KFC Korea to start franchise business for faster growth

Fast food chain KFC said on Friday it will begin franchise store operations in South Korea next year, when the company will mark 40 years of business in the Asian country.

The plan follows Orchestra Private Equity’s master franchise agreement with KFC’s parent group Yum! Brands in January of this year. At the time, the Seoul-based PE firm acquired a 100% stake in the domestic operations of KFC for 60 billion won ($44.5 million) from Korea’s KG Group.

The US parent group directly manages about 200 KFC Korea locations under a company-owned system.

Other major fast food chains in the country, which operate both company-owned and franchise systems, run more outlets. Homegrown burger franchise Mom’s Touch & Co. and Lotte Group’s fast food chain Lotteria manage around 1,400 and 1,300 locations, respectively. McDonald’s and Burger King operate around 400 and 470 outlets, respectively.

Franchise management is cost-effective and can rapidly increase the number of franchise outlets, while the company-owned system is not as cost-effective, a food and beverage industry source said.

“KFC Korea will also increase its small-box stores, which require less floor area than conventional outlets. The newly designed restaurants will enable more franchisees to open their businesses with less cost, particularly in smaller cities with lower populations,” a KFC official said.

The fast food chain’s Korean operation opened its first small-box store in Seoul last month and will launch two additional ones in the capital by the end of this year.

Write to Kyeong-je Han at hankyung@hankyung.com

Jihyun Kim edited this article.