Why Do Stores in Seoul Change So Fast? The Real Story Behind the Franchise Churn

Anyone who spends time in Seoul notices it. The cafe that just opened last spring is already gone, replaced by a tanghulu shop. Before the year is out, that's gone too, replaced by yet another chicken joint.

This isn't just imagination; the turnover is intense. It's easy to blame it on fast-moving trends. But that’s not the whole picture. There's a unique economic and regulatory engine humming just beneath the surface, driving this constant "boom and bust." It's a pattern baked right into the system.

It’s Not Always a Dream, It’s Often a Necessity

From a distance, all these new shops look like a vibrant startup culture. It's easy to picture hopeful entrepreneurs chasing their dreams.

The reality is often something else entirely. For many in Korea, opening a small business isn't the first choice. It's the onlychoice. It's what happens after retirement with a severance package, or when the corporate ladder just doesn't have another rung.

This makes the whole small-business sector very fragile. These aren't just passion projects. They are survival startups. And they are often funded by massive personal debt. As of mid-2025, the total debt for self-employed people hit a record of nearly 1,070 trillion won.

That's not just a number. It's a mountain of risk. When one of these shops fails, it's not just a closed sign on the door. It's a personal financial disaster.

The Hidden Logic: Why It's Easier to Open Than to Survive

So, why do so many unstable brands pop up? A big part of it is a strange regulatory loophole.

In Korea, a company can start selling franchises after running just one store for one year. That's it. It’s a super low bar compared to places like the U.S. or France, where brands have to prove their business model actually works.

But here's the real kicker. It’s the fee structure.

Normally, a franchise headquarters (the franchisor) makes money when the store (the franchisee) makes money. They take a percentage of sales, called a royalty. It’s a partnership. Makes sense, right?

The Korean model is often flipped on its head. Many HQs here advertise "zero royalty." It sounds like a great deal. But it's not. They make all their money at the beginning. They charge massive fees for the interior design. They take a big payment just for signing the contract. They force the owner to buy supplies from them at a high markup.

This changes the entire game. The HQ's main goal isn't to help the existing stores succeed. Its main goal is to sell morecontracts and build more new stores.

Too Many Slices, Not Enough Pie

This incentive system creates the exact saturation we see on the streets. When a brand's headquarters gets paid to open new stores, it will open them everywhere. Even right down the street from another one. It's pure cannibalism.

Just look at the food and beverage sector. It's famous that Korea has more chicken shops than there are McDonald's in the whole world. The same goes for coffee shops.

The numbers tell the whole story. Recent 2025 data is pretty shocking. In the last two years, the big franchise headquarters saw their revenues jump by over 10 percent. But the average sales for an individual store owner? They fellby more than 7 percent.

Think about that. The HQs are getting richer while the owners are getting poorer. And during that exact same time, the total number of stores grew by over 6 percent.

It's simple, really. More stores are fighting for the same group of customers. The pie isn't growing, but it's being sliced thinner and thinner. When someone has already sunk an average of 120 million won into opening their shop, a sales drop like that isn't just a bad month. It's the beginning of the end.

The Trap Door: Why Failing Stores Don't Just Close

So, if the business is failing, why not just cut losses and close? That's the logical thing to do.

But it’s not that simple. This is the last part of the trap.

Many franchise contracts are loaded with huge termination fees. If an owner tries to get out early, they face massive penalties. They are stuck.

This is how we get "zombie" stores. Shops that are clearly empty, with no customers, but the lights are still on. The owner is bleeding money every day, but they stay open because the cost of closing is even higher than the cost of operating at a loss for one more month. It’s a terrible choice to have to make.

The situation got so bad that the government is now trying to step in and create new policies to reduce these penalties, just to let people escape.

So, What's the Real Takeaway?

When we see a street change its face every six months, it's not just about trends. It’s a system where:

• The success of the brand and the success of the store owner are not connected.

• The rules make it very easy to open a franchise, even an unproven one.

• The real money is made in the setup, not in the long-term health of the business.

  
  

COVID-19 didn't cause this problem, but it was like pouring gasoline on a fire. It wiped out businesses that depended on foot traffic, forcing this cycle to spin even faster. It also forced everyone to adapt, which is why delivery and automated stores are now everywhere.

There are new policies now. Things like government-backed loans, support for delivery fees, and better social safety nets for owners. But the main engine—that weird incentive to just open, open, open—is still there. And as long as it is, the streets of Seoul will probably keep on changing.

Disclaimer: This article is for educational and informational purposes only and should not be considered as financial, investment, or trading advice; always conduct your own research and consult with a qualified financial advisor before making any investment decisions.