Posted : 2009-03-19 20:00
Updated : 2009-03-19 20:00

Can Lotteria Put TGI Friday’s Back on Burner?

By Jane Han
Staff Reporter

Will the country's largest burger chain be the magic recipe to spice up T.G.I. Friday's flat business?

The snazzy western restaurant opened with a roar in Seoul in 1992, but was taken over by Lotteria, a fast food chain run by Lotte Group, earlier this week, after wobbling along with a chronic deficit for years.

Friday's had been operated by Food Star, another Lotte affiliate, since 2002, but the latest acquisition will now place the red-and-white striped restaurant directly under the burger division, a line-up that will stimulate synergy, according to Lotteria officials.

``We are already a successful fast food chain, so expanding into the sit-down restaurant business will help enhance our competitiveness and utilize our resources,'' said Jung Sung-hoon, a company spokesman.

Lotteria currently operates 920 outlets nationwide and saw sales growths of 10 percent and 16 percent in 2006 and 2007, respectively.

But even for the well-seasoned business, reviving wobbling Friday's in today's economy isn't going to be easy.

The casual diner shut down 17 locations in the third quarter of last year alone after bleeding 20 billion won in losses in 2008.

Business wasn't always bad for Friday's, but things turned downhill in 2003 when U.S.-based Outback Steakhouse and Korea's native brand VIPS stepped up their game by aggressively rolling out stores and new menus.

Currently, Outback owns 104 joints nationwide, while VIPS and Friday's run 91 and 29 each.

``They came out with healthy and localized varieties that appealed to consumers,'' said an industry official, who added, however, that although the two are faring better than their competitors, the overall casual dining business is ``extremely tough.''

The economic downturn and hawkish consumer sentiment are pulling eaters away from these venues, which cost about 10,000 to 30,000 won per meal.

Observers say that the latest Lotteria-Friday's link-up is going to prompt a series of mergers and acquisitions in the industry.

``Current cutthroat competition isn't helping anyone,'' said Kim Young-kap, a professor of franchise management at Sejong University. ``The market was saturated one to two years ago.''

While chains that have been around for a long time are losing their fresh edge, emerging so-called second-generation restaurant franchises such as Mad for Garlic, Seven Springs and Bulgogi Brothers are considered winners amid the downfall.

``As these brands demonstrate, it's going to take a lot more than look-a-like menus and drastic discounts to attract consumers,'' said Kim.
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