SEOUL, Jan. 10 (Korea Bizwire) — Despite the government dismantling an attempt by a leading chicken franchise to raise the cost of its meals last year, the matter appears to have maintained relevance, with the industry once more abuzz with discussion of what some believe is a necessary price adjustment.
The industry is arguing that the minimum wage jump, from 6,470 won last year to 7,530 won starting this January, necessitates a corresponding price modification for chicken products, since the 16.4 percent wage increase puts significant financial pressure on their operations.
One franchise insider said, “A significant number of businesses, some for three years, others for up to eight, have been unable to raise their prices. With the minimum wage increasing drastically this year, paying employees has become tougher, leading franchisees to clamor for companies to alter prices.”
Delivery, which some might say is the lifeblood of chicken franchises, may, depending on whom one asks, prove to be the straw that breaks the camel’s back.
By and large, most establishments have on staff their own delivery personnel, but willing delivery workers for hire are becoming hard to come by. With no means of their own, franchises have turned to specialized delivery services to handle distribution, which in many cases have become 500 to 1,000 won more expensive since the start of the new year thanks to the heftier minimum wage.
Despite these concerns, the chicken industry’s individual actors are wary of being the first to raise prices and possibly become the target of government ire. While South Korean companies have twiddled their thumbs and looked sideways at one another, it was KFC that crossed the Rubicon on December 29, when it announced that customers would be required to pay an average 5.9 percent more for 24 of its menu items.
To the collective indignation of domestic chicken retailers, the government has so far taken little notice of KFC’s audacious price tweak.
Last May, chicken franchise BBQ bowed to government pressure and withdrew its plans for across-the-board price hikes, while South Korea’s market leader Kyochon Chicken likewise backed off from taking similar action.
As such, aggrieved voices have criticized the government’s uneven approach in saying yay or nay to individual companies’ price-setting tendencies.
Chicken franchises occupy a large swath of the dining market, outnumbered only by convenience stores and Korean food franchises. However, average earnings are relatively low. According to Statistics Korea, in 2014 there were 24,329 chicken franchises that earned an average 114.1 billion won per store, far lower than the average 430.9 billion won each of the 26,280 convenience stores pulled in. Last year, 25,000 chicken franchises were counted, with average revenue per restaurant coming in at 140 billion won.