Bureaucratic Banishment
Korean food franchises are scrambling to expand their presence abroad. Stagnant domestic economic performance has prompted them to turn their attention to foreign markets for further growth. The MPK Group announced that Mr. Pizza, the group’s affiliate, opened its first franchise store in Buena Park, California. This is the first franchise operation since the group’s first entry into the U.S. market 8 years ago via direct management.
Prior to opening in the U.S., Mr. Pizza had been actively pursuing expansion in Southeast Asia by opening stores in the Philippines in May and July. Mr. Pizza has also been triumphant in the Chinese market, posting 41 billion won (US$34.9 million) in sales, doubling the previous year’s values. As of Aug., Mr. Pizza announced that it would increase the number of stores from 88 to 120 in China.
The trend is similar for E-land. Prior to its launching of “Nature Kitchen,” E-land introduced Café Lugo and Ashley to the Chinese market, and declared the company’s plan for further expansion in the Chinese market. In Oct. and Nov., E-land will open two Natural Kitchen stores in Shanghai. The former will be located in Super Brand Mall, Pudong District, Shanghai, and measure about 660 square meters in size. The latter will be located in the Changning District.
Either through its own logistics channel or that of its Chinese logistics partner, E-land is opening Nature Kitchens stores in major cities in China, including Beijing and Shanghai. E-land said that the company plans to increase the number of stores in China to 200 by 2020.
Since 2010, Bibigo, a Korean food restaurant and an affiliate of CJ Foodville, has been expanding its presence in China. Bibigo opened its first Shanghai branch in the Shanghai World Financial center on Sept. 7.
The Shanghai financial center where Bibigo opened its new restaurant is a district where financial ventures, investing companies, and global companies are concentrated and bringing in a large influx of tourists. The Bibigo restaurant is on the first floor of the 101 story building. CJ Foodville has 40 percent (100 stores) of its total overseas businesses in China under the brand names of Tous Les Jours, Vips, Twosome Coffee, and Bibigo.
Some observers attribute the tendency of Korean culinary franchises to turn their focus abroad to the restrictions that the Korean government imposes on the number of stores that large franchise companies can have in Korea. For instance, as the National Commission for Corporate Partnership recognizes that many types of culinary franchises are suitable for small and middle-sized companies, many large franchise companies find the domestic market restrictive for future growth.
A Mr. Pizza insider said, “Thanks to a restrictive regulatory environment in the domestic market, large franchise companies find the local market less favorable than overseas markets,” noting, “In the case of Mr. Pizza, the Philippine branch that was opened in July has already grossed one hundred million won [US$85,139]. The U.S. case represents a favorable case. In the past, Mr. Pizza used to directly control the U.S. branch, but thanks to thriving business operations, it now converted direct operations to franchise operations.”