Seven Convenience Stores in One Apartment Complex... Franchise Owners Say "Stop Overcrowded Openings"

[Asia Economy Reporter Seungjin Lee] Convenience store franchise owners nationwide have urged convenience store headquarters to "comply with the convenience store self-regulation agreement and refrain from excessive store openings."

On the 12th, the National Franchise Owners Association, CU Franchise Owners Association, and Korea Seven-Eleven Franchise Owners Association held a press conference in front of Shinsegae Department Store in Jung-gu, Seoul, stating, "Franchise owners are suffering from sales declines caused by excessive store openings," and argued, "To prevent excessive convenience store openings, the '100m designated distance rule for tobacco retailers' should be expanded nationwide."

The franchise owners' claims stemmed from the fact that seven convenience stores have opened within the Ilsan Win City KINTEX apartment complex in Goyang-si, Gyeonggi-do, which has 2,208 households. In this apartment complex, GS25, CU, Seven-Eleven, and Emart24 are competing, but the last Emart24 store opening became an issue.

Goyang-si, Gyeonggi-do, set the tobacco retailer distance restriction at 50m, but the Emart24 store was located 49.45m from the previously opened CU store, exceeding the standard. In December 2019, six convenience store companies including GS25, CU, and Seven-Eleven established a self-regulation agreement limiting convenience store openings to 50-100m distances, similar to the designated distance for tobacco retailers, to resolve convenience store oversaturation, which was approved by the Fair Trade Commission.

A CU franchise owner claiming damage from the Emart24 opening said, "Since Emart24 opened within 50m in April this year, sales have dropped by about 35%." He added, "We inquired with the four convenience store headquarters and the Korea Convenience Store Industry Association, which led the self-regulation agreement, about violations and adjustment plans, but all remained silent," and said, "We sent a certified letter demanding the withdrawal of the last Emart24 store to CEO Kim Seong-hyun, but received no response."

Regarding this, Emart24 expressed a difficult position. An Emart24 official explained, "When the franchise owner and headquarters of the last opened store measured the distance to the competing store, it was over 50m, but when measured by Ilsan Dong-gu Office, it was below the distance standard," and added, "There is a difference in interpreting the distance measurement ordinance, and the franchise owner is currently pursuing administrative litigation with Ilsan Dong-gu Office."

Meanwhile, according to the National Franchise Owners Association, as of 2018, the proportion of franchise owners with daily sales of 1.2 million KRW (low sales/loss zone) among the three major convenience store companies approaches 26.5%. An association official said, "From the franchise owners' perspective, daily sales of 1.2 million KRW is the break-even point, but the headquarters considers daily sales of 800,000 KRW as break-even. This 400,000 KRW gap causes conflicting positions between the two sides."

He continued, "In reality, franchise owners preparing for new store openings have less information than the headquarters," and said, "If the location is unlikely to exceed daily sales of 1.2 million KRW, store openings should be discouraged, but headquarters tend to encourage openings, claiming the store will do well."