or steamed pork, franchise chains, while Bonjuk serves porridge and Saemaeul Sikdang is a popular barbecue chain.

Family restaurants like VIPS, which is run by CJ Group, and Ashley, which is run by E-Land Group, will also be restricted. So will foreign brands like Outback Steakhouse.

Bakery franchises, like SPC Group’s Paris Baguette and CJ’s Tous Les Jours, won’t be able to open stores within 500 meters (1,640 feet) of existing mom-and-pop bakeries. On top of that, their growth will be limited to 2 percent of the total number of stores they operated last year.

CJ expressed unhappiness with the new restrictions.

“The bakery business is now slapped with double restrictions on distance including a similar one by the Fair Trade Commission,” said the group in a statement. “The government is not asking us to refrain from expanding but forcing us to downsize.”

The statement said the restrictions limit consumers’ choices and undermines fair competition.

CJ said the government’s attitude conflicts with its sincere efforts to globalize Korean cuisine by expanding its business overseas.

It agreed on the need for shared growth with small merchants and promised to cooperate with the government.

The new restrictions were announced as part of the government’s designation businesses that will be reserved exclusively for small players.

The commission designated 14 service industries, including bakeries and restaurants, and two manufacturing businesses - plastic bags and buckwheat flour - as areas reserved for small enterprises.

Other services closed to conglomerates include: servicing vending machines, delivering gas for households, selling bicycles, books, used cars and flowering plants.

“Designation of reserved businesses is necessary for shared growth between large and small businesses,” said Commissioner Yoo Jang-hee.

Opposition from the Korea Franchise Association is expected to follow.

An official at the association said the restrictions on franchised restaurants doesn’t jibe with President-elect Park Geun-hye’s policy on medium-sized businesses.

A spokesman for Won Grandma said the company was unlucky to be restricted because it has just started to grow and make profits.

“Blocking expansion of such franchises could lead to taking away opportunities from people trying to become self-employed,” said Kang Byeong-oh, a professor at Chung-Ang University.

The Korea Foodservice Industry Association, which represents about 420,000 small restaurants, welcomed yesterday’s announcement.

By Song Su-hyun [ssh@joongang.co.kr]