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| A bucket of fried chicken sold for 6,900 won ($5.23) at a branch of Homeplus in Seoul. Korea Times file |
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| Kyochon CEO So Jin-se |
Korea's three major fried chicken franchises ― Kyochon, Genesis BBQ and BHC ― are coming under mounting pressure to lower their prices, cornered by what many have characterized as an "extreme overpricing designed for the sole benefit of the middleman," according to market watchers, Monday.
Propelling the criticism is the recent explosive sales of a bucket of fried chicken sold at large retail chains including Homeplus and Emart where it is priced at less than 7,000 won ($5.23). In contrast, the three chicken franchises sell most of their similar-sized menu items for well over 20,000 won.
Franchisees take issue with purchase policies whereby key ingredients must be bought in bulk at preset rates ― usually for much higher than market prices.
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| Genesis BBQ head Yoon Hong-geun |
The criticism is justified in large part by the three franchises exceeding a combined 1 trillion won in sales last year.
BHC, for example, registered an operating profit of 153.8 billion won and sales of 477.1 billion won last year. The year-on-year operating profit increase of over 33 percent is a performance far better than global tech giant Apple whose annual operating income grow 18.4 percent year-on-year as of June this year.
Kyochon's sales and operating profit in the same period came to 493.5 billion won and 28 billion won, respectively. Genesis BBQ registered 362.4 billion won in sales and an operating profit of 60.8 billion won.
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| BHC CEO Lim Keum-ok |
About 90 percent of the profits are collected by franchisers, leaving member franchisees with little cash in hand and a lot of consumer complaints, according to a franchisee of one of the three.
"Consumers take it out on us saying the prices are too high," a man in his 50s running a branch in Sejong said.
"We are being painted with a broad brush as greedy sellers when it's the franchisers that take all the money. They are not willing to overhaul the current pricing and purchase policy, because those who want to open fried chicken joints always outnumber the frustrated current restaurant owners considering outright business closure."
Korea Franchisee Union Secretary-General Lee Joong-seon said the status quo will continue hurting small restaurant owners, unless the powerful franchisers are willing to share the costs.
"Major franchisers are not incentivized in any way to revise their policies," he said. "Franchisees will have to keep taking the blame for expensive fried chicken while facing the constant risk of being put out of business."
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