South Korea’s restaurant industry is experiencing its most severe downturn since the pandemic. (Image courtesy of Yonhap)
SEOUL, March 11 (Korea Bizwire) — South Korea’s restaurant industry is experiencing its most severe downturn since the pandemic, with business sentiment falling to levels last seen during COVID-19 social distancing measures, according to government data released on March 9.
The Restaurant Industry Business Survey Index dropped to 71.52 in the fourth quarter of 2024, down 4.52 points from the previous quarter, according to a report from the Ministry of Agriculture, Food and Rural Affairs and Korea Agro-Fisheries & Food Trade Corporation. A reading below 100 indicates more businesses reported decreased sales compared to the previous year.
The index, which surveys 3,000 food service establishments, has been declining steadily since reaching 89.84 in the third quarter of 2022. The current level mirrors the dire conditions seen during the pandemic’s social distancing period in late 2021, when the index hit 70.34.
“Since mid-2023, restaurant sales have stagnated due to decreased consumer spending, while operating costs have surged due to rising ingredient prices and labor costs, making price increases inevitable,” said Jin Hyeon-jeong a professor of economics at Chung-Ang University.
The downturn has affected all sectors of the food service industry. Catering services saw the steepest decline, with their index falling 8.23 points to 80.41. Bars and pubs were hit hardest overall, recording the lowest reading at 65.40.
In the streets of Seoul’s Eunpyeong district, the crisis is evident. “This year is even more worrying than last,” said a Chinese restaurant owner. “Business is down, ingredient costs are up, and imported items are both expensive and facing delivery delays due to the high exchange rate.” The owner noted the proliferation of “For Rent” signs in both Seoul and provincial shopping districts.
Multiple factors are compounding the industry’s challenges. Jin pointed to the growth of home meal replacement products, the spread of delivery systems, rising delivery platform fees, and exchange rate fluctuations affecting imported ingredient prices as additional burdens on restaurants.
“Middle and lower-priced restaurants have been particularly hard hit as consumers reduce their dining out frequency due to increased economic pressure,” said Kim Young-gap of Hanyang Cyber University’s Graduate School of Business.
The outlook for 2025 appears even bleaker. The industry’s forward-looking index for the first quarter has fallen to 79.39, down 4.26 points from the previous quarter’s forecast of 83.65. Industry experts cite continued domestic and international political uncertainties and inflation as factors likely to further weaken consumer spending.
A franchise industry insider warned that without substantial economic stimulus measures, the sector faces another challenging year. “Operating costs, including delivery app commissions, are expected to rise further, while consumer sentiment continues to deteriorate,” they said.
Jin called for government intervention, suggesting tax benefits and policy funds to help the industry weather the crisis.
Ashley Song (ashley@koreabizwire.com)
