No tip & Tax included: The Restaurant industry in Korea

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Why is Korean restaurant food cheap?

OK! We do not pay tips.
But this discussion is limited to the menu sticker price of food.
Oh and the  tax is include in that price!
Hello. This is AKIA Talking from Korea. I have been tweeting stuff I see on the streets of Korea since I came back about a week ago. Among the towering apartment complexes, the numerous mobile cell phone related stores everywhere, and the sheer amount of leg you can see just walking on a crowded street, the most interesting stuff I tweet about is related to food!!

What can I say!?
We Have to eat…
 After numerous  in-depth observations, usually sitting with food in my mouth or drooling outside looking at a menu attached to the Plexiglas, a few things become crystal clear about the Restaurant industry in Korea.

First, compared to 5 years ago, there are at least 50% more food related eateries everywhere period. And this is a conservative figure.

Good for everyone, yes?

Second, the food franchises are dead. I’m talking about KFC, McDonald’s, Pizza hut, and etc. Even 5 years ago, you could still easily find them around the corner even though they were somewhat on the decline after the franchise related boom around the turn of the century,

Now, you have to go look for them to find them. And its McDonald’s… if you are going to put that much effort into eating, why not go somewhere better? There are places 5 minutes from your location in any direction that are at least a bit better. So, “Demolition Man” was wrong at least in Korea! “Taco Bell” did not win the franchise war. It seems like “Lotteria” won the war. It is a Korean fast-food chain that still has a wide presence on the streets.

Although I saw a “Taco Bell”in Korea. This is a new development.
When was “Demolition Man”set it?
There may be time!

Third, there are far more numbers of independent Restaurants in the place of the big franchise chains with weird Korean or English names.

At least, the English names are less odd than half a decade ago.
Koreans do not get nuance!

Fourth, the variety and price range of food and restaurants have increased drastically. I mean you have the cheap Korean staples. You have the basic burgers. You have the Chinese. You have your Mexican. You have your Italian. You have your Indian. There is a tone of stuff and all of them do not really taste alike which is not the case in the U.S.  Since every place is small and independent, everyone has their own home recipe.  

Finally, you have the big thing I noticed. The price of food had not much changed in a decade. Compared to 5 years ago, the price of food in restaurants has not increased in price. More accurately, it has actually decreased. This is rather less noticeable on the low end of the price spectrum.  However, above the median price range this is very clear. This is in contrast to the average 3 % inflation during the same period.

So Back to the question : Why is this happening?
If I were to simplify the matter, I would say the reasons lie with the massive supply surplus. Koreans are not that imaginative in regard to the range of avenues to make money. Traditionally, Koreans tend to go into the real-estate game. To be frank, the majority of the people who made money in Korea had done so at least partially through real-estate. However, this avenue does require a certain level of cash reserves. In addition, the revenue stream is not fluid. In contrast,  The restaurant business is less restrictive.
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It is a common saying that, if you do not any particular skills, you go into the restaurant business. For a long time, it was common place for households to use their retirement fund and get into this business. Now in 2014, this has not changed. The problem is that, as the cost of living increases for those post-retirement households and other avenues of income generation have become less profitable and reliable, the influx of new people willing to invest in the restaurant business has increased drastically.

This is a serious problem!
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While Koreans love to eat out, the basic market size is limited. Considering the number of restaurants in place even half a decade ago, it cannot be said that this market had been underserved even then. Thus, the limited demand and hyper competition resulted in a zero sum cost competition. And there is no one able to regulate the supply increase.

At the current state, half of the new restaurants will go under in 3 years after they start to serve their first customer.

The 'Korean Economy" newspaper called it "The mutually ensured destructive chicken race played by 6.1 million people". There are 6.1 million people in the customer service based mom & pop businesses in which  restaurants constitute a huge portion. According to the paper, the survival rate of these businesses is 30% in the next 3 years.

This is why Korean restaurant food is cheap! So, we should enjoy eating cheap food. You are eating their life savings one spoon, one chopstick at a time.

Bon appetite!  
p.s.   I’m getting hungry!

$6.50 & No tip & Tax included


  1. Thinking about what you said re: retirement, competition, death of franchises, I think this is happening in my country too.

    Specialty food shops with unique names (Eat Your GF -- that's Garlic Fries!) and gimmicks. It attracts the millenials who have more purchasing power and are tired of the "same old same old" stuff offered by huge food franchises.

    Also, gotta love your last statement. "So, we should enjoy eating cheap food. You are eating their life savings once spoon, one chopstick at a time." That was so wrong but also so right!

  2. Thanks for commenting. ;)
    Oh and I found a typo in the quote you used of my words. Fixed.

  3. I can still quote lines and sing songs from this movie, my sisters and I still make jokes. Loved it! As a pre-teen I was always running to the library to rent videos and my then 3 yr. old sis would always say, "Get the King with the baby."