While most of the franchise restaurants are dominated by foreign multinational companies, Korean franchises are now hitting back. Equipped with affordable prices, fast chain networks, and thorough knowledge of Korean tastes, many Korean franchises are destroying the fortress of foreign companies. Surprisingly, it is the mid or small sized companies that are leading the assault, instead of the big companies with their large capitals and name recognition.

Starbucks and Coffee Bean’s weak performance in Daegu

Da Vinci, Sleepless in Seattle, Coffee Myungga, Han’s Coffee, and Ahn Espresso were all franchises started in Daegu and so far they have gained significant popularity. They own about 120 coffee shops, representing 70% of all the coffee shops in Daegu.
Starbucks currently has only 8 stores in Daegu; Coffee Bean and Tea Leaf, only one.

The reasons for the popularity of these Korean coffee brands are affordable prices and high quality products. These coffee shops offer such things as Caffe Latte and Americano 30% cheaper than their foreign competitors do. Da Vinci Coffee strictly limits the expiration date of its coffee beans to 10 days after the beans have been roasted, and Coffee Myungga serves coffee made from beans that president of the company, Mr.Baristein, purchased directly from thirty different countries.

Caffe Bene, which opened up this April, donates part of its profits to the community instead of paying loyalty to its headquarters. As a result the company differentiates itself by having values such as unique taste and atmosphere, as well as social contribution.

Chain Store system has advantages in expansion.

Started in August, 1985 and advertising with the slogan ‘fun in exploring delightful tastes’, Baskin Robbins currently is the No.1 brand in the ice cream market. It occupies 65% of ice cream market and has approximately 700 chain stores.

Caffe Ti-amo, a Korean ice cream brand which started 3 years ago, challenged the ice cream giant. It offers easy requirements for the new business owners to open up a franchise location and now it has over 200 stores. The company added an “edge” by making ice cream in each store instead of receiving deliveries from headquarters.

Some critics say that chain store system is good for expansion, but lacks uniformity and service compared with direct management system used by foreign companies.

Na Se-Chul, the market manager for Bonjook, says that the Korean franchises are trying to improve their weaknesses by having regular training sessions for employees and quality-maintenance officers.

In the fast food market, Korean franchises are stepping up against McDonalds and KFC.

A chicken and burger restaurant named Mom’s Touch advertises with an image of mom’s hearty meal and operates in over 200 restaurants across the country. Concerned with Korean customers’ need for healthy food, Mom’s Touch is also taking charge in managing its food ingredients.

Kraze burger, although has only 25 restaurants so far, operates a made-to-order system and is getting a positive response for its successful differentiation from other foreign burger restaurants.

In contrast to the success of new Korean franchises, McDonalds and KFC have been decreasing the number of restaurants they operate. McDonalds went down from nearly 300 to 231 stores; KFC, from 200 to 173. Kang Byung-Ho, the chief of FC foundation Korea, says that there were about 2200 Korean franchises by the end of year 2005, and through many failures and success, the franchises have been gaining skills and popularity to compete against foreign franchises.

Source: Dong-A
Translated by Lee Joon-Yeob
Proofed and edited by: Michelle Van Balkom-Nicholson