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China Tops Target List for Korean Franchise Operators

Catering Sector Represents 60% of All Korean Franchising as Country Prioritises Globalisation.

Photo: BBQ Chicken: One of Korea’s global franchises.
BBQ Chicken: One of Korea's global franchises.
Photo: BBQ Chicken: One of Korea’s global franchises.
BBQ Chicken: One of Korea's global franchises.

China is the country most targetted by the Korean franchise sector, according to figures just released by the Korean Chamber of Commerce and Industry (KCCI). Some 60% of all overseas Korean franchises are based on the mainland, with the majority of them in the catering sector.

Overall, though, franchising is still relatively in its infancy in Korea. Only some 3-4% of the country's businesses – some 509 companies – have established franchise operations. Of these, only 96 operate franchises outside Korea. Despite these comparatively low figures, the Korean franchise industry has grown significantly over the past 15 years, albeit from a very low base. The sector's growth was initially pioneered by fast-food outlets, with family-friendly restaurants, clothing chains, cleaning services, educational institutions and discount stores then following suit.

Overall, some 60% of Korean franchise companies focus on the food sector. In addition, there is also a huge gulf between the few large franchise operations and the middle-ranking players. In terms of overseas franchises, after China the next most popular areas of operation are southeast Asia, the US and Japan. According to the KCCI report, Korean businesses are – understandably – prioritising establishing franchises in easily accessible markets that demonstrate a degree of cultural compatibility.

In 2009, the Korean government passed legislation aimed at boosting the globalisation of the Korean franchise sector. The country's Ministry of Trade, Industry and Energy (MOTIE) and the Korea Trade-Investment Promotion Agency (KOTRA) have both subsequently launched a number of initiatives aimed at supporting the country's businesses in any bids to establish overseas franchises.

Estelle Choi, Seoul Consultant

Content provided by Picture: HKTDC Research
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