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Franchise industry

Korean fried chicken brand reports all-time high earnings in 2020

By Feb 16, 2021 (Gmt+09:00)

The 214-square-meter Kyochon restaurant in Sookdae, Seoul, opened in January 2020.
The 214-square-meter Kyochon restaurant in Sookdae, Seoul, opened in January 2020.

South Korea's No. 1 fried chicken brand Kyochon F&B reported all-time high earnings last year, with its franchise restaurant outlets pulling in total sales of over 1 trillion won ($910 million), according to industry sources on Feb. 16.

Last year, the company's headquarters reported 447.6 billion won in revenue, up by 18% from the previous year. Its operating profit also climbed by 4% to 41 billion won.

The company's performance is owing to the food delivery boom amid the global pandemic. The rising demand for food delivery pushed franchise brands -- mostly fried chicken and pizza -- to engage in a cutthroat competition, aiming to lure customers with perks and discounts.

For this reason, most franchises saw their operating profits either drop or increase only slightly despite seeing sharp growth in revenue last year.

Meanwhile, Kyochon focused on the basics. Instead of increasing its number of franchise outlets, the company decided to convert its small outlets into mid- to large-sized restaurants. 

“Expanded outlets saw their sales jump by over 26%,” said a Kyochon official, explaining that these outlets were able to process more orders during peak hours, when they bring in nearly 80 to 90% of the daily revenue.

Kyochon operates around 1,269 outlets, notably less than its competitors BHC and BBQ, which operate 1,550 and 1,800 outlets, respectively.

The company aims to raise the portion of its mid- to-large-sized outlets to 90% by 2025. 

Graphics by Jerry Lee
Graphics by Jerry Lee

Over the past three decades, Kyochon's business closure rate has never gone above 1 percent. Last year, the closure rate of the company's outlets hovered around 0.08%, with only a single outlet shutting down, whereas 112 outlets were newly established.

A franchise operator with a closure rate between 2% and 5% is considered a blue-chip company.

Meanwhile, Kyochon plans to build additional logistics centers this year to accommodate its domestic operations and to lay the groundwork for new businesses, such as home meal replacement (HMR), craft beer, sauce and pet food.

The company will also boost its overseas operations. Last year, Kyochon pulled in around 12 billion won via overseas sales, up by 35% from the previous year despite the global pandemic.

Currently, the Korean fried chicken brand operates 42 outlets across six countries. It plans to foray into nine additional markets, including Singapore, Africa and the Middle East, during the first half of this year.

"This year marks our 30th anniversary and we're set to establish a strong infrastructure at home and to grow as a general food company abroad," said Kyochon Chairman So Jin-se.

Last November, Kyochon made a successful trading debut on the country's main bourse, Kospi. It was the first chicken franchise to go public.

The company aims to post 770 billion won in revenue and an operating profit of 100 billion won by 2025, with a substantial amount coming from overseas operations.


Write to Bora Kim at destinybr@hankyung.com

Danbee Lee edited this article.

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