"Cafes and Convenience Stores Face Discrimination"...Will the 10-Year-Old Restriction on Large Corporation Bakeries' Store Openings Be Lifted?

Expiration of Bakery Industry Win-Win Agreement on the 8th of Next Month
Diversification of Bread Sales Channels to Cafes and Convenience Stores Unlike in the Past
Major Corporations Claim "Current Regulations Discriminate Against Franchise Owners"

The 'Bakery Industry Win-Win Agreement,' which restricts the opening of large corporate bakeries such as Paris Baguette and Tous Les Jours, will expire on the 6th of next month. Unlike 10 years ago, the bakery sales channels have diversified to include cafes and convenience stores, leading to calls for effective policies that reflect the current market situation. Large corporations operating franchise bakeries are demanding deregulation, arguing that the current rules constitute "reverse discrimination against self-employed franchisees."

According to the industry on the 23rd, the Fair Trade Commission's Win-Win Growth Committee has been holding working-level meetings since the end of last month to discuss whether to extend the Bakery Industry Win-Win Agreement. The Win-Win Agreement is a private self-regulation agreement made for items whose designation as a small and medium-sized enterprise (SME) suitable industry period (a total of 6 years) has expired. The bakery industry was designated as an SME suitable industry in 2013 and converted to a Win-Win Agreement in 2019.

Under the Win-Win Agreement, large corporate bakeries such as SPC's Paris Baguette and CJ Foodville's Tous Les Jours can only open new stores within 2% of the number of stores from the previous year. They are also prohibited from opening within 500 meters of neighborhood bakeries operated by individuals.

Since the Bakery Industry Win-Win Agreement, the number of large corporate bakery stores has fluctuated around 2%. According to the Fair Trade Commission's disclosure documents, Tous Les Jours decreased by 1.42% from 1,335 stores in 2018 to 1,316 in 2022, while Paris Baguette increased by 1.7% from 3,366 to 3,424 during the same period.

However, over the past decade of continued regulation, the bakery market has changed dramatically. Consumers who used to buy bread mainly from Paris Baguette, Tous Les Jours, or local bakeries now use various channels including cafes and convenience stores. Because of this, there are criticisms that the Bakery Industry Win-Win Agreement has become less effective as a measure to protect neighborhood commercial districts.

In fact, convenience store bakery sales have recorded double-digit growth rates every year. CU posted growth rates of ▲11.7% in 2021 ▲51.1% in 2022 ▲28.3% in 2023, while GS25 grew by ▲16.7% in 2021 ▲59.3% in 2022 ▲34.0% in 2023. Both are focusing on the bread market, having launched their own bakery brands, Bakehouse405 and Breadique, respectively.

Franchise cafes are also strengthening their bakery offerings. Ediya, which has the largest number of stores domestically, saw its bakery and dessert sales increase by 15% year-on-year last year. Angel-in-us operates more than 30 bakery-specialized stores, whose sales also grew by 32% during the same period.

Accordingly, among franchise bakery franchisees of large corporations, voices claiming that the current regulations constitute reverse discrimination are growing louder. A representative of a large corporate bakery said, "It is necessary to ease regulations such as reducing the restricted distance for new store openings to reflect the diversified bakery sales channels in the market."

However, small and medium-sized bakeries, led by the Korea Bakery Association, maintain that the current regulations should remain unchanged. Ryu Jae-eun, chairman of the management division of the Bakery Association and CEO of Ryu Jae-eun Bakery, said, "From the perspective of neighborhood bakeries struggling through difficult economic times, extending the Win-Win Agreement will be a great help in protecting commercial districts."

Large corporate bakeries are paying attention to the recent case of the 'Restaurant Industry Win-Win Agreement,' where regulations were eased. Last month, the Win-Win Growth Committee decided to exclude franchise stores from the restaurant opening regulation. This means viewing franchise businesses not as large corporations but as opportunities for small business owners to start up, thereby opening market entry opportunities for them. A representative of a large corporate bakery said, "Franchises provide startup and employment opportunities for retirees who want to start self-employment after retirement, allowing them to live a second chapter of their lives. The current regulations need to be revised so that they do not become reverse discrimination against these individuals and function properly according to their original purpose."