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Posted : 2016-09-19 16:32
Updated : 2016-09-19 17:57

Cheap coffee franchise shops increasing

By Yoon Ja-young

Ediya Coffee has the most shops while Paik's Coffee is growing exponentially. Caffe Bene, meanwhile, is closing down its locations. These are part of an analysis of the country's coffee franchise industry by the Korea Fair Trade Mediation Agency.

The agency released the data, Monday, after comparing the country's top 10 coffee franchises ― Ediya Coffee, Caffe Bene, Angel-in-us, Yoger Presso, A Twosome Place, Coffee Bay, Paik's Coffee, Hollys Coffee, Tom N Tom's and Caffe Pascucci. It aims at providing the right information for those wishing to open a franchised coffee shop. Starbucks was not included in the data as it is run directly by the headquarters.

The data showed that Ediya Coffee has 1,577 locations operating around the country as of 2015. The franchise has been focusing on providing coffee at reasonable prices.

Paik's Coffee, however, was growing most steeply. The number of its franchised shops soared from 24 in 2014 to 412 in 2015. The franchise founded by restaurant franchise Midas and TV celebrity Paik Jong-won features low-priced coffees.

Caffe Bene, meanwhile, is struggling, with 14.6 percent of its locations having closed down in 2015.

The agency also revealed how much sales one can expect by opening these franchised coffee shops. A Twosome Place topped the list with each of its franchises recording on average 482.9 million won in sales a year. It doesn't necessarily mean, however, that it is the most profitable.

"It is because their shops tend to be bigger than other franchises," said Bae Jin-chul, chief of the agency.

A Twosome Place, Caffe Bene, Angel-in-us and Caffe Pascucci had shops bigger than 130 square meters, and their shops recorded more than 300 million won in annual sales, on average.

Yoger Presso and Coffee Bay, meanwhile, had annual sales averaging 100 million won at their shops smaller than 30 square meters.

Opening franchised coffee shops requires heavy investment. To open an A Twosome Place coffee shop, for instance, one should pay on average 287.7 million won to the franchise headquarters. This includes training fees, interior decoration and facilities, but does not include rent for the space.

After opening, the shops pay monthly royalties to the franchise headquarters, ranging from 110,000 won to 880,000 won, or 2.5 to 5 percent of total sales. They also shoulder advertising costs.

"Korea has a high ratio of self-employed compared with other countries. Those who want to start a business tend to choose franchise shops as they lack experience," Bae said.

The ratio of self-employed workers stood at 22.9 percent between 2010 and 2013, which compares with the 15.4 percent average of OECD member countries.

"While they can decrease risks as they get operational knowhow from the franchise headquarters, they are also paying heavy fees to the headquarters," Bae added. "They should compare the pros and cons."

Visit kofair.or.kr or franchise.ftc.go.kr for detailed information on franchises.

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