Lotteria's Boycott of Baemin Club: Impacts on Franchises

Lotteria's boycott of Baemin Club delivery highlights increasing franchise concerns over rising costs and profit margins.

### Impact of Baemin Club on Self-Employed Businesses: Lotteria's Boycott and Industry Reactions
* 🚫 Starting September 11, the Baemin Club will be applied to store deliveries, prompting Lotteria, a large hamburger franchise, to **boycott it to protect franchisees from increased costs**.
* 💰 Lotteria's decision aims to **prevent the burden of delivery fees from shifting entirely to self-employed business owners**, which could **significantly impact their profit margins**.
* 📊 If the Baemin Club is adopted, the delivery tip of **3,500 won** would become the responsibility of store owners, potentially leading to **negative margins for lower order amounts**.
* 🚚 Currently, delivery fees in Seoul are around **4,400 won for 1.2 km**, and if these costs are shifted to store owners without the ability to charge customers additional fees, many may find delivery **unfeasible**.
* 📉 As delivery fees rise, franchises like Lotteria are expected to **strengthen their marketing through their own apps**, as they face challenges in **managing fees while maintaining profit margins**.
* 🔼 Rising selling prices due to increased delivery costs could lead to **decreased consumer orders**, ultimately **reducing profits for store owners** and threatening the **sustainability of franchises**.
* 🏪 Other franchises, including Subway and Bonjuk, are exploring ways to **opt out of the Baemin Club**, reflecting a growing trend among businesses to **minimize reliance on delivery apps**.
* 🤝 The backlash against Baemin's policies is evident, as the company’s market share has **fallen below 60%**, indicating a shift in the landscape of food delivery services amidst **rising dissatisfaction among self-employed business owners**.

Hello, this is a self-employed tile business. Starting from September 11, the Baemin Club will be applied to store deliveries. In this context, the large hamburger franchise Lotteria has declared a boycott of Baemin Club for store deliveries. This is because, if the Baemin Club is applied to store deliveries, the entire delivery fee that customers used to pay will now be the responsibility of the self-employed business owners. Lotteria stated that this decision was made to prevent increasing the cost burden on franchisees. This is quite significant. I believe that a franchise of Lotteria's scale deciding not to accept orders through the Baemin Club could have considerable implications in the future. From the government's perspective, it is much better for the head office to decide collectively not to join the Baemin Club rather than allowing individual branches to decide. This way, there won't be any issues where some branches participate while others do not, which is very appreciated by the store operators. It's commendable that the head office has made this decision.

It must have been difficult for the media to report on this, but I think Lotteria has taken the lead and accomplished something significant. Currently, if you look at Lotteria on Baemin, they are not operating their own delivery service; they are only running store deliveries. If we examine the minimum order amount and customer-borne delivery tips, the minimum order amount is all set at 1,000 won, and the delivery tip is 3,500 won for orders under 40,000 won, while orders over 40,000 won are free. In the case of Lotteria, unlike other franchises like Burger King, the prices of the food sold on Baemin are the same as those in-store. Therefore, if Lotteria joins the Baemin Club for store deliveries, the current customer-borne delivery tip of 3,500 won would shift to being the responsibility of the store owner when ordering through the Baemin Club. This would make operating the Baemin store delivery service itself quite challenging. With a minimum order amount of 1,000 won, the delivery tip of 3,500 won represents a significant portion of the total order amount.

If about 32% of these costs become a burden for store owners, it could lead to a situation where, in the case of low order amounts, negative margins could occur. Therefore, from the perspective of Lotteria, it is simply not feasible to proceed with the store delivery Baemin Club. Currently, in Seoul, the delivery fee is about 4,400 won, including tax, for a distance of 1.2 km. If the entire delivery fee is applied to the store delivery Baemin Club, it will all fall on the store owners. Additionally, if the distance is longer or if there are surcharges for weather or distance, the delivery fee can rise to between 7,000 and 8,000 won. Even with these increased delivery costs, since the store owners cannot charge customers additional delivery fees as before, they find themselves in a situation where they cannot afford to deliver at all. Moreover, in the case of Lotteria, the menu prices are not significantly higher compared to other burger franchises, so if they are unable to receive delivery tips from customers, it becomes even more detrimental.

It is inevitable that prices will rise. Even now, the price of a Deliburger is 3,500 won, which is really a good price. In the case of Lotteria, many orders come through their own delivery app, so there is no need for Baemin to worry too much. When ordering through the Lotteria app, customers can earn rewards, and there are many coupons available that can only be used on this app. Therefore, from the customer's perspective, it doesn't matter if they don't order through Baemin; they can order from places that are cheaper and offer more benefits. 

