Price Dualization Spreads Against Delivery Platforms
LotteRia Delivery Prices Raised Up to 1,300 Won
Chicken Industry Negative Over Sales Concerns... "Encouraging Own Apps"
In response to the increase in delivery platform fees, the dual pricing system for in-store and delivery prices is rapidly spreading among burger franchises. With high inflation increasing cost burdens and delivery fees further maximizing the burden, franchise owners believe it is becoming impossible to endure without raising delivery prices. While Lotteria has officially announced a delivery price increase of up to 1,300 won, Mom's Touch also plans to test dual pricing at some stores within the year.
However, chicken franchises, where delivery accounts for more than 70% of sales, remain negative about price differentiation. Instead, as a last resort, they have launched aggressive promotions to increase users of their own apps, which avoid commission fees.
Lotteria Raises Delivery Prices by up to 1,300 Won... Mom's Touch Also Pilots 'Dual Pricing' at Directly Operated Stores
According to industry sources on the 25th, Mom's Touch, the burger franchise with the largest number of stores, will experiment with a dual pricing system that differentiates between in-store and delivery prices at some directly operated stores in the fourth quarter of this year. The in-store prices will remain the same, while delivery prices, which include various fees, will be raised to a certain extent. A Mom's Touch representative said, "We are reviewing which directly operated stores will test the dual pricing system," adding, "Since the desired increase varies by region and franchise owners, we plan to gather opinions and decide accordingly."
Earlier, Lotteria also implemented price differentiation starting from the 24th. Delivery prices are now 800 won higher than in-store prices for single items and 1,300 won higher for sets. Lotteria had previously set different prices for in-store and delivery but unified them in October 2021 when delivery demand surged due to COVID-19. Recently, however, they decided to reintroduce the dual pricing system.
Additionally, McDonald's, KFC, Popeyes, and Frank Burger have delivery app prices higher than in-store prices. McDonald's has been implementing a dual pricing system since the early 2010s with its own delivery service and continues to maintain it.
"Nothing Left to Gain"... Franchise Owners Demand Delivery Price Increases Amid Rising Costs and Commission Fees
The rapid spread of dual pricing for in-store and delivery prices among burger franchises is due to the sharp increase in intermediary commission fees by delivery platforms. This year, delivery platforms such as Baedal Minjok, Coupang Eats, and Yogiyo engaged in a 'zero delivery fee' competition, which resulted in commission fees soaring up to 9.8%. Baedal Minjok, the industry leader, raised its commission fee from 6.8% to 9.8%, a 3 percentage point increase. Franchise owners complain that with rising costs due to high inflation, combined with delivery fees, VAT, card fees, and soaring commission fees, there is nothing left to gain.
As a result, franchise owner associations are demanding dual pricing from headquarters. The National Mom's Touch Franchise Owners Association sent a certified letter to headquarters in July requesting the dual pricing system. A representative from Lotteria's operator, Lotte GRS, explained, "As delivery sales increase, the costs borne by franchise owners are also rising," adding, "After discussions with the National Franchise Owners Association, we have established a differentiated pricing policy for delivery services to guarantee franchise owners' survival rights."
Other franchises beyond burgers are also pleading that they can no longer endure. The Korea Franchise Industry Association launched an emergency response committee on the 6th and announced plans to report delivery platforms to the Fair Trade Commission. A press conference was also scheduled after the Chuseok holiday but was postponed after Baedal Minjok proposed discussions on improving fee policies with the association.
'Chicken Businesses Relying on Delivery Say "It's Practically Difficult"... Encouraging Use of 'Own Apps' Without Commission Fees
Meanwhile, unlike the burger industry, chicken franchises such as bhc, BBQ, and Kyochon are negative about the dual pricing system. Since delivery is their main sales channel, price differentiation could be perceived as a price increase, leading to strong consumer backlash. A chicken industry official said, "With a sales ratio of about 7 to 3 between delivery and in-store, raising delivery prices could significantly impact sales," adding, "Although the dual pricing system was considered due to worsening profitability from delivery platform fee increases, it was judged to be practically difficult."
As a last resort, the chicken industry is focusing on increasing the use of their own apps, which do not impose intermediary commission or advertising fees on franchise owners. For example, BBQ is running an aggressive promotion throughout September, offering half a Golden Olive Chicken free for orders over 20,000 won placed via the BBQ app or website. bhc also offers a 3,000 won discount for orders through its own app. A bhc representative said, "With rising delivery fee burdens, we launched our own app for the first time in July to encourage consumer use," adding, "We plan to run new promotions for our app every month during the second half of the year."
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