History of franchise industry in Korea

How has the franchise industry in Korea grown so impressively over the years? I would like to talk about the history of the franchise business in Korea between the 1970’s and 2000’s.

The industrialized franchise based on the advanced business system in Korea began in 1979 when Lotteria opened its first store. It was followed by many multinational franchises entering the Korea market and domestic brands establishing their presence as Korea went through a drastic transformation with rising national income, westernization of lifestyle, and the hosting of the Asian Games and the Seoul Olympics. The leading franchise brands that began in the 1980’s include McDonald’s, KFC, Burger King, Pizza Hut, Paris Baguette, Nolbu, Tudali, Shilla Bakery, Baskin Robbins, and Crown Bakery.

Then the foreign family restaurant chains began the transformation of the foodservice industry in Korea in the 1990’s. Beginning with T.G.I. Friday in 1991, many international franchises such as Sizzler, Skylark, and Bennigan’s opened their restaurants to lead the large-scale and high-end trend of the foodservice industry in Korea. The Korean franchise industry entered the maturing phase as the domestic franchises had adopted the advanced systems of the international franchises operating in Korea.

Although the Korean foodservice industry faced a threat due to the depressed consumer sentiment following the Asian financial crisis in 1997, it actually turned into an opportunity for the industry as many of the people who had been forced into an early retirement entered the restaurant business market. However, it led to adverse effects such as shoddy franchises deceiving potential entrepreneurs, quality degradation in the foodservice industry, and many issues related to business ethics.

To straighten out the turmoil in the industry, the Korea Franchise Association held its inaugural general meeting in 1998 and began promoting the rapid development of the franchise industry by working together. As a result, the franchise industry began leading the foodservice market in Korea in the 2000’s to meet the increasing demands by people who wanted to enter the business with relatively small capital, and the items that enabled people without extensive skill or know-how to open restaurants became popular.

Although Korea has a shorter history of franchising than the United States of Japan, increasing number of Korean franchises are actively entering the global markets to take advantage of the Korean Wave craze and to overcome worsening conditions in the domestic business environment. Moreover, the expanded government support also led to even more demand for the business.

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