[비즈한국] Popeyes, which dreamed of a spectacular revival, is now facing a crisis. After re-entering the domestic market at the end of 2022, Popeyes, which had been operating 12 stores, has closed 5 locations in the second half of this year alone. Some are suggesting that the brand may be on a path to withdrawing from the business again due to deteriorating profitability.
5 out of 12 stores closed; has the spark of Popeyes' revival already faded?
The Popeyes Hwajeong Station branch, which opened in March 2023, entered into closure last September. The decision to halt operations was made just one year and six months after the store began business. A notice was posted at the entrance stating that the store was "temporarily closed due to interior remodeling," but no construction took place for several months. Recently, the renovation notice disappeared from the entrance, and the signboard on the exterior of the building was removed.
In August, Popeyes entered a period of intense restructuring following the appointment of new CEO Park Jong-min at Non-Luxurious Company (NLC), a food service subsidiary of Silla Co., Ltd. 004970, which operates Popeyes Korea. The company announced it would temporarily suspend operations at three stores—Gongneung Station, Hwagok Station, and Hwajeong Station—to carry out interior remodeling and improve operating systems. However, the atmosphere at these closed locations is that they are effectively in the process of shutting down, with no construction work taking place at all.
While Popeyes initially announced the closure of three stores, the number of closed branches has since increased. After the initial three, the Anyang Ilbeonga branch and Seongnam Sinheung branch also closed in succession, reducing the total store count from 12 to 7. A representative from a real estate agency near the recently closed Popeyes Anyang Ilbeonga branch said, "I know that store operations hadn't been going as well as expected. They signed a two-year contract, but it looks like they are shutting down without even fulfilling the contract period."
With nearly half of its operating stores now closed, some voices are expressing concern that Popeyes might be on the verge of withdrawing from the domestic market again, only two years after its return. However, Popeyes maintains the position that "withdrawing from the business is not being considered."
A Popeyes representative explained, "It is true that some stores are currently closed. However, nothing has been decided regarding permanent closures," adding, "We are in the stage of reviewing whether to proceed with renewal work for the closed stores or to reorganize and reopen them in different areas."
Will launching new menus and refining sales strategies improve sluggish performance?
The American chicken and burger brand Popeyes first landed in Korea in 1994 and enjoyed immense popularity until the early 2000s, expanding to over 200 stores. However, as competition in the burger market intensified and profitability deteriorated, the company ultimately decided to withdraw from the domestic business in December 2020.
Two years after leaving, Popeyes re-entered the domestic market in partnership with Silla Co., Ltd. Silla Co., Ltd., which has focused on deep-sea fishing as its core business, established its subsidiary NLC to expand into the food service industry and secured the domestic business rights for Popeyes. Popeyes even announced plans to open over 100 stores in the domestic market.
Popeyes' return was initially considered a success. When the first store opened near Gangnam Station in Seoul in December 2022, large crowds flocked to it, leading to "open-run" queues. Popeyes successfully increased its store count to 12 within one year of its re-entry. However, the growth trend appears to have quickly broken. Although Popeyes announced plans to open more than 10 new stores this year, there has been no news of new openings.
Sluggish performance continues as well. Last year, NLC, which manages Popeyes, recorded 11 billion KRW in revenue and 11.5 billion KRW in operating losses. Through the third quarter of this year, Popeyes' revenue (Silla Co., Ltd. food service division) stood at 9.8 billion KRW, with an operating loss reaching 8.9 billion KRW.
While a turnaround is urgent, analysts suggest it will not be easy due to intense competition in the domestic burger market. When Popeyes withdrew from the domestic market in 2022, it was a scenario where global fast-food chains like McDonald's and Burger King were competing for market share; however, recent times have seen an influx of overseas premium burger brands, further intensifying competition. Seo Yong-gu, a professor of business administration at Sookmyung Women's University, explained, "There is a prominent trend among the younger generation preferring premium, handmade burgers. With more diverse food options available to replace fast food compared to the past, the atmosphere makes it difficult for Popeyes to maintain continuous customer interest."
Popeyes states that it plans to improve performance by accelerating the launch of new menus while simultaneously revamping its overall menu lineup. Previously, Popeyes had been somewhat passive in launching new products under the strategy of banking on the "taste of nostalgia." Professor Seo Yong-gu pointed out, "Popeyes implemented a nostalgia marketing strategy to capture the demand of the Baby Boomer generation, who were its existing customers, but that has made it difficult to capture new customers."
A Popeyes representative said, "We are preparing renewal work for our menu and sales strategies. We are preparing to re-release representative items that were popular in the past and are working on launching new menus by localizing items that are popular in global markets," adding, "We are also preparing to introduce new store openings within December. We will attempt various changes."