Lettuce be the first to say: Big burger joints are coming your way.

Industry

Published: 31 Oct. 2022, 15:37 Updated: 14 Jul. 2024, 13:49

Lettuce be the first to say: Big burger joints are coming your way.

Five Guys’ burger and fries [SCREEN CAPTURE]

Korea is opening wide as it welcomes various premium burger chains from abroad, giving more choices to foodies but pushing out traditional fast-food chain competitors like McDonald’s as consumers pursue the newest trends.

BHC will be opening its first overseas Super Duper Burger branch in Korea on Tuesday through a master franchise deal. The branch will be located in Seocho District, southern Seoul.

Based in San Francisco, the brand is referred to as a premium burger chain for offering fresh patties instead of frozen ones and also for their price. Compared to McDonald’s, which sells its burgers alone for around 5,000 won ($3.50) to 7,000 won, Super Duper Burger will sell burgers for around 9,000 to 14,000 won.

Another overseas premium burger chain coming soon to Korea is Five Guys, a Virginia-based franchise that will be operated by Hanwha Solution’s Galleria division.

The brand also offers fresh, not frozen, patties and is known for its fries cooked in peanut oil, with customers given free complimentary peanuts to munch on.

Starting with Shake Shack in 2016, these premium brands have been entering the Korean market in response to rising demand, making the burger market highly competitive.

Galleria Department Store plans to open the country's first Five Guys branch in the first half of next year and at least another 15 branches more in the next five years.

Although the company said it cannot yet specify the location of its first branch due to contract restrictions, a likely location is the Gourmet 494 Hannam building in Hannam-dong, central Seoul.

Gourmet 494, a venue consisting of various restaurants and cafes, run by Galleria Department Store [GALLERIA DEPARTMENT STORE]

The venue is run by Galleria Department Store and is mostly comprised of restaurants, cafes and bakeries, with the department store company tending to use it as a place to introduce up-and-coming new eateries. Pipit Burger opened its second branch in the building in May 2020, and ckbg.lab, a restaurant that sells Nashville-style hot chicken sandwiches, also opened its second branch in the building in March.

"Premium burger brands from abroad are becoming popular as consumers want to enjoy food from global brands, considering it is still hard to go abroad even though we are now in an endemic," said Lee Eun-hee, a consumer studies professor at Inha University. "Also, the younger generation tends to eat burgers more often and wants high-quality burgers to satisfy their taste standards, but brands like McDonald's tend to target consumers who want cheaper foods."

"There is rising demand for high-quality burgers, and the small range of traditional fast-food brands currently in Korea aren't enough to meet customers' demands."

With the young generation preferring burgers higher in quality than those offered at traditional fast-food chains, McDonald's Korea has been reporting net losses since 2017. Although its losses have been improving since introducing kiosk ordering machines and therefore cutting labor costs, it still remained in the red as it reporting a net loss of 34.9 billion won in 2021, though less than the loss of 66.1 billion won the previous year.

Burger King Korea swung back to the black by logging net profit of 12 billion won in 2021, compared to a net loss of 4.35 billion won the previous year.

Despite businesses starting to improve, both chains are currently looking for new owners. One reason for that could be because it is hard to expect rapid growth as consumers' focus is switching to premium burgers.

"New handmade burger brands are entering the market, and the market share of traditional fast-food franchises are decreasing as there are a lot of people choosing to eat from brands like McDonald's less often," said Kim Sang-bum, CEO and culinary director at Plating Food & Culture. "With more brands, and our population decreasing, those traditional fast-food chains will inevitably loose their footing, especially with new foreign burger chains and individual restaurant owners creating their own burger brands."

"Before, traditional fast-food chains almost dominated the market, but not they can't, which will make it hard for them to grow as rapidly as before."

Other premium burger brands have been doing well in Korea, expanding the market as they grow.

Shake Shack, a burger franchise based in New York, was first brought to Korea through a licensing agreement in 2016. Since its first branch in Gangnam District, southern Seoul, the brand now has 23 branches around the country.

Paris Croissant, which operates Shake Shack burger in Korea, says sales from the brand have been rising 20 to 25 percent on year since 2016.

The burger market has also been growing, with Euromonitor saying the Korean burger market will grow 35 percent to 4 trillion won in 2022, compared to 2020, when the same stats were last announced.

“The market for burgers are growing, but rather than understanding it as all burger brands witnessing growth, it's more accurate to say that there’s a growing demand for high quality burgers,” said Prof. Lee. “The market for cheaper fast-food burgers will become smaller.”

Shake Shack faced less competition as it was one of the first premium burger brands to tap into Korea, but things could change once new brands enter the market.

“Global food franchise companies first started to tap into the Korean market in the 1980s, and they made a big impact on the local food industry, introducing them to new business strategies,” said Kim Maeng-jin, a professor teaching restaurant management at Baekseok Arts University. “For burger chains to stand out, taste, speediness and customer service are the three most important factors that franchises need to make sure that they offer consistent and satisfying services in.

“Customer groups such as young students are already satisfied with various menu offerings from brands such as McDonald’s, and there are various opinions that other brands should focus on enhancing the quality of their individual items rather than trying to also offer a larger variety,” Prof. Kim said.

One strategy Shake Shack has chosen is to offer various Korea-specific foods that are exclusive to certain branches.

Its Korean branches annually offer Korea-exclusive items such as chicken sandwiches marinated with gochujang.

The company aims to bring people to different branches as well, with the Suyu branch in northern Seoul being the only location that offers a mugwort and red bean-flavored frozen custard dessert. The Daejeon branch exclusively carries a chestnut-flavored custard dessert as well.

BY LEE TAE-HEE [lee.taehee2@joongang.co.kr]