Food companies rethink expansion

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Food companies rethink expansion

SunAtFood, which operates several restaurant chains, was hoping to open half a dozen Italian and Korean restaurants in Ulsan and elsewhere this year.

Then the National Commission for Corporate Partnership proposed new restrictions on food service businesses with more than 200 employees and 20 billion won ($182.5 million) in annual revenues.

“We postponed all the decisions on store openings until next month, when the final decision of the commission is expected,” said a SunAtFood official. “We have also stopped recruiting personnel to open new stores.”

SunAtFood, which operates Mad for Garlic Italian restaurants and the modern Korean restaurant Morac, was chosen as one of “the 100 best companies at creating jobs” by the Ministry of Employment and Labor after hiring 1,300 employees last year. The company typically hires 35 to 40 employees per restaurant.

Because the commission designated 14 service industries including not only large corporations but also mid-sized food service businesses or franchise companies as areas reserved for small enterprises, youth employment could take a direct hit.

The food service industry is especially preferred by young job seekers.

Caffe Bene, which started an Italian restaurant chain with Blacksmith and acquired Japan’s Mainz Dom to tap into the bakery business, also has put its expansion plans on hold.

“We were planning to make aggressive investments this year, but are reconsidering all of our plans. If we are banned from opening new stores, that is 20 jobs at each store that would be lost,” said a Caffe Bene official.

A company operating family restaurants said that 80 to 100 employees work at each of its restaurants and that employment reductions would be inevitable if the new rule is imposed. The company said it mostly hires young people.

The commission encouraged mid-sized food service companies to target overseas markets to get bigger, but many companies say they are unprepared.

“Even the large corporations such as Samsung and Hyundai succeeded in expanding overseas, based on decades of accumulated experience of manufacturing in the country,” said a company official.

In academia, there are concerns about the regulation of food service companies and franchise businesses, which are effective job creators.

Park Joo-young, a professor in the venture small business department at Soongsil University, recently published a study at a policy symposium that showed one franchise bakery store hires 4.31 people, one more than at mom-and-pop bakeries.

In 2009, the Presidential Council on National Competitiveness cited job creation as one of the reasons for allowing 100 large franchise companies to operate more than 1,000 stores.

The Korea Medium Industries Association (Komia) has complained that the commission is regulating mid-sized companies along the same lines as large conglomerates and discouraging them from trying to expand and grow by specializing in food-service.

“It is regrettable that the commission banned even mid-sized food companies from expanding,” said Kang Ho-gap, the next president of Komia. “It is undermining the hopes of small and medium enterprises to grow into mid-sized companies and mid-sized companies into large corporations.”

By Chang Jung-hoon, Kim Young-min []
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