Delivery motorcycles (Image courtesy of Yonhap)
SEOUL, Aug. 7 (Korea Bizwire) – A wave of restaurant closures is sweeping across South Korea as small business owners grapple with rising inflation and escalating delivery fees.
Despite government pressure to reduce commissions, the country’s leading delivery app, Baemin, announced an increase in its brokerage fees starting August 9, pushing many struggling entrepreneurs to the brink.
According to Seoul’s commercial district analysis service, the number of fast-food outlets in the capital decreased by 4.3% in the first quarter of 2024 compared to the same period last year. Chicken restaurants, a staple of Korean cuisine, saw a 2.7% decline.
The online store trading platform Assa Store Exchange reported a surge in business owners looking to sell their franchises.
As of August 5, 93 Mom’s Touch burger outlets were listed for sale, with the highest concentrations in Gyeonggi Province and Seoul. Chicken franchises fared no better, with 190 stores from major chains like bhc, BBQ, and Kyochon seeking new owners.
These franchises share a common vulnerability: a high reliance on delivery sales. Mom’s Touch, for instance, derives an average of 40% of its revenue from deliveries, making it particularly susceptible to increases in delivery fees.
Baemin’s decision to raise its commission from 6.8% to 9.8% of the order value for its Baemin1Plus service aligns it with competitors Coupang Eats and Yogiyo.
The company has also modified its “store delivery” policy, encouraging restaurants to offer free delivery to customers while shouldering the costs themselves.
One business owner, speaking on condition of anonymity, expressed frustration: “They’re asking us to bear not only the delivery tips but also surge pricing for distance and rainy weather. We’d like to handle deliveries ourselves, but labor costs make that impossible.”
Industry experts argue that some form of checks and balances is necessary for the oligopolistic delivery platform market. Professor Lee Eun-hee of Inha University suggested, “Until the Online Platform Act is passed, regulation of market-dominant businesses through fair trade laws or other regulations is needed.”
Professor Suh Yong-gu of Sookmyung Women’s University added, “As the delivery platform market has consolidated into a three-company oligopoly, we’re starting to see the negative effects. Government intervention or social pressure to curb excessive behavior will be crucial.”
Ashley Song (ashley@koreabizwire.com)
