SEOUL, KOREA - A tough time has come for premium burger purveyors. Following Kraze Burgers' court receivership, other franchisers such as CJ Foodville, Shinsegae, and Maeil Dairies are reluctant to expand their business for fears of being undercut by low-cost rivals.

 

On November 25, Kraze Burgers International, the pioneer in the market segment, announced that it would enter court receivership after a series of failures in investment and weakening profitability. Established in 1998, the company has opened more than 100 locations focusing mostly on Seoul's Gangnam area. Thanks to this aggressive expansion strategy, it posted 28.3 billion won in sales revenue in 2008, followed by 32.5 billion won in 2010 and 36.6 billion won in 2011.

 

Encouraged by the seeming success of Kraze Burgers, major conglomerates entered the market in droves. Shinsegae brought in American burger brand Johnny Rockets in 2011. CJ Foodville and OurHome also came out with their own burger restaurant brands "Vips Burger" and "Burger Hunter." In addition, Maeil Dairies and HomePlus launched "Golden Burger Republic" and "The Burger," respectively.

 

But the recession halted the expansion binge of the big franchisers. In a 1-trillion-won burger market, the share of premium burgers has remained at 5 percent. The biggest reason for their lackluster performance was high price. While most low-cost burger places such as McDonald's and Burger King offer burgers at 1,000 or 2,000 won all year round, these "designer" burger restaurants charge almost 10,000 won for a burger alone. Including fries and a drink, it is easy to go over 20,000 won per person.

 

Naturally they were unable to open more stores fast enough and their popularity began sagging rapidly in the late 2000s. A premium burger restaurant official said, "Excessively high price is what keeps these companies from growing further. It has been 15 years since premium burgers were introduced in Korea, but their market size is below the 100-billion-won level and major franchisers are unwilling to move aggressively in a depressed market."