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Restaurant year-end boom fails to materialize

Jan 03,2019
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From left: Myeong-dong, central Seoul, on Dec. 25, and a lease sign on a building in Seoul. Small businesses are closing as the economy slows and costs rise. [YONHAP]
Despite the end of the year usually being the peak time for restaurant businesses, Park Hee-jin, who owns a seafood establishment in Masan District, Changwon, South Gyeongsang, is nearly in the red due to the lack of customers.

“I used to record sales of at least 50 million won [$44,640] every December even when business was slow,” sighed Park. “It was about half of that last month, at 23 million won.”

Restaurants had no year-end business boom this year amid the sluggish local economy and the introduction of new workplace regulations, such as the 52-hour workweek that has employees going home instead of having late-night company dinners.

Park pointed to the lack of group dinners as a reason for the decline.

“The biggest reason is that there was a huge drop in the number of group customers for year-end meetings,” Park said.

After paying around 13 million won in wages for her five employees at the 148-square-meter (1,593-square-foot) establishment, there isn’t much left for the restaurant