Even Frying 100 Chickens a Day Leaves Nothing... A Deep Dive into the 25,000-Won Chicken Price [The Fall of the Chicken Republic] ①

How Delivery Platforms Are Driving Chicken Shops Out of Business
An Analysis of Settlement Statements from Chicken Franchise Stores
Franchise Headquarters Take 45% vs. Delivery Apps 26% vs. Owners 12%

Editor's Note
The delivery platform market experienced explosive growth during the COVID-19 pandemic. However, chicken, the most frequently ordered item on delivery applications, is facing a crisis. The more orders come in through delivery apps, the more delivery fees snowball. Chicken franchise companies have responded by raising prices to protect their profit margins. However, price increases have led to higher delivery fees, which in turn have driven up consumer prices, reduced demand, and exacerbated management difficulties, creating a vicious cycle. The 25,000 won price tag for a single chicken reveals the collapse of the "chicken republic" that once thrived on delivery platforms. Chicken, a beloved national snack, marks the beginning of the downfall of self-employed businesses. There are growing concerns that if the monopolistic structure of delivery platforms is left unchecked, even the franchise industry-a popular choice for aspiring entrepreneurs-could collapse.

Mr. Lee (54), who runs a chicken franchise in Gwanak-gu, Seoul, fries 100 to 130 chickens a day. His daily sales reach between 2.5 million and 3.5 million won. At first glance, it seems like a thriving business, but a closer look at the settlement statement tells a different story. After deducting cost of goods sold, platform fees, rent, labor, and taxes, virtually nothing is left. Net profit is less than 10%.

Chicken Price at 25,000 Won... Only a Few Thousand Won Left for the Owner

According to the delivery platform settlement statement and franchise headquarters operation guidelines obtained by The Asia Business Daily on October 21, the selling price of a new chicken menu item at Mr. Lee's store is 25,000 won (excluding VAT: 22,727 won). Of this, the headquarters supply price (including chicken, oil, batter, sauce, packaging, etc.) is 11,480 won (45.9%), leaving the store owner with a projected profit of 11,247 won. In the past, before delivery apps, fixed costs (rent, labor, delivery fees) were simply deducted from this amount.

However, since the arrival of delivery apps, the profit structure has changed completely. The cost taken by the delivery platform alone amounts to 6,710 won (26.8%) per chicken. The owner is left with only 4,537 won. The breakdown of delivery platform costs is as follows: brokerage fee (7.8%) of 1,950 won, payment processing fee (3%) of 750 won, delivery fee of 3,400 won, and VAT of 610 won.

Even this is not net profit. Rent is 1.5 million won per month, and part-time labor costs are 3 million won, totaling 4.5 million won per month. Assuming 100 chickens are fried per day, the fixed cost per chicken is 500 won for rent and 1,000 won for labor, totaling 1,500 won. The actual amount left is 3,037 won. After accounting for electricity, gas, and taxes, the real net profit is virtually zero. This calculation also assumes only one part-time worker and no spending on delivery platform advertisements.

If only 40 chickens are sold per day, the situation becomes even more dire. Fixed costs per chicken rise to 3,750 won. As a result, selling 30 chickens a day means a loss, and only at 40 chickens does the store barely break even. To earn a stable profit, at least 70 chickens must be sold each day.

Mr. Lee lamented, "The supply price set by the headquarters is usually about half of the selling price. With the delivery platform fees on top of that, nothing is left." He added, "The supply price from headquarters hasn't changed much over the years, but the cost of delivery app advertising is strangling sales. If I cut back on advertising, orders dry up; if I increase it, profits fall further. It's a dilemma."

Daily Sales of 3 Million Won... Platform Took 830,000 Won

Even when Mr. Lee sold 3,000,400 won worth of chicken through the delivery platform in a single day, only 2,165,838 won was deposited into his account. A total of 834,562 won disappeared as the platform's share. This includes 165,503 won in brokerage service fees for exposure on the platform and 146,500 won for customer discount costs (coupon support), which are split equally between the franchise headquarters and the store owner. The delivery fee (373,400 won), ranging from 2,500 to 3,400 won per order, accounted for the largest portion of the expenses.

This is the situation without any advertising. If advertisements are run, platform costs can soar to as much as 40% of total order revenue. The advertising model charges 200 to 600 won per click, and costs are incurred even if there are no orders, as long as there are clicks. Due to intense competition for exposure, most stores set the per-click cost at 600 won. Mr. Lee said, "Even if there are only clicks and no orders, money is deducted. But if I don't advertise, my store isn't featured at the top and orders stop coming in. I'm trapped in the platform structure with no way out."

As delivery platforms expand their single-serving, low-value delivery policies, franchise headquarters are also rolling out "solo meal" menus in competition. However, store owners unanimously say, "Our margins shrink even further." This is because the delivery fee remains the same, but the average order value drops.

According to an analysis by the Seoul Metropolitan Government of sales data from 186 franchise stores, the average proportion of sales through delivery platforms was 48.8%. However, the reality is even more severe. Another store owner, Mr. Park (56), said, "More than 80% of our sales come from Baedal Minjok and Coupang Eats. We survived COVID-19, but we can't survive the delivery apps. Either way, it's the same result, so I'm even considering closing." He added, "I know that more than 20% of owners running the three major chicken franchises have put their stores up for sale."

Jung Eunae, a research fellow at the Korea Small Business Institute, pointed out, "For self-employed business owners, delivery apps have become not a tool for expanding the market, but a structure where you can't even secure basic sales without participating." She added, "Groups that use the platforms more benefit, while cost pressures intensify, creating a vicious cycle. Korea's self-employment structure is different from other countries, yet there is a lack of discussion on this issue. There needs to be a social debate on how platforms, headquarters, and the government will share their respective roles and burdens."