McDonald's Stores in South Korea Closing Down; Food Chain Has Alternative Plan
It looks like South Koreans will have a McDonald's cheeseburger and french fries drought soon. The Korean's love of quarter-pound cheeseburgers will be limited in the coming months as some of the McDonald's stores across the country are closing down.
As the fast food giant celebrates its 30th year in South Korea, the company is pulling the plug on some of its stores instead of building new ones. The latest of which is the McDonald's store located on the first floor of the Center Mark Hotel in Seoul. Reports indicate that the outlet is closing by the end of April.
This will be the seventh McDonald's outlet in Korea to shut down by the end of the month. The outlets in Sinchon, Gangnam, Yongin, Gwanak-Gu, Seomyeon area in Busan, and more have also announced their impending closure last month.
Apparently, the decision to close down came directly from the McDonald's headquarters in the United States. The trend started last month and here is the reason why.
Is McDonald's Leaving Korea For Good?
The world's largest food chain is shutting down some of its stores in Korea because of rent. The buildings in high-end areas, in which most food chains occupy, have increased their rental fees. Additionally, the country also raised its minimum wage this year.
McDonald's, however, assured that there's no need for consumers to worry as McDonald's will not be totally pulling out of Korea. Apparently, closing down outlets is normal for the company.
"Last year, we closed around 18 stores and opened 10. And in 2016, we closed around 24 and opened 22. This is just our annual business cycle," a McDonald's representative told The Korean Herald.
The company believes the recent shutdown garnered media attention because of the closing of the Sinchon Station outlet in Seoul. The store is considered a major landmark in the area as it is a common meeting spot for university students. The outlet served its first customer in 1998.
Fortunately, McDonald's has a contingency plan in place. The company said they are moving away from expensive areas. Instead, they plan to increase the number of drive-thru stores. Of the McDonald's stores in Korea, 252 have drive-thru service. These branches are located in the outskirts of towns. They pay lower rent and gain 30 to 40 percent higher profit margins compared to similar sized stores in urban areas.
Currently, McDonald's has 448 branches nationwide. It opened 40 to 50 stores each year in early 2000, but it has slowed down expansion in recent years. McDonald's opened just a couple of new stores in 2016 and 11 last year. The first outlet of McDonald's in Korea was in Apgujeong in southern Seoul. It was unveiled in 1988 but closed down in 2007, mainly because of excessively high rent.