As a result of this situation regarding the Baemin Club delivery application, it seems that large franchises will strengthen their marketing through their own apps in the future. Until now, they have endured certain fees to attract customers, but it has become difficult to manage the level of these fees. It appears they are beginning to seek solutions. If Baemin continues to raise its fees, from the franchise's perspective, they will need to ensure that the store owners meet their standard profit margins.

To do this, we have no choice but to raise the selling price. Essentially, when the selling price increases, consumer orders naturally decline, and from the perspective of store owners, this leads to decreased sales and consequently reduced profits. Ultimately, from the franchisor's standpoint, the store owners' profits need to be somewhat stable in order to continuously operate the business and increase the number of locations. However, as delivery fees rise, costs increase, and the profits of existing store owners inevitably decrease, leading to a deterioration in their sentiment. Moreover, prices have already risen significantly last year and this year, and consumers are experiencing a strong aversion to price increases. Therefore, it seems that they are in a difficult situation where further price hikes are not feasible. Additionally, due to these high commission rates, the delivery prices and in-store prices are gradually increasing.

There are many stores with differing prices, and ultimately, if delivery prices are raised, Baemin Club takes a commission based on a percentage of sales. Ironically, this means that Baemin's commission revenue also increases. Therefore, when most Baemin Club consultants say that people do not join due to delivery fees, they suggest that raising prices is the solution, because this price increase ultimately benefits Baemin. Fundamentally, it is difficult to resolve the situation unless these high commissions are lowered. Additionally, the application of delivery services for Baemin Club stores will be particularly detrimental to industries with a high percentage of raw material costs, such as chicken and pizza, where the raw material ratio exceeds 50%. For example, in the case of chicken, if an order is placed for a 20,000 won chicken through Baemin delivery, Baemin delivery...

The commission and delivery fees, along with the VAT and discounts from coupons, leave the store owners with only 2,000 won, resulting in a truly disastrous profit margin. Many stores are finding it increasingly difficult to continue operating under these conditions. Due to these issues, not only Lotteria but also Bonjuk and the sandwich franchise Subway are informing franchisees about methods to opt out of the Baemin Club. Although the movement among franchises to refuse Baemin Club is not widespread, it is gradually being sensed. Furthermore, Subway is currently not using Baemin for deliveries at all and is only doing in-store deliveries. This choice seems to stem from the significant impact on in-store delivery profits when Baemin Club is applied. In the case of BBQ, to mark its 29th anniversary, they decided to give away half a golden olive chicken only for orders placed through the BBQ app or website, reducing their reliance on delivery apps.

Franchise companies are continuing their efforts to reduce costs and increase the utilization of their own delivery apps. In August of this year, Baemin's overall market share fell below 60% for the first time, reflecting increasingly tangible figures. The backlash from Baemin's policies and the resulting commission structures is becoming apparent. No matter how much they implement consumer-friendly policies, the negative image continues to accumulate among self-employed business owners and delivery riders who are actually operating the app. It is uncertain when this buildup will reach a breaking point. I hope that even now, they will not be overly focused on profits and will return to a more cooperative approach, reminiscent of the earlier days of Baemin. This concludes today’s video. Thank you.

롯데리아가 배민클럽을 보이콧한 이유 (ft.10년차 자영업자)

장사, 자영업 관련 모든 것을 다룹니다

메일 - jangsadiary@gmail.com


자영업 다이어리(10년차 ing)

Lotteria has declared a boycott of the Baemin Club for store deliveries, citing the increased cost burden on franchisees as the reason.

The head office's collective decision not to join the Baemin Club is seen as beneficial for store operators.

Lotteria's food prices on Baemin are the same as in-store, and the shift of the customer-borne delivery tip to the store owner would make operating the delivery service challenging.

The Impact of Delivery Fees on Store Owners

Delivery costs are becoming a burden for store owners, potentially leading to negative margins and making it unfeasible for Lotteria to participate in the Baemin Club.

The current delivery fee in Seoul is 4,400 won for 1.

2 km, but can rise to 7,000-8,000 won with longer distances or surcharges.

Lotteria's competitive menu prices and reliance on their own delivery app for orders may lead to large franchises strengthening their marketing efforts through their apps in response to rising delivery fees.

The Impact of Rising Costs on Store Owners and Delivery Services

Raising selling prices leads to decreased consumer orders, impacting store owners' profits and business stability.

High delivery fees and commission rates are driving up costs, causing a decline in store owners' profits and increasing their dissatisfaction.

Baemin's commission structure benefits from rising delivery prices, making it challenging to resolve the issue without lowering these high commissions.

Struggles of Store Owners Amid Baemin's Policies

Store owners are left with only 2,000 won after commission and delivery fees, leading to a disastrous profit margin.

Franchises like Lotteria, Bonjuk, and Subway are gradually opting out of the Baemin Club due to its negative impact on profits.

Baemin's market share has fallen below 60% for the first time, reflecting the growing backlash against its policies and commission structures.