Seoul 'Franchise Brands' Surge 70% in One Year... Average Annual Sales per Franchise Store Reach 330 Million KRW

Franchise Headquarters Increased by 37% to 2,739, Brands Up 71% to 4,534... Number of Franchise Stores Up 0.4% to 163,529
Average Annual Sales per Franchise Store 332 Million KRW... Average 36.1 Franchise Stores Operated per Brand
Highest Proportion of Food Service Brands

[Asia Economy Reporter Lim Cheol-young] Last year, franchise brands in Seoul increased sharply by more than 70% within a year. This surge is attributed to the amendment of the Franchise Business Act, which requires disclosure documents to be registered within six months, leading to a rapid increase in the registration of new and small-scale brand disclosure documents, thereby causing a sharp rise in franchise headquarters and brand numbers.

On the 31st, the Seoul Metropolitan Government announced the '2021 Seoul Franchise Business Registration Status' containing these details. According to the analysis, there were 2,739 franchise headquarters and 4,534 brands registered in Seoul. Although the number of franchise stores operated nationwide by brands registered in Seoul increased by only 0.2% to 163,529 compared to 2020, the number of franchise headquarters rose by 37.2%, and brands surged by 70.8% during the same period.

Average annual sales per franchise store 332 million KRW... Average 36.1 stores operated per brand

The average number of franchise stores operated by a single brand was 36.1 as of 2020. By industry, the 'wholesale and retail sector' operated the most franchise stores per brand, averaging 234.6 stores. Compared to 2019, when the average number of franchise stores was 61.5 and brands numbered 2,654, the number of stores per brand significantly decreased. This is analyzed as a result of many newly registered brands having no stores or being small-scale. Nationwide, the number of franchise stores per brand decreased across all industries, with an average of 23.7 stores per brand and 109.5 stores on average in the wholesale and retail sector.

Among large brands with over 100 franchise stores, 60% were concentrated in Seoul. There were 223 large brands in Seoul, accounting for 57.2% of the 390 large brands nationwide with over 100 stores. Small-scale brands with fewer than 10 franchise stores numbered 3,487 in Seoul, making up 40.2% of the nationwide total of 8,673.

The average annual sales of franchise stores in Seoul were 332 million KRW per business. Although this was a 4.6% decrease compared to the previous year, sales at service industry franchise stores, including delivery, increased by 3.3%.

Food service sector holds the largest share... Small-scale brands with fewer than 10 stores account for 77% overall

By industry, the 'food service sector' had the highest registration rates in Seoul for franchise headquarters (67.9%), brands (74.6%), and franchise stores (38.1%). Following this, the 'service sector' had a high proportion of headquarters and brand registrations, while the 'wholesale and retail sector' had a smaller share of headquarters and brands but ranked second in the number of franchise stores (32%) after the food service sector.

Investigating changes in brand numbers by industry and the rates of store openings and closures, the food service sector's brands increased significantly by 88.9%, from 1,789 in 2020 to 3,380 in 2021. The number of franchise stores also rose by 1.9% year-on-year to 62,339. The opening rate of food service franchise stores was 22.5%, and the closure rate was 11.3%. Compared to 2020, the opening rate increased by 1.8 percentage points, and the closure rate decreased by 0.5 percentage points. Specifically, openings in the bakery and confectionery field decreased by 5.3 percentage points year-on-year, and closure rates declined in sectors such as Korean cuisine and coffee.

In the food service sector, 81% of brands had fewer than 10 franchise stores, indicating many small-scale brands, while only 121 brands (3.6%) had more than 100 stores. Additionally, 218 brands (29.4% of Seoul's food service sector) had average annual sales exceeding 300 million KRW, and 129 brands (17.4%) had sales below 100 million KRW.

Meanwhile, the 'service sector' had 931 brands registered in Seoul, a 28.6% increase from the previous year. However, the number of franchise stores decreased by 5.3% year-on-year to 48,864. This decline is attributed to the increase in small-scale new brands with fewer than 10 stores. The opening rate of service sector franchise stores was 18.3%, up 16.9 percentage points from the previous year, while the closure rate was 10%, down 2.4 percentage points.

Among registered service sector brands, 588 (63.2% of Seoul's service sector) had fewer than 10 stores, and 81 (8.7%) had more than 100 stores. Brands with average annual sales over 300 million KRW numbered 65 (19.8%), and those under 100 million KRW numbered 117 (35.7%).

The 'wholesale and retail sector' had 223 registered brands, a 58.2% increase from the previous year. Franchise stores numbered 52,326, up 3.9% year-on-year. The store opening rate was 11.7%, up 0.2 percentage points, and the closure rate was 6.8%, up 0.1 percentage points. In this sector, 162 brands (72.6% of Seoul's wholesale and retail sector) had fewer than 10 stores, and 21 brands (9.4%) had more than 100 stores. Brands with average annual sales over 300 million KRW numbered 31 (46.3%), and those under 100 million KRW numbered 12 (17.9%).

Meanwhile, the Seoul Metropolitan Government continuously monitors the 'disclosure documents of franchise headquarters,' which prospective franchise entrepreneurs must verify, to ensure accurate information is clearly stated. When necessary, they request corrections and refer cases of incorrect information to the Fair Trade Commission for investigation, maintaining ongoing management and supervision. Since the amendment of the Franchise Business Act on the 20th, local governments have been authorized to impose fines on franchise headquarters that violate obligations, such as failing to provide prospective franchisees with estimated sales statements of franchise stores, which is expected to provide stronger protection for prospective entrepreneurs.

Han Young-hee, Seoul's Labor, Fairness, and Coexistence Policy Officer, said, "Despite COVID-19, the franchise industry overall maintains a growth trend, but franchise stores, mostly small businesses, are struggling due to decreased sales. We will create an environment where franchisees can operate safely through continuous inspections of franchise headquarters and transparent information sharing between headquarters and franchise stores."

This content was produced with the assistance of AI translation services.