On Friday, KFC, the fast food chain, announced its plans to launch franchise store operations in South Korea next year, coinciding with the company’s 40th anniversary in the Asian nation.
This move comes in the wake of Orchestra Private Equity’s master franchise agreement with Yum! Brands, the parent company of KFC, which was established in January of this year. Back then, the Seoul-based private equity firm purchased the entire domestic operations of KFC from Korea’s KG Group, acquiring a 100% stake for 60 billion won ($44.5 million).
Approximately 200 KFC locations in South Korea are currently directly managed by the US parent company through a company-owned system.
In contrast, other prominent fast food chains in the country employ a combination of company-owned and franchise systems, boasting larger networks. The domestic burger franchise Mom’s Touch & Co. manages approximately 1,400 locations, while Lotte Group’s fast food chain, Lotteria, operates roughly 1,300 outlets. McDonald’s and Burger King, on the other hand, have around 400 and 470 establishments, respectively.
According to an industry insider in the food and beverage sector, franchise management offers cost-effectiveness and the potential for a rapid expansion of franchise outlets, whereas the company-owned system is deemed to be less cost-efficient.
“KFC Korea will also increase its small-box stores, which require less floor area than conventional outlets. The newly designed restaurants will enable more franchisees to open their businesses with less cost, particularly in smaller cities with lower populations,” a KFC official said.
The South Korean branch of the fast food chain inaugurated its initial compact store in Seoul just last month and is set to introduce two more in the city before the year’s end.
