SEOUL—Nearly half of franchisees (48%) of large c-store chains in Korea didn’t make a profit last year, the Korea Herald reports. Those include franchisees of 7-Eleven, GS25 and CU.
Rep. Woo Won-shik reported that 15,819 out of the 33,068 convenience stores operating in Korea registered sales below the equivalent of $1,255 USD per day in 2018. Of those, 20% had daily sales below $924, and about 7% made less than $672 per day.
7-Eleven had the highest number of stores operating in the red with 69%. Around 39% of 7-Eleven stores brought in under $672 per day. BGF Retail-operated CU reported 48% of its stores earned less than $1,260 in daily sales, while for GS25, 33% of stores brought in less than $1,260 daily.
Some industry experts pointed out that the downturn on the individual store level hasn’t cut into the health of the chain’s headquarters. In addition, the number of convenience stores in Korea jumped from 12,000 in 2008 to 45,000 in early 2019. Single-member households are the major drivers behind the expansion.
Franchise owners are calling on the government to regulate how many stores can be opened in a certain area to minimize over-saturation. “The government should more actively engage and apply regulations like obligating the minimum distance between rival stores, considering the area and the floating population,” said Choi Jong-yeol, head of the CU franchisees association.
In 2018, the Fair Trade Commission set forth voluntary regulations that convenience stores agreed to that limited the opening of a new c-store to 50 to 100 meters away from existing locations. Cho Jae-woon, a professor of business from Aju University, weighed in on the matter stating, “What always becomes problematic in the field of franchises is the opening of stores. From the company’s point of view, it is necessary to open more stores, but it should also be able to understand and protect franchisee’s business environment when there is market saturation.”
For a closer look at the c-store retail landscape in Asia, mark your calendars for the NACS Convenience Summit Asia, which will be held in Bangkok, Thailand, March 3–5, 2020.