Press Conference on Theborn Korea Franchise Business on the 9th
"Focused on Expansion, Neglecting Franchisee Growth"
Improvement Measures Needed for Franchisees Worried About Closure
"CEO Baek Jong-won's Theborn Korea has now become a mid-sized company with sales in the 300 billion KRW range. However, the average sales and operating period of its franchise stores have continued to decline. Although it created 50 brands through an expansive franchise business, only 25 remain today. This means Theborn Korea focused solely on external expansion and neglected the growth of franchise owners. Franchise owners' startup funds should no longer be used as Theborn Korea's 'experimental costs.'" (Song Myung-soon, Co-chair of the National Franchisee Association)
On the 9th, the National Franchisee Association held a press briefing at the People's Solidarity for Participatory Democracy in Jongno-gu, Seoul, announcing an analysis of problems in Theborn Korea's franchise business. Based on the Fair Trade Commission's franchise business disclosure documents, the association presented an analysis that the average operating period of Theborn Korea's franchise stores is about 3 years. This is less than half the domestic franchise average operating period of about 7 years. They also claimed that while Theborn Korea's sales have grown ninefold over the past 13 years, the average sales of franchise owners have been halved.
The National Franchise Owners Association held a press conference on the morning of the 9th at the People's Solidarity for Participatory Democracy in Jongno-gu, Seoul, to present an analysis of the issues in Theborn Korea's franchise business.
Only 25 of Theborn Korea's 50 Brands Survive... "Stores Close After About 3 Years on Average"
Since 2008, Theborn Korea has registered disclosure documents for a total of 50 brands, but only 25 brands are currently operating, including Paik's Coffee, Hanshin Pocha, Saemaeul Sikdang, and Hong Kong Banjeom. Brands such as Haemul Tteokjjim have been voluntarily deregistered by Theborn Korea.
According to the National Franchisee Association, the survival period of Theborn Korea's franchise stores is very short compared to the industry average. On average, it was ▲3.3 years in 2020 ▲3.2 years in 2021 ▲3.1 years in 2022. This means stores closed after just about 3 years of operation. Considering the overall domestic franchise average survival period is 7.7 years, this is a very short duration. Jeong Jong-yeol, a franchise transaction specialist at the association, pointed out, "The short operating period is a problem, but unlike the trend of increasing operating periods in the overall franchise industry, Theborn Korea's period is actually shortening, which is concerning."
"Theborn Korea's Sales Increased Ninefold, but Franchise Store Sales Halved"
Criticism was also raised that while Theborn Korea's sales have been booming, franchise owners' sales have been halved. Theborn Korea's sales grew from about 43 billion KRW in 2010 to about 388 billion KRW in 2023, more than ninefold. Meanwhile, the average annual sales of franchise owners dropped from 875 million KRW to 386.8 million KRW during the same period. Except for Paik's Coffee and a few others, most franchise owners' average sales have decreased.
The National Franchisee Association explained that the inverse relationship between headquarters' and franchise owners' sales is due to the headquarters opening new franchise stores near existing ones, reducing mutual sales, or cutting back on support. Jeong, the franchise transaction specialist, said, "Typically, franchise headquarters and franchise owners' sales increase together. However, Theborn Korea's headquarters sales increase due to expansive brand growth, but franchise store sales are decreasing."
"Ignoring Theborn Korea's Structural Problems... Need Improvement Measures for Franchise Owners Worried About Closure"
The National Franchisee Association also criticized Theborn Korea for ignoring these structural problems and blaming franchise owners for sales declines or business closures. Song Myung-soon, co-chair of the association, said, "Instead of engaging in dialogue, Theborn Korea demonizes franchise owners and blames them for closures. Franchise owners' startup funds are directly linked to their livelihoods. These costs must no longer be used as Theborn Korea's experimental expenses."
Jeong, the franchise transaction specialist, added, "Many franchise owners of Theborn Korea are worried about closures. Theborn Korea should stop blaming franchise owners and actively support them by establishing improvement measures."
Theborn Korea: "Average Sales Declined Due to Increase in Small Stores... National Franchisee Association Misinterpreted Operating and Survival Periods"
In response, Theborn Korea issued an official statement in the afternoon, directly refuting the National Franchisee Association's claims. Regarding the claim that Theborn Korea's sales increased ninefold, they explained, "The significant increase in annual sales compared to 2010 is due not only to franchise business operating income but also to distribution and hotel businesses." Excluding distribution and hotel businesses, 2023 sales are about 7.4 times those of 2010.
Regarding the halving of franchise owners' sales, they countered, "This is because the proportion of small-scale franchise stores has increased." According to Theborn Korea, in 2010, the main brands in the franchise business were large stores such as Hanshin Pocha, Bonga, and Saemaeul Sikdang, so individual franchise stores recorded high annual sales. However, from 2015, brands focused on small and medium-sized stores like Paik's Coffee were launched, naturally leading to lower annual sales. Theborn Korea stated, "Simply comparing franchise store annual sales between 2010 and 2023 distorts the facts."
Regarding the National Franchisee Association's claim that the average operating period is about 3 years, Theborn Korea pointed out that this is a misinterpretation of operating period and survival period. The operating period refers to the time from the start of business to the present for stores currently operating, while the survival period refers to the time from business start to closure for individual stores. Therefore, citing the operating period to claim "Theborn Korea franchise stores closed after about 3 years" is incorrect. The operating period does not consider closure timing and is unrelated to the survival period based on closure.
They also claimed that the survival period of Theborn Korea's franchise stores was 8.7 years as of last year, longer than the overall franchise average survival period of 7.7 years.
Theborn Korea stated, "Reports not based on accurate facts are causing serious harm to our company and franchise owners' operations and credit. We will take legal action against false and exaggerated reports to protect our legitimate rights."
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