[비즈한국] Kyochon Chicken is cornered. Following conflicts with franchisees, the company has recently been embroiled in a controversy over reduced product weights, leading to criticism that it is a "deceptive company," and its standing in the franchise market is no longer what it once was. While Kyochon is seeking breakthroughs through overseas expansion and new business ventures, no clear results have emerged yet.
Cracks in the "Honest" Brand Image
Kyochon Chicken has recently been caught up in a "sneaky price hike" controversy following the release of new products. With the launch of new boneless chicken menu items this month, the company reduced the product weight from the existing 700g to 500g and changed the ingredients by mixing in some breast meat instead of using only chicken leg meat. Once this became known, complaints poured out among consumers. Criticism followed that while the price remained the same, the reduction in weight and the inclusion of less-preferred parts amounted to a form of deception and a price increase.
Kyochon explained that the decision was made to consider the operational efficiency of its franchisees. An official from Kyochon F&B339770, which operates Kyochon Chicken, explained, "Among the five existing boneless chicken products, only 'Honey Boneless' was 500g, while the others were 700g. We launched 10 new menu items this time, and because having different weights could make operations cumbersome, we unified them to 500g."
Despite Kyochon's explanation, public opinion remains cold. An industry insider pointed out, "It is difficult to avoid the criticism of 'shrinkflation' (a de facto price hike through reduced product size or weight)," adding, "Even if it was a measure to accommodate franchisees, the negative public sentiment could actually work to the disadvantage of the franchisees."
Kyochon Chicken, which rose to the top of the industry with its "premium chicken" image, is faltering after being hit by a series of controversies. Following the controversy over indirect price hikes and conflicts with franchisees, the positive image of an "honest brand with conviction" that it had built up over time appears to be cracking.
Earlier this month, some franchisees announced that they would file a lawsuit for damages against the headquarters, claiming they suffered sales losses due to chicken supply shortages. Kyochon explained that supply disruptions were inevitable due to avian influenza (AI) and rising costs, but complaints were raised that some stores did not even receive half of their orders. There is also ongoing noise in its overseas business. The master franchise (MF) contract signed to expand into the Canadian market led to a conflict with the local partner, ultimately resulting in a complaint being filed with the Fair Trade Commission.
The status of Kyochon, which once held the number one spot in the domestic chicken franchise industry, is no longer what it used to be. Over the past few years, due to intensifying competition and a saturated market, it has been pushed aside by BHC and BBQ, falling to third place in the industry. While it maintained the top position in terms of sales until 2022, its 2023 sales were 426 billion won, a 14.6% decrease from the previous year. Although sales rebounded slightly to 480.6 billion won last year, operating profit fell to 15.2 billion won, a 38.6% drop in a year, worsening profitability.
The strength of being a "zero-closure brand" has also become difficult to maintain. While Kyochon drew attention as a stable franchise model with a 0% closure rate in 2021, its closure rate exceeded 2% last year. Although it is still lower than the industry average (approximately 14%), the symbolic "zero-closure" image has been shaken.
Regarding this, a Kyochon F&B official explained, "From 2022 to 2023, we actively opened special stores in resorts, baseball stadiums, etc., and the closure rate rose temporarily because those two-year contracts expired," adding, "In the case of general franchise stores, there were almost no closures."
Overseas Market, Challenged for 18 Years, Still Shows Minimal Results
As its brand image and profitability are shaken in the domestic market, it is urgent for Kyochon to find a new breakthrough. To this end, it is putting effort into overseas expansion and new businesses, but it has not produced any significant results.
Kyochon challenged the global market starting with the Mid-Wilshire store in Los Angeles, USA, in 2007. However, 18 years later, the proportion of global business in its total performance is not significant. As of the first half of 2025, Kyochon F&B's global sales were 6.1 billion won, accounting for only 2.4% of total sales.
Kyochon F&B's US subsidiary (Kyochon USA Inc.) posted an operating loss of 2.7 billion won last year despite generating 8.1 billion won in sales. Deficits continued in the first half of this year, with cumulative losses reaching 1.7 billion won. The Chinese subsidiary (Kyochon F&B China) recorded a small profit (30 million won) last year, but turned to a deficit of about 600 million won in the first half of this year. The number of stores also decreased from 19 last year to 17 as of June this year, showing a slowdown in growth.
A Kyochon F&B official explained, "We understand that China is being affected by the sluggish domestic economy," adding, "In the first half of this year, we established the Shenzhen subsidiary (Kyochon F&B (SHENZHEN) Co.,Ltd.) and began expanding local stores. We are continuously making efforts to increase brand awareness in the Chinese market." The official added, "In the case of the US, we recently closed the first store for about 7 months for renovations, and this gap has also had an impact on the sluggish performance."
The situation is no different in the new business sector. Packaging subsidiary K&L Pack, established in 2022, and fermented food and liquor subsidiary Fermentation Workshop 1991 have yet to achieve tangible results. In the case of K&L Pack, the deficit is widening; operating losses, which were 2.6 billion won in 2023, swelled to 3.2 billion won last year and recorded a loss of about 1.3 billion won in the first half of this year. Fermentation Workshop 1991 is also in a deficit state. Its sales in the first half of this year were only 87 million won, and its operating loss was about 400 million won, an increase from the 200 million won level last year. A Kyochon F&B official said, "New businesses are in the early stages, so it is difficult to expect immediate results. Internally, we are pursuing business from a long-term perspective with a grace period."