The Born Korea Offers Generous Support Including 2-Month Royalty Reduction
"Headquarters' Support is Crucial... Must Endure with a Sense of Community"
Food Service Industry Sees Continued Headquarters Support..."Sympathizing with Franchisees' Difficulties"
[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 during hardships, it is time to provide a sense of community where the franchisor stands by and supports the franchisees, giving them the strength to endure and persevere even in difficult times."
Baek Jong-won, CEO of The Born Korea, the nation's top dining franchise operator, emphasized in an interview with Asia Economy 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 the current situations alone," adding, "In fact, the biggest advantage of a franchise is that support is possible so that franchisees can overcome challenges together, not alone."
◆ Save the struggling franchise stores = 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 costs of perishable food ingredients discarded 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 franchisees and staff to wear masks, provide hand sanitizers, and disinfect the stores twice daily to create a safe environment for both 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 the '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 franchisor could be," adding, "I thought that waiving royalties (for two months), temporarily lowering supply prices for key ingredients (coffee beans, meat, sauces, etc.), covering the costs of discarded food ingredients for temporarily closed stores, and strengthening promotions so customers can visit safely might provide some tangible help from the franchisees' perspective," while modestly expressing his thoughts.
The ripple effect on the dining industry is also significant. After CEO Baek's support announcement, other companies in the industry have followed with measures such as royalty reductions, ingredient supply price cuts, and material support. It is truly a 'good 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 this year, he also lowered the supply price of coffee beans for Paik's Coffee to ease franchisees' 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 large, but I hope dining industry workers will gather strength once again and overcome this difficult time well." He continued, "COVID-19 is not limited to the dining industry but affects various other sectors, and during this nationally challenging time, everyone must unite and support each other. The Born Korea plans to do its best at the headquarters level to support franchisees until COVID-19 is resolved and stabilized."
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, Macao Banjeom 0410, Seongseong Sikdang, Baek's Bibimbap, Daehan Gukbap, One Kitchen, and Gosok Udon. Their performance growth has slowed. In 2013, they recorded sales of 77.524 billion KRW and operating profit of 5.052 billion KRW. By 2016, sales had sharply increased to 174.871 billion KRW and operating profit to 19.762 billion KRW. 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 12.8 billion KRW in 2017. This was due to overlapping adverse factors such as various regulations, domestic recession, and saturated competition.
◆ A wave of coexistence against COVID-19: "Let's overcome together" = The dining franchise industry is seeing movements to overcome COVID-19 through coexistence.
Yiyeon FNC's Yuksoodang decided to waive two months' royalties for all franchise stores. A Yuksoodang official said, "This COVID-19 situation is causing significant damage across the dining industry, increasing the burden on franchisees. We decided to waive royalties to share some of the pain with franchisees and offer comfort and strength."
Saenghwal Maekju (Life Beer) also announced plans to provide some free supplies to all franchise stores. The support items include hand sanitizers, salted chicken, and potato fries exchange coupons, worth about 40 million KRW.
Im Sang-jin, CEO of Saenghwal Maekju, said, "As the headquarters operating many directly managed stores, we deeply empathize with the difficulties franchisees face. We will continue to provide support in line with Saenghwal Maekju's core value of coexistence, with gratitude to those who trust and stand with us during these tough times."
Outback Steakhouse urgently supported 4,000 Bushman Breads, mango spreads, and bottled waters twice on the 2nd and 4th in the Daegu and Gyeongbuk regions. McDonald's delivered 4,200 hamburger sets to firefighters in Daegu and Gyeongbuk who were unable to have meals on time due to the surge in COVID-19 cases.
CJ Foodville's Tous Les Jours decided to supply 50,000 bread ingredients free of charge to about 1,300 franchise stores nationwide. They also urgently provide hand sanitizers to all stores for the health and safety of visiting customers and employees.
BonIF, at the headquarters level, supported about 9,000 Bonjuk home meal kits to children and elderly people struggling to secure meals after the spread of COVID-19. They are also running a zero delivery fee event to support franchisees. Some franchisees who received support from the headquarters have been donating to those in greater need, showing a spirit of coexistence and sharing even in crisis. Franchisees of Bonjuk and Bonjuk & Bibimbap Cafe near screening clinics have joined forces to donate about 1,800 bowls of porridge to medical staff fighting COVID-19.
Lee Jin-hee, CEO of BonIF, said, "This donation was made with the heartfelt gratitude of franchise owners who wanted to express thanks to medical staff dedicating themselves on the front lines during this crisis. We hope the medical staff enjoy a bowl of porridge filled with franchise owners' sincerity and have a healthy and comfortable day."
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