Introduction of Compact Stores... Lower Startup Costs to Accelerate Franchise Expansion
Burgers Continue to Thrive Amid Economic Downturn... Targeting the 5 Trillion Won Market
Shinsegae Food has unveiled its blueprint to elevate 'No Brand Burger' to become the third-largest burger brand in South Korea within the next five years. To achieve this, Shinsegae Food plans to accelerate the expansion of its franchise business by introducing a new franchise model, the 'compact store,' which lowers the initial investment required for new franchisees.
Introduction of Compact Stores... Lower Startup Costs to Accelerate Franchise Expansion
On May 8, at COEX in Gangnam-gu, Seoul, Shinsegae Food held a press conference for its burger franchise 'No Brand Burger' and announced its goal to enter the top three in the domestic burger industry by 2030 through franchise expansion.
The strategy Shinsegae Food has chosen to speed up franchise openings is the 'compact store' model. While the company has previously expanded using stores with a standard size of about 82.5 square meters (25 pyeong), the newly introduced compact store is approximately 49.6 square meters (15 pyeong). This model features a startup cost about 60% of the existing stores, significantly reducing the initial burden for prospective franchisees. In fact, the company stated that while opening a standard store required 180 million won, the compact model can be launched with about 105 million won.
No Brand Burger explained that it simplified the construction manual to reduce costs. The compact store kitchen is designed as a dry kitchen, the signage design has been simplified, and only essential elements for store operation remain. To further cut startup costs, the interior construction manual was streamlined, reducing the construction period from four weeks to three weeks, and the number of finishing materials from 22 to 14. The number of seats per pyeong was increased by 35% compared to existing stores, improving space efficiency. The decision to reduce store size was also influenced by the rising trend of delivery and takeout orders. The proportion of delivery and takeout orders increased from the mid-50% range last year to the high-60% range this year.
Shinsegae Food plans to attract more prospective franchisees by lowering startup costs, thereby creating a virtuous cycle of growth that expands the No Brand business. Seunghyup Kang, CEO of Shinsegae Food, stated, "Reducing the startup burden for franchisees will be a key competitive advantage for the growth of the No Brand Burger business," and added, "Our goal is to enter the top three in the burger industry by 2030 through the new franchise model."
Alongside the new franchise model, Shinsegae Food also introduced a new product, the 'NBB Amazing Double,' which is set to become the signature burger of No Brand Burger in the future. The NBB Amazing Double features a patty that is 30% heavier than similar burgers from other brands, while its price is set at 4,500 won, which is 30% lower than the industry average. Kyusik Kim, Executive Director in charge of franchises at Shinsegae Food, said, "For hamburger patties, increasing the amount of meat is the most important factor in improving taste due to the nature of ground meat," and added, "Despite the increased portion, the price is lower, making it a solid meal option in an era where the average lunch costs around 10,000 won."
Burgers Continue to Thrive Amid Economic Downturn... Targeting the 5 Trillion Won Market
Although the overall food service industry is struggling due to the economic downturn and sluggish consumer spending, the burger industry is performing relatively well. This is because demand for hamburgers, which offer a relatively affordable meal option in an era of high inflation, continues to rise. According to Statistics Korea, the dining-out industry business trend index for the fourth quarter of last year was 71.52, down from 76.04 in the previous quarter and 2.16 points lower than the same period the previous year (73.67). The business trend index is based on 100, and an index below this level indicates that more businesses saw a decline in sales compared to the same period the previous year. However, during the same period, the index for similar food service businesses such as burgers and pizza was 78.28, exceeding the average and indicating a relatively healthy market.
In fact, McDonald's Korea, the top player in the domestic burger industry, recorded total sales of 1.409 trillion won last year, including franchise sales, up 9.1% from the previous year and marking a record high for the fourth consecutive year. Operating profit also reached 11.7 billion won, turning a profit for the first time in eight years since 2016. During the same period, BKR, the operator of Burger King, reported sales of 792.7 billion won and operating profit of 38.4 billion won, up 6.4% and 60.4%, respectively, from the previous year. Lotte GRS, the operator of Lotteria, posted sales of 995.4 billion won and operating profit of 39.1 billion won, up 7.7% and 87.9%, respectively, from the previous year. Shinsegae Food's efforts to strengthen No Brand Burger's franchise business amid the downturn are also based on expectations for a market that continues to grow. According to market research firm Euromonitor, the domestic burger market, which was worth about 3 trillion won in 2020, expanded to over 5 trillion won last year.
No Brand Burger plans to further strengthen its value-for-money concept. Executive Director Kim stated, "While burgers have become a popular meal option due to their speed and convenience, it is also true that the rising cost of ingredients and related expenses has increased the price burden," and added, "No Brand Burger will focus on essentials and eliminate non-essentials, offering affordable prices to customers and low startup costs to prospective franchisees to enhance competitiveness." Shinsegae Food aims to increase No Brand Burger's sales from 120 billion won last year to 700 billion won by 2030.
No Brand Burger is a mid-priced burger brand launched by Shinsegae Food in August 2019. Starting with its first store in Hongdae, Seoul, it surpassed 200 stores in 2022. However, the growth in the number of stores has recently slowed. The number of stores stood at 246 in 2023 and around 265 as of last year.
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