[비즈한국] As dining-out costs have risen sharply, buffets and family restaurants are emerging as "value-for-money dining spots." CJ Foodville, which had been reducing the number of VIPS outlets to improve operational efficiency, appears to be restarting its expansion efforts with new store openings. The strategy is to differentiate itself in the dining market through a premium image, but industry observers are watching closely to see if it can maintain competitiveness among rivals who are prioritizing cost-effectiveness.
Will CJ Foodville Join the '1 Trillion Won Club' with VIPS?
VIPS, a family restaurant chain operated by CJ Foodville, has recently been increasing its number of locations. Following the opening of the VIPS Eunpyeong Lotte branch in April and the Daejeon Hyundai Outlet branch in June, a new store will open in Dongtan, Gyeonggi Province, this August. A CJ Foodville representative explained, "During the COVID-19 pandemic, we focused on operational efficiency, and by strengthening premium elements during that process, we saw positive customer feedback. Due to requests from customers for more locations, we have begun opening new ones this year," adding, "In the case of the Eunpyeong Lotte branch, the response is so good that it ranks among the top stores in terms of sales and visitation rates. The performance of new stores is generally positive."
CJ Foodville had declared a halt to new VIPS openings starting in 2020 as sales in its dining business declined in the aftermath of COVID-19. As profitability worsened, the number of VIPS stores gradually decreased. After reaching 112 stores in 2015, the count fell to 41 in 2019, 34 in 2020, and 28 last year. Currently, there are 29 VIPS locations.
VIPS began a structural turnaround after CEO Kim Chan-ho took the helm of CJ Foodville in 2021. CEO Kim focused on renovating existing stores rather than opening new ones, while boldly closing down low-profit locations. The strategy was to differentiate from other family restaurants by introducing a premium approach to a select number of stores.
CJ Foodville's performance in the dining business has left something to be desired. The company is divided into a franchise division (Tous Les Jours) and a dining division; as of last year, 72% of total revenue came from the franchise division. Moreover, 60% of its total operating profit is generated by Tous Les Jours' overseas business.
CJ Foodville aims to achieve 1 trillion won in revenue this year by growing its dining business, centered around VIPS. CJ Foodville first entered the '1 Trillion Won Club' in 2013, but revenue declined following the sale of A Twosome Place, dropping to the 600 billion won range in 2020. Last year, CJ Foodville's revenue was 844.7 billion won, with an operating profit of 45.3 billion won. A CJ Foodville official stated, "VIPS is the primary brand we are focusing on in the dining division. While we aren't aggressively expanding VIPS stores like some of our competitors, we are proceeding with careful consideration."
With VIPS' Market Share Minimal, Will the Premium Niche Strategy Work?
As family restaurants enjoy a second heyday, CJ Foodville seems to have gained confidence in operating VIPS. Having enjoyed its prime until the mid-2000s, the growth of family restaurants slowed following the 2010 economic downturn. With the arrival of COVID-19, most brands decided to withdraw from the business. Bennigan's exited the domestic market in 2016, and Seven Springs, operated by the Samyang Group, ceased operations in 2020. Once-popular Korean-style buffet chains faced the same fate; in 2021, Shinsegae Food's 'Olbaan' withdrew from the market, and CJ Foodville shut down its 'Gyejeol Bapsang' brand in 2022. Closures of remaining brands continued.
However, the market atmosphere has changed completely since last year, as high inflation has caused family restaurants to emerge as value-for-money dining venues. Ashley Queens, operated by E-Land Eats, saw its revenue reach 236 billion won last year, a 50.3% increase from the previous year (157 billion won). Ashley Queens opened 17 new locations this year alone. Outback Steakhouse also saw its revenue reach 457.6 billion won last year, an 11% increase from the previous year (411 billion won).
As VIPS expands its new store openings, the dining market is anticipating a three-way battle between VIPS, Ashley, and Outback. However, VIPS' market share remains minimal compared to its competitors. While Ashley and Outback have around 90 stores, VIPS has only about 30. There is also a gap in revenue scale. The industry estimates VIPS' revenue last year was around 100 billion won, half that of Ashley (236 billion won) and significantly lower than Outback (457.6 billion won).
With the burden of dining costs rising due to inflation, attention is focused on whether VIPS' premium strategy will continue to be effective. Unlike VIPS, industry competitors have shifted toward cost-effective strategies to win over consumers.
Ashley Queens has captured demand from family customers who prefer budget dining by offering a price of 19,900 won for adults on weekday lunches. In the case of VIPS, the weekday lunch salad bar price is 37,900 won. Outback has also abandoned its previously held premium image and recently rebranded toward casual dining. The intention is to capture customers in their 20s and 30s with affordable menu items like pasta and sandwiches instead of high-priced options.
Some in the industry suggest that VIPS might be targeting a niche market in the dining sector. Professor Lee Eun-hee of the Department of Consumer Science analyzed, "With rising prices, a single bowl of Seolleongtang now easily costs over 10,000 won. As high inflation continues, there is an increasing preference for buffets or family restaurants where one can enjoy a variety of foods, and this atmosphere is expected to persist for the time being. While the preference for value-for-money dining has grown, there remains a demand for premium options. For consumers seeking a high-end meal, VIPS may be perceived as a value-for-money option, which could become an opportunity for growth."
A CJ Foodville representative explained, "Although VIPS has a premium strategy, it is not as expensive as hotel buffets. Also, many customers use affiliate discount benefits to ease the price burden. Considering the recent rise in inflation, it can draw positive customer responses in that one can enjoy a meal in a high-end atmosphere at a relatively reasonable price."