Korean Brands Turning to Franchising

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Paris Baguette’s Palo Alto branch

Korean brands in the U.S. market are increasingly turning to become franchise businesses.

Tom N Toms, Coffee Bay and Paris Baguette have already turned to franchise opportunities.

Last month, Tom N Toms had its franchise license reapproved and started exploring opportunities to open more branches in various locations. Coffee Bay, which garnered considerable attention for opening a branch inside of a Walmart, also received its franchise license this month and is looking to expand its reach to additional markets.

It has also been revealed that StreetChurros, an immensely popular brand now in Korea which has opened over 70 branch locations there, and kimbap restaurant Gyudong are also in the process of receiving their franchise licenses.

Paris Baguette is still aiming to open 350 branch locations by 2020 after entering the U.S. market in 2015. The bakery café is currently operating branches in seven different states.

Industry experts agree that the increasing number of Korean brands turning to franchise opportunities means that the perception among Korean entrepreneurs has now changed from the traditional management models that have thrived on distribution agreements.

Lawyers who specialize in franchise licensing processes added that businesses with sufficient resources prefer franchising their brands when entering the U.S. market. In the past, many businesses were reluctant about franchising as the process often delayed itself in addition to its considerable cost.

However, as recent cases have shown, the traditional model based on licensing, management and distribution agreement was prone to legal battles. Such struggles drive new businesses to test the waters in the franchise market.

“Businesses are looking to franchise their brands even if that costs more as it allows them to prevent further troubles in the future,” said Yohan Lee, an attorney who represents the Korea Franchise Association. “Obviously, no business is required to earn a franchise license. Depending on the business model, some brands are better off with basic license contracts.”

Another expert in the industry added: “For those with financial resources who do not exactly have a place to invest in, franchising is a pretty attractive option. However, if the franchiser only seeks profit without looking after its branch owners, the potential to succeed will drop significantly. For those interested in becoming a franchiser, the system to support branches has to be meticulous to minimize troubles in the future.”

By Sungcheol Jin