War's Impact Divides Responses: BBQ, Kyochon, BHC Freeze Prices, While Cheogajip Raises Bag Costs

The ongoing conflict in the Middle East, particularly between Israel and Iran, has sent ripples through global markets, causing significant fluctuations in international oil and raw material prices. This economic turbulence is presenting a stark divergence in how South Korea's popular chicken franchises are navigating the rising costs.

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The recent prolonged war in the Middle East has caused a sharp increase in the cost of raw materials such as crude oil and petrochemicals, as well as logistics costs, leading to a significant increase in the cost of vinyl bags.

While some smaller brands are passing on these increased expenses to their franchisees, larger, more established players are demonstrating a commitment to absorbing these costs. Cheogajip Yangnyeom Chicken, for instance, has notified its franchisees of an upcoming price increase for plastic bags, citing a nearly 50-60% rise in raw material and logistics costs due to the prolonged regional conflict. This decision places an additional financial burden on franchisees, with one noting that monthly costs for bags could increase by approximately 100,000 won (including VAT) for stores using around 3,000 bags per month.

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We have been doing our best to bear the cost increase internally, but due to continuous cost rises, it has become difficult to maintain the existing supply price.

In stark contrast, major franchises like Genesis BBQ (operating BBQ chicken), Kyochon Chicken, and Dining Brands Group (operating BHC) have publicly stated their intention to freeze supply prices to franchisees. These companies are choosing to shoulder the increased expenses for key ingredients like chicken and cooking oil, as well as packaging and delivery fees. This decision reflects a strategy to maintain price stability for consumers and support their extensive network of small business owners, who are already operating under challenging conditions.

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There are no plans to increase the supply price of chicken or vinyl bags.

The differing approaches highlight the competitive landscape of the South Korean fried chicken market. While Cheogajip's move might be seen as a necessary adjustment to market realities, the larger franchises' decision to freeze prices signals a focus on market share and brand loyalty. Franchisees of the latter are expressing relief, though some are contemplating using cheaper, non-branded packaging to cut costs, a move that could potentially tarnish brand image. The situation underscores the delicate balance these businesses must strike between managing operational costs and maintaining customer satisfaction and franchisee viability in a volatile economic environment.

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We are striving to maintain the current supply prices for chicken and various other materials by bearing the increased costs at the headquarters level.