By Kim Tae-gyu
Owners of small neighborhood restaurants keep running into trouble due to the protracted economic downturn that is showing few signs of turning around in the near future.
The hitch is that retiring baby boomers continue to wade into the saturated business to aggravate the oversupply of mom-and-pop restaurants across the country.
The Korea Food Service Industry Association (KFIA) said Tuesday that about 29,000 small eateries shut down in 2009 and the yearly figure almost doubled last year to more than 47,000.
A total of 26,615 faced the same fate during the first half of last year and for all of 2011, the size is expected to easily top the 50,000 mark, according to the Seoul-based association.
``On top of those that directly went out of business, as many as 250,000 small restaurants remained idle in 2010 although they have not closed down yet, which is far more than some 150,000 a year before,’’ a KFIA official said.
``Despite this dire situation, a rising number of people open small restaurants because they can do so with minimal investment. Hence, the market mechanism fails to deal with the problem.’’
KFIA said that upside of 29,000 small restaurants opened anew in 2009 while the figure skyrocketed to some 56,000 in 2010 and 28,000 during the first six months of last year.
``A vast majority of neighborhood restaurants operate under tenant contracts, which means that they do not have the capacity to stand up to downturns for a long time,’’ the official said.
The brisk advancement of domestic conglomerates into the food and beverage industries also worries the owners of mom-and-pop restaurants.
In particular, Lotte, Doosan and CJ groups have proactively tapped into such businesses as bakeries, fast food restaurants and coffee chains prompting other big players to follow suit.
The all-out rush to these areas has raised people’s ire, who have taken issue with the conglomerates’ excessive expansion to segments traditionally reserved for ordinary vendors.
In the face of the uproar, Korea’s two foremost chaebol of Samsung Group and Hyundai Motor Group recently decided to pull out of the bakery business.
Hyundai Motor, the country’s primary automaker, said late last week that it will scrap its cafe business, which was headed by Chairman Chung Mong-koo’s eldest daughter.
Earlier in the week, Hotel Shilla also said that it would retire from its upscale bakery chain. Hotel Shilla is run by Samsung Group owner Lee Kun-hee’s eldest daughter.
However, concerns linger that large companies might eventually swallow the restaurant business at the expenses of smaller ones.
``As demonstrated by last year’s large-scale street rallies by neighborhood restaurant owners, their operators are facing an imminent crisis,’’ an official from the Korea Federation of Small and Medium Business said.