Franchises suffered and flourished during pandemic

Food delivery bikes in Sincheon, Seoul. Thanks to increase in food delivery due to Covid-19 social distancing, some of the franchises such as chicken as seen earnings increase. [YONHAP]

Many franchised chains blossomed through the pandemic thanks to take-out orders.

According to a study by the Fair Trade Commission on Tuesday, there were 7,342 franchise companies last year in Korea, a 31.1 percent increase compared to a year earlier.

Some companies operate more than one brand. The number of brands increased 58 percent to a total of 11,218.

The number of outlets increased at a much lower rate to 270,485 in 2020, the latest available figures, which represented a 4.5 percent increase over 2019.

Restaurant and coffee chains accounted for 80 percent of the brands.

The number of restaurant and coffee chain brands grew 66.5 percent in 2021 to reach 8,999.

Services franchises, which included hagwon (cram schools), hair salons and taxi companies, was the second highest category with 1,662, a 24 percent increase year-on-year. Wholesale and retail franchises such as convenience stores and cosmetics shops grew 59 percent to 557 brands.

Most of the franchises were small brands -- 77.3 percent had fewer than 10 stores nationwide. Even among small brands, 80 percent were restaurant and coffee chains.

By brand, Korean food restaurants accounted for the most brands with 3,047, followed by chicken (701), bakeries (254) and pizza (240).

Korean food franchise brands increased 72.3 percent, bakeries 64 percent, pizza 54 percent and chicken 47 percent.

By number of stores, chicken franchises were largest. In 2020 there were 25,867 chicken franchise outlets, which accounted for 22.5 percent of the total.

Korean restaurants trailed behind with 25,758, accounting for 19 percent. Coffee shops took third place with 17,856 stores, or 13.2 percent.

However, in 2020, by number of stores, coffee shops saw the sharpest increase, 10 percent.

The impact of Covid-19 was evident on earnings.

Chicken franchises' average earnings in 2020 grew 8.4 percent largely thanks to increases in deliveries.
However, businesses that relied on face-to-face services saw earnings shrink.
The average earnings at Korean restaurant franchises fell 18 percent while those of coffee franchise fell 15 percent.

The study found that most restaurant and coffee franchises were making less than 200 million won a year.

Among chicken franchises, those that made less than 200 million won accounted for 71 percent. In the case of coffee shop, 83 percent made less than 200 million won.

The impact of Covid-19 was also felt on wholesale and retail franchises.

One of the businesses that suffered was cosmetics.

Due to more people shopping online, the average earnings of cosmetic franchise shops tumbled 41 percent in 2020 compared to 2019.

The number of cosmetic stores fell 30 percent.

By number of stores, convenience stores accounted for the most at 80 percent or 61,008 stores, and cosmetics stores accounted for 3.3 percent or 2,018 stores.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]