Once, American brunch brands, which heated up the domestic restaurant market, are disappearing one after another in the Korean market.
According to ChosunBiz's report on the 12th, Butterfinger Pancakes, a first-generation American brunch brand, decided to close its store in Yeonnam-dong, Seoul, this month.
Butterfinger Pancakes entered the Korean market by opening its first store in Cheongdam-dong, Seoul, in 2006, and has been recognized as a first-generation American brunch for 18 years. In the early days of its opening, it led the domestic brunch boom, with waits exceeding two hours on weekends being commonplace. However, the Yeonnam store, which opened last June, failed to withstand market changes and will close in less than a year.
American brunch brands began to enter the domestic market in earnest in the mid-2000s. 'Sarabeth's,' which gained attention for appearing in the popular American drama 'Sex and the City,' entered the Korean market in 2017. 'Tartine Bakery,' which is listed in the San Francisco Michelin Guide, opened in Korea in 2018. All achieved thriving business despite their high prices, comparable to those in the U.S.
However, as the pandemic hit, Sarabeth's closed its locations, including its flagship store in Gangnam, Seoul, in 2021. Tartine has reorganized its major locations since 2022. The egg sandwich brand 'Eggslut,' which was operated by SPC Group, also announced its withdrawal from the Korean market last year.
According to the '2023 Food Service Industry Report' published by KB Financial Group's Management Research Institute, the food service industry has faced worsening management issues due to rising material and labor costs following COVID-19.
In particular, American brunch brands, which have a higher dependency on imported ingredients compared to other food service sectors, have shown vulnerability to recent increases in raw material prices and fluctuations in exchange rates. According to the 'Food Service Company Management Status Survey' announced by the Korea Agro-Fisheries & Food Trade Corporation, the average raw material prices in the food service industry rose by 22% last year compared to the previous year. Notably, dairy products saw a 36% increase in import prices compared to the prior year.
Kim So-hyung, a consultant at Davis and Company, noted, "The rising rent in key commercial districts like Gangnam, Itaewon, and Hongdae, where premium food service brands are mainly located, is a major factor contributing to the decline in revenue. Furthermore, recent consumer trends prioritizing price since last year (value-for-money) have also had an impact."
According to the Seoul Metropolitan Government's commercial district analysis service, the average rent for food service establishments in major commercial areas in Gangnam stands at 118,000 won per 3.3 square meters as of the fourth quarter of 2023, representing a 15.3% increase compared to 2021.
The Korea Agro-Fisheries & Food Trade Corporation's 'Food Service Consumption Behavior Survey' indicates that 70% of food service consumers last year cited price as their top criterion for selecting food service establishments. This is an increase of 12.3 percentage points compared to the 2021 survey.
Experts in the food service industry predict that the brunch market will find it difficult to maintain competitiveness solely based on the image of being a 'foreign brand.'
According to a survey by the National Restaurant Association (NRA), the success rate for American brunch specialty stores entering overseas markets has continually declined since 2019. As of 2023, the closure rate within a year in the Asian market reached 35%.
In contrast, local brunch brands such as 'Dangs' and 'Gangbyeol,' which have recently gained attention, are seeking new opportunities through thorough localization strategies and regionally efficient operating systems. They focus on actively utilizing domestic ingredients and developing menus that cater to Korean tastes.
Goldman Sachs, in its 'Global Food Service Industry Outlook Report' released last year, predicted that "the rise of localized brands in various countries' food service markets will be pronounced," adding that "especially in the Asian market, the market share of local brands is expected to increase even further."