SEOUL, Dec. 22 (Korea Bizwire) – Despite much larger sales, franchisees in South Korea earn less money than owners of stand-alone stores due to higher costs, a report said Thursday.
The operating margin for one-man franchise stores in the wholesale and retail sectors came to 12.8 percent in 2014, 10.5 percentage points lower than that for non-franchised shops, according to the report by the Korea Labor Institute.
The margin, or the ratio of operating income to sales, for franchise stores with employees stood at 6.1 percent, also 1.4 percentage points lower than the comparable figure for stand-alone counterparts.
Annual sales of franchises in the sectors averaged 248 million won per store that year, nearly three times the per-shop top line for stand-alone businesses.
The report attributed franchisees’ lower profitability to greater marketing expenses, franchise fees, and higher costs of goods and services sold.
As of 2014, the number of franchise stores in the country stood at 207,000, 1.5 times more than five years earlier, according to the report.