Royalty Exemption and Goods Support Wave of Coexistence... Baek Jong-won "COVID-19 Attack, Headquarters Must Provide Strength to Endure"

The Born Korea Offers Generous Support Including 2-Month Royalty Reduction
"Headquarters' Support is Crucial... Must Endure with a Sense of Community"

[Asia Economy Reporter Lee Seon-ae] "Just as the saying goes that true family is not only when times are good but when you stand together in difficult times, it is time to provide a sense of community where the franchisor stands by and supports, giving the strength to endure and persevere even when times are tough."

Baek Jong-won, CEO of The Born Korea, the nation's top dining franchise operator, emphasized in an interview with Asia Economy on the 4th that franchisor support is essential for dining self-employed business owners facing a crossroads for survival due to the spread of the novel coronavirus infection (COVID-19). He said, "I believe the role of the franchisor is to minimize the burden on franchisees of having to handle all current situations alone," adding, "In fact, the biggest advantage of a franchise is that support is possible so that franchisees are not alone but can overcome challenges together."

CEO Baek quickly announced generous support measures for franchise stores struggling due to the spread of COVID-19. The Born Korea decided to fully waive two months' worth of royalties for its 1,484 franchise stores nationwide and temporarily reduce supply prices for key ingredients such as coffee beans, meat, and sauces. Additionally, for stores temporarily closed, the headquarters will cover the cost of discarded food ingredients with short shelf lives incurred during the closure period. They are also strengthening promotional support for hygiene and safety so customers can visit stores with peace of mind. The company encourages all franchise stores nationwide to wear masks, provide hand sanitizers, and conduct self-disinfection twice daily to create a safe environment for franchisees, employees, and customers.

It is indeed a difficult decision for The Born Korea to fully waive two months' royalties and reduce ingredient supply prices. The headquarters is also experiencing poor performance as the dining industry rapidly deteriorates. However, his belief in a 'sense of community' that they must endure this difficult time together made this possible. He said, "I thought about what the best effort as a franchise headquarters would be," adding, "I thought that waiving royalties (for two months), temporarily lowering supply prices for key ingredients (coffee beans, meat, sauces, etc.), covering the cost of discarded food ingredients for temporarily closed stores, and strengthening promotions so customers can visit stores with confidence might provide some tangible help from the franchisees' perspective," while modestly expressing his thoughts.

The ripple effect on the dining industry is also significant. Following CEO Baek's announcement of support, other industry players have followed with measures such as royalty and ingredient supply price reductions and material support. It is truly a 'kind wave' rising from the perspective of dining self-employed business owners.

CEO Baek's positive influence on the dining industry is considerable. This is not the first time he has reduced royalties. In January 2018, he lowered the annual royalties for all brands and implemented several policies to reduce supply prices for items delivered to franchise stores. In January of this year, he also lowered the supply price of coffee beans for Paik's Coffee to alleviate franchise store operational difficulties caused by minimum wage increases and rising store rents. His direction is focused on expanding franchisees' profits.

Finally, CEO Baek urged, "Since people tend to avoid crowded places, the impact on the dining industry is inevitably significant, but I hope dining industry workers gather strength once again and overcome these difficult times well." He continued, "COVID-19 is not limited to the dining industry but affects various other sectors, and during this nationally challenging time, we must all unite and support each other," emphasizing, "The Born Korea plans to do its utmost at the headquarters level to support franchise stores until COVID-19 is over and stability is restored."

The Born Korea operates 22 brands, including Baek Jong-won's Original Ssambapjip, Saemaeul Sikdang, Hanshin Pocha, Paik's Coffee, Bonga, Hong Kong Banjeom 0410, Yeokjeon Udon 0410, Dolbaegi Jip, Baek's Beer, Baek Cheolpan 0410, Rolling Pasta, Insaeng Seolleongtang, Richun Market, Mijeong Noodles 0410, Paik's Coffee Bakery, Seafood Tteokjjim 0410, Macau Banjeom 0410, Seongseong Sikdang, Baek's Bibimbap, Daehan Gukbap, One Kitchen, and Gosok Udon. The upward trend in performance has stalled. In 2013, it recorded sales of 77.524 billion KRW and operating profit of 5.052 billion KRW, and by 2016, three years later, performance had risen sharply to 174.871 billion KRW in sales and 19.762 billion KRW in operating profit. However, sales slightly decreased to 174.1 billion KRW in 2017 and only reached 177.6 billion KRW in 2018. Operating profit in 2018 was 10.2 billion KRW, about 20% less than the 12.8 billion KRW in 2017. This was due to overlapping adverse factors such as various regulations, domestic recession, and saturated competition.