Delivery Fee Burden... No Brand Burger Lowers Franchise Royalties and Raises Selling Prices

On the 8th, at COEX in Samseong-dong, Gangnam-gu, Seoul, during the '2021 No Brand Burger, Brand Partner (Franchisee) Co-Growth Convention,' Shinsegae Food employees and brand partners are shouting "Fighting" together, pledging the growth of No Brand Burger.

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[Asia Economy Reporter Lim Hye-seon] Shinsegae Food will lower royalties and raise prices for No Brand Burger franchise stores that are burdened by increased delivery fees.

Shinsegae Food announced on the 10th that starting January next year, the royalty paid to headquarters from delivery sales generated at franchise stores will be reduced from the current 8% to half, 4%. This reduction in delivery sales royalties by Shinsegae Food is the first of its kind in the domestic franchise industry and is a decision made to promote mutual growth and coexistence with No Brand Burger franchise stores.

Kim Gyu-sik, head of franchise at Shinsegae Food, explained, “At the mutual growth convention held on the 8th to share the business direction of No Brand Burger next year with franchisees, brand partners expressed difficulties due to the rapid increase in delivery fees. The headquarters actively reviewed these concerns and made this decision.”

In fact, with the resurgence of COVID-19 leading to the spread of non-face-to-face trends and the year-end approaching, delivery agencies have raised delivery fees to secure riders, increasing the burden on restaurant franchise owners. Although franchise owners have the authority to decide how much of the delivery fee to pass on to consumers, in the fiercely competitive dining market, franchise owners have no choice but to absorb the increased delivery fees themselves to receive even one more delivery order.

Along with this, Shinsegae Food will raise sales prices for the first time in three years since the launch, reflecting brand partners’ requests to increase store prices due to next year’s minimum wage hike and recent surges in raw material costs, logistics, and delivery fees. The average increase rate is 2.8%. To maintain the brand concept of cost-effectiveness, the brand partners and headquarters agreed to minimize the price increase. With the price increase for No Brand Burger starting on the 28th, the previously cheapest Grilled Bulgogi Set price has risen from 3,900 won to 4,200 won. However, this price remains about 20% cheaper compared to similar menus from other burger brands.

At the same time, Shinsegae Food will improve efficiency in various activities such as diversifying suppliers, contract farming to reduce raw material costs, logistics, and systems.

Meanwhile, No Brand Burger, launched by Shinsegae Food in 2019 with a cost-effective concept, has gained popularity not only among the main consumer group of burgers, the MZ generation, but also prospective franchisees due to its excellent taste and quality, reasonable prices, stylish interior, and unique marketing. Since starting the No Brand Burger franchise business in July last year, about 1,000 franchise inquiries have been received monthly, and around 10 new franchise stores open each month, surpassing 100 stores in just 1 year and 6 months, the shortest period in the industry. Shinsegae Food aims to open 170 No Brand Burger stores by the end of the year.

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