[비즈한국] As the domestic coffee market reaches a saturation point, budget coffee brands are entering overseas markets one after another. Following the "Big Three" of budget coffee (Mega MGC Coffee, Compose Coffee, and Paik's Coffee), The Venti is also setting out to penetrate the global market. However, some franchisees are expressing criticism, arguing that the company is obsessed with overseas business while neglecting the needs of its domestic franchise stores.
The Venti Sets Out for Global Expansion, Why Franchisees Are Unhappy
Budget coffee brand The Venti has recently announced its entry into the overseas market. Its strategy involves opening its first international store at the CF Richmond Centre in British Columbia, Canada, to expand into the North American market. This move appears to be a search for new growth engines as the domestic budget coffee market becomes saturated.
Other brands in the market have already made the decision to enter overseas markets early on. The Born Korea's 475560 Paik's Coffee has been opening stores in the Philippines, Singapore, and elsewhere since 2016, and Compose Coffee also entered the Singaporean market in 2023. Mega MGC Coffee launched an overseas store in Mongolia last May.
As The Venti announced its international expansion, a cold reaction has been detected among domestic franchisees. Some are venting their frustrations, questioning whether it shouldn't be a priority to take care of domestic franchises rather than expanding overseas. One franchisee pointed out, "Even if store owners stay in their shops all day, there is almost no profit left in their hands. Many people are forced to operate their stores because there is no one willing to take them over even when they put the store up for sale. The head office is ignoring this."
The Venti is a budget coffee brand launched in 2014. It began its franchise business in the same year as Compose Coffee and entered the market two years earlier than Mega MGC Coffee (2016). However, as Mega MGC Coffee and Compose Coffee rapidly expanded their number of franchises, The Venti currently holds the 4th largest market share in the budget coffee segment. As of 2023, the number of its franchise stores was recorded at 1,129, and it recently announced the opening of its 1,500th store.
Some The Venti franchisees are launching sharp criticisms at the head office. They claim that franchise profitability is worsening due to a high cost-of-goods ratio applied to generate profits for the headquarters. A franchisee named A complained, "The cost of raw materials reaches 40%. For recently released new menu items, it has gone up to 42%. With a cost-of-goods ratio over 40%, after paying delivery agency fees and the like, there is nothing left." The cost-of-goods ratio in the budget coffee industry averages around 38%, which is considered high even within the food and beverage sector. Another The Venti franchisee also noted, "Among budget coffee brands, The Venti has a particularly high cost-of-goods ratio."
S&C Seine, which operates The Venti, established 'Purple Land' in 2022, a 33,000-square-meter (approx. 10,000 pyeong) coffee bean roasting and powder factory in Jeungpyeong, North Chungcheong Province, to cut production costs. Purple Land is a large-scale food factory capable of producing approximately 5,000 tons each of coffee beans, powder, and liquid bases annually. Franchisees raise complaints that despite The Venti having a distribution structure that allows for cost reduction, it is charging excessive logistics fees to the franchises.
"Before the factory was established, the head office promoted to franchisees that building and operating a roasting facility directly would lower the supply prices for beans and powder," A claimed. "But since the factory started operating, logistics costs have become more expensive. Does it make sense that the powder they produce themselves is more expensive than other powders sold on the market?" A added, "This year, the price of coffee beans went up, and powder prices were also raised by 3-6%."
In response, a representative from The Venti explained, "Since the establishment of the Purple Land factory, we have realized continuous reductions in the prices of supplies every year through production efficiency and logistics optimization." The representative added, "Despite difficult external factors in recent years, such as global inflation, the continuous rise in international coffee bean prices, and increased logistics costs, we carried out price reductions for coffee beans and auxiliary materials like disposables in 2024, and only implemented limited price adjustments for certain items in 2025."
Market Competition Taking Its Toll, Store Closures Continue: "A Repositioning Strategy"
With intensifying competition in the budget coffee market, franchisees are seeing a trend of declining revenue. In narrow alleys as well as within single buildings, multiple budget coffee brands are competing to open stores, which is worsening profitability. There is also an increasing number of franchisees who decide to close their stores even while paying penalties for early contract termination. According to the Korea Fair Trade Commission's franchise information system, the number of The Venti franchise contract terminations and cancellations reached 61 in 2023. By comparison, Mega MGC Coffee saw 14, Compose Coffee saw 15, and Paik's Coffee saw around 20.
A franchisee operating a The Venti store pointed out, "Over 60 The Venti stores closed last year. The situation in the budget coffee market is so bad that some have to close their doors while paying tens of millions of won in termination penalties. Even in this situation, the head office only thinks about how to open more new franchises."
A The Venti official explained, "This year marks the brand's 11th anniversary. Last year's store closures are a phenomenon resulting from the expiration of 10-year contracts for early stores. A significant portion of these are cases where many franchisees chose to reopen in new locations for the purpose of repositioning in line with changing commercial areas."
Even as the survival crisis for franchisees intensifies, the operating profit of the franchise headquarters continues to grow every year. The revenue of S&C Seine, which operates The Venti, was 91.9 billion won in 2023, an increase of 17% from the previous year (78.7 billion won). Operating profit also expanded by 74%, from 7.7 billion won in 2022 to 13.4 billion won in 2023.
The Venti stated, "While there are stores with declining revenue, there are also stores with rising revenue. The rise and fall vary from store to store. Average store revenue is increasing compared to the previous year." The company added, "The Venti has established and operates a multi-faceted support system for the management stabilization and profitability improvement of its franchisees. We operate a dedicated department for stores experiencing profitability issues and run promotions to boost sales, with the head office covering the full cost."
The company continued, "We are exploring various ways to maintain a stable profit structure for franchisees while providing high-quality products that fit the brand identity. We will create a virtuous cycle where both franchisees and the head office can grow together through continuous efforts to improve costs."