Survivorship in International Chain Restaurant in Korea Woo Gon Kim Oklahoma State University, [email protected]
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Hospitality Review Volume 21 Article 3 Issue 1 Hospitality Review Volume 21/Issue 1 January 2003 Survivorship in International Chain Restaurant in Korea Woo Gon Kim Oklahoma State University, [email protected] Kye-Sung Chon The Hong Kong Polytechnic University, [email protected] Follow this and additional works at: https://digitalcommons.fiu.edu/hospitalityreview Part of the Food and Beverage Management Commons Recommended Citation Kim, Woo Gon and Chon, Kye-Sung (2003) "Survivorship in International Chain Restaurant in Korea," Hospitality Review: Vol. 21 : Iss. 1 , Article 3. Available at: https://digitalcommons.fiu.edu/hospitalityreview/vol21/iss1/3 This work is brought to you for free and open access by FIU Digital Commons. It has been accepted for inclusion in Hospitality Review by an authorized administrator of FIU Digital Commons. For more information, please contact [email protected]. Survivorship in International Chain Restaurant in Korea Abstract Several western chains have done well in Korea, while others have withdrawn from the market. The uthora s summarize the current operational results of western chain restaurants in Korea, report positive impacts of western foodservice firms, and analyze the key elements leading to their survival and non-survival. Some lessons could be used as tools to establish entrance strategies of western chain restaurants in Korea as well as in other Asian markets Keywords Woo Kim, Food and Beverage This article is available in Hospitality Review: https://digitalcommons.fiu.edu/hospitalityreview/vol21/iss1/3 Survivorship in international chain restaurants in Korea by Woo Gon Kim and Kaye Chon Several western chains have done well fn in Japan was approximately 25 Korea, while others have withdrawn from percent in the same period. In the market. The authors summarize the current operational resub of western the US., FAFH expenditures per cha;n restaurants in Korea, report positive household in 1996 were approxi- impacts of western foodservice ffms, and mately 45 percent compared to analyze the key elements leading to their 35 percent in Korea.' survival and non-survival. Some lessons could be used as tools to establish entrance strategies of western chain Western chains enter restaurants in Korea as well as in other It was not until the 1980s Asian markets. that Korean food service became a modern enterprise with strong management emphasis. In 1982 he food service industry in Burger King signed a franchise Korea has grown consider- contract and started operations T ably in size and changed in Korea. In the following two to significantly in composition over seven years, American chain the last several decades. Within restaurants such as Wendy's and a decade the number of restau- Kentucky Fried Chicken (KFC), rants increased more than three both in 1984, Pizza Hut in 1985, times, compared to the figure of McDonald's in 1986, Denny's in 154,000 units in 1988. Many of 1987, Coco's in 1988, and them are family-owned and are Domino's Pizza in 1990 pene- small conlmercial restaurants. trated the Korean food service Food away from home market. (FAFH) expenditures per house- In the 1990s, the Korean food hold in 1990 represented 21.6 service firms that made joint percent of total food spending ventures or franchising agree- expenditures, while that figure ments with western food service 22 FIlJ Hospitality Review /Spring 2003 Contents © 2003 by FIU Hospitality Review. The reproduction of any artwork, editorial or other material is expresslv prohibited without written permission from the publisher, excepting thatone-time educational reproduction is allowed without express permission. firms shifted from their previous Table 1 summarizes the concentration on fast-food opera- status of American food semice tions toward more diverse chains operating in Korea at the concepts such as family restau- end of 2000. Of the top 25 restau- rants and dinner houses. Some rant chains ranked by Nation's of those restaurants are TGI Restaurant hrews in terms of U.S. Friday's that arrived in 1991, sales, only 10 were represented in Ponderosa in 1992, Sizzler in K~rea.