[The Editors' Verdict] What the Restrictions on Large Corporate Bakery Openings Have Left Behind

Did It Really Work Only Against Large Corporation Bakeries?

"Please recommend a local bakery."

In every regional online community, this is a common question, but large corporate franchise bakeries like Paris Baguette and Tous Les Jours are excluded from the answers from the start. Among people who want to share new flavors, places, and trends, large corporate franchise bakeries?once known for their above-average taste and accessibility everywhere?have become environments where their strengths no longer apply.

Once perceived as a threat to local bakeries and subject to regulations, large corporate franchise bakeries have now weakened to the point where it is difficult to attract customers without various ‘discount’ benefits. It is said that unless they pour out discounts from telecom companies, affiliated card discounts, and various delivery platform discounts such as Yogiyo and Baedal Minjok, it is hard to win back customers lost to local bakeries.

The bakery store opening restrictions, which began in 2013 with the designation of small and medium-sized enterprises suitable industries, ended in 2019, but the large corporate baking industry and the Korea Confectionery Association have renewed a coexistence agreement that continues to this day. According to the agreement, large corporate franchise bakeries must maintain a 500-meter distance from local bakeries when opening new stores and can only open new franchises within 2% of the number of stores at the end of the previous year.

As a result, SPC’s Paris Baguette and CJ Foodville’s Tous Les Jours have seen their number of stores stagnate over the past decade. Meanwhile, fueled by the bakery and dessert craze among the MZ generation (Millennials + Generation Z), the competitiveness of local bakeries has strengthened so much that the term ‘bakery pilgrimage’ has emerged. The number of bakeries has also increased. According to the National Tax Service’s National Tax Statistics Portal, as of January this year, the number of confectionery business operators nationwide reached 22,622. This number has been increasing annually, with 18,288 in 2021, 20,718 in 2022, and 21,949 in 2023.

Feeling pressured, large corporate franchise bakeries now complain that even filling the allowed number of stores, which can be increased regardless of regulations, has become difficult. There are even claims that the regulations introduced 10 years ago to revive neighborhood commercial districts have become reverse discrimination and an uneven playing field against franchise bakeries.

Given this situation, as the regulation on large corporate franchise bakeries is set to expire this August, fierce debates over extending the regulation are underway. One side argues that extending the regulation is still necessary to protect neighborhood commercial districts, while the other side contends that local bakeries have become competitive enough after 10 years of restrictions on large corporate bakery openings, so the regulations should be eased to create a fair competitive environment.

Have the regulations over the past 10 years really worked only to the disadvantage of large corporate franchise bakeries?

While it is clear that the regulations have been unfavorable to domestic growth, conversely, the process of seeking an escape route has led to achievements in building global competitiveness. The regulations over the past decade, which were inconvenient domestically, actually gave large corporations?who might have been complacent in the domestic market competing only with local bakeries?a chance to spread their wings overseas. Paris Baguette increased its overseas stores by more than 500, and Tous Les Jours expanded by over 400 stores, driven by a sense of crisis that they would be left behind if they did not take a gamble in overseas markets beyond the narrow and heavily regulated domestic market.

It is appropriate to give more opportunities to local bakeries that protect neighborhood commercial districts in the domestic market. This way, small business owners can climb the ladder of growth, and large corporations can gain opportunities to survive longer and stronger in a broader global arena. Rather, the domestic market needs fine-tuning of regulations, such as expanding the scope of regulation to large corporations in the broader food service industry, responding to an era where convenience stores and coffee shops also sell bread.