Restaurant chains point to the rising commission fees charged by delivery apps, particularly Baemin, as the primary driver behind their need to raise prices. (Yonhap)
SEOUL, Aug. 31 (Korea Bizwire) –As menu prices in South Korea’s restaurant industry continue to climb, a heated debate has erupted between the country’s leading food delivery app, Baedal Minjok (Baemin), and restaurant owners over who bears responsibility for the increases.
Restaurant chains point to the rising commission fees charged by delivery apps, particularly Baemin, as the primary driver behind their need to raise prices. Baemin, however, counters that soaring ingredient costs are the real culprit behind the squeeze on franchise profitability.
On August 30, Woowa Brothers, the company behind Baemin, addressed the controversy in a post on the company’s website.
Citing a 2023 report from the Ministry of Agriculture, Food and Rural Affairs and the Korea Agro-Fisheries & Food Trade Corporation, the company stated that 90.35% of restaurants that raised prices attributed the increase to higher ingredient costs. Only 0.61% cited delivery app fees as the main reason.
Woowa Brothers, the company behind Baemin, argues that soaring ingredient costs are the real culprit behind the squeeze on franchise profitability. (Yonhap)
Woowa Brothers further argued that most of the fees charged on a typical 20,000 won chicken order – approximately 6,000 won – go towards rider wages, payment processing fees, and taxes. These costs, they claim, would exist even without the use of delivery apps.
The company also referenced a study suggesting that restaurants using delivery platforms save an average of 1.42 million won per month compared to employing their own delivery staff.
They dismissed claims that the app takes 1.5 times more profit than restaurant owners as unfounded, stating that their commission amounts to just 2.73% of a restaurant’s sales.
However, the restaurant industry has pushed back against Baemin’s defense. An industry insider criticized the company for relying on outdated data, arguing that the situation has changed dramatically since Baemin introduced a new percentage-based fee system and quasi-mandatory free delivery options this year. “The entire restaurant industry in Korea is being decimated,” the source claimed.
The dispute has real-world implications, with several major franchise chains citing delivery app fees as a reason for recent price hikes. Paik’s Coffee, owned by celebrity chef Baek Jong-won’s The Born Korea, raised beverage prices on August 23, citing both increased coffee bean costs and higher delivery platform fees.
Hosigi Two Chicken announced price increases for app-based orders on August 28, directly attributing the change to unsustainable commission structures.
Other chains, including KFC and Popeyes, have introduced dual pricing systems this year, charging higher prices for delivery orders to offset app commissions.
The government has so far taken a wait-and-see approach, pointing to ongoing discussions between delivery platforms and partner businesses in a government-led “coexistence council” aimed at finding mutually beneficial solutions.
Ashley Song (ashley@koreabizwire.com)