~Baskin-Robbins had the 1993, Popeye's in 1994, Tony largest number of units in Korea, Roma's, Bennigan's, and Planet but most were very small. In Hollywood in 1995, Chili's and terms of the number of units, Hard Rock Cafe in 1996, McDonald's with 244 units was Outback Steakhouse in 1997, the second largest U.S. chain in and Starbucks in 1999. By Korea, followed by KFC and Pizza providing casual and friendly Hut, with 206 and 199 units, service and a nice atmosphere respectively. not usually found in Korea, Within the segment of family western restaurants became the and dinner house, Coco's with food service equivalent of Levi's 29 units was the leading Jeans or Coca-Cola.2 restaurant, followed by TGI Friday's and Bennigan's with 17 Chains are varied units and 10 units, respectively. There were also some In terms of sales volume, successful chains that are non- McDonald's was the number one western restaurants. Lotteria, a chain with US$206.4 million, Japanese hamburger restaurant followed by Pizza Hut and chain, was the first chain restau- Kentucky Fried Chicken with rant company introduced to Korea US$156.3 and US$145.3 million, in 1979; its performance is ranked respectively. Among family and at the top of the fast-food segment dinner house restaurants, TGI in terms of the number of units and Friday's was the leading chain sales. Skylark, a successhl family with US$46.9 million, followed reskaurant in Japan introduced in by Bennigan's and Coco's with 1993, emphasized a lower-end US$31.5 million and US$23.4 market positioning strategy by million, respectively maintaining a lower average check It is interesting to note that of US$10. The average check of Coco's, which commands a most western family restaurants in relatively tiny market share in Korea ranged from US$13 to the U.S. restaurant industry US$18. Marche, introduced in and which falls behind TGI 1997 fro111 Switzerland, became a Friday's and Outback Steak- strong competitor against the house in terms of the number of rapidly expanding American food units operating in the U.S. was service chains. ranked as one of the top 10 Kirn and Chon ~--- Contents © 2003 by FIU Hospitality Review. The reproduction of any artwork, editorial or other material is expresslv prohibited without written permission from the publisher, excepting thatone-time educational reproduction is allowed without express permission. chains in Korea. In fact, Coco's, U.S. chain restaurants pene- the first U.S. family restaurant trated the Korean food service to open in Korea in 1988, enjoyed industry. Sizzler, Ponderosa, and the leadership position before Chili's operated only a few units other well-known, high-profile in Korea in 2000. Table 1 U.S.-based food service chain restaurants in Korea in 2000 Brand Rank in Number Korean U.S. U.S. U.S. U.S. sales number ol units sales volume units units sales volume of units in Korea (US $Millions) rank number rank (USSMiI) Korea McDonald3 2 244 $206 4 2 12.629 1 $19,006 Burger King 8 93 67.3 4 8.139 2 8.659 Hardeep 10 23 15.6 16 2.673 13 2,139 KFC 3 206 145.3 8 5.182 6 4.300 Popeye's 6 160 108.6 32 1.165 35 986.4 Pina Hut 5 199 156.3 5 8,084 5 5,000 Domino's Pina 7 149 39.1 11 4.629 9 2,560 Little Caesars Pina 14 6 NA 12 3.850 26 1.200 Coco's 9 29 23.4 88 NA NA NA Ponderosa 17 3 NA 56 465 58 560.2 Siuler 15 4 6.3 76 253 90 315 Tony Roma's 15 4 9.0 85 157 100 297 - Benn~gan's 12 10 31 5 79 237 71 460.3 Chili's 18 2 NA 43 626 21 1.555 Piueria Uno Chicago 18 2 NA 86 155 94 308.4 OulbackSteakhouse 13 8 11.7 47 574 18 1.729 TGI Friday's 11 17 46.9 58 452 24 1,334 Dunktn Donuts 4 200 19.5 13 3.650 15 2.007 Baskin-Robbins 1 460 29.7 18 2,438 57 573.3 Source of units and sales in Korea: Korean Restaurant Associaton. 2000 5o:ce cl .S .I adno s,~sodlo \al ons &slz .rail h~hs..re 26 2:3C Trs hRh u?la r6ronc'~dr~l!r IIIC 10~-'0010~oser.CL cnanscii Oalal:r"rnro.lra.~m?~:o IOOaresio:.nas'hA FIU Hospitality ReuiezulSpring 2003 -- Contents © 2003 by FIU Hospitality Review. The reproduction of any artwork, editorial or other material is expresslv prohibited without written permission from the publisher, excepting thatone-time educational reproduction is allowed without express permission. Managers of the three different mom-and-pop establishments segments of Korcan restaurants, found they could not compete traditional Korean food, fast food, effectively against a huge local and family and dinner house, were restaurant, international chain, selected for an interview. The 12 or domestic chain restaurant. restaurants included one tradi- Regardless of the rapid increase tional Korcan food restaurant, two in the number of stand-alone hamburger fast food restaurants, restaurants, the proportion of two pizza restaurants, two chicken restaurants whose owners restaurants, and five family and directly participated in manage- dinner house restaurants. The ment decreased from 22.3 majority were western chain percent in 1982 to 12.9 percent in restaurants. 1991.This fact reflects that many small eating places had Positive impact recognized become large local restaurants Managers participating in the affiliated with prominent local focus group interview recognized restaurant chains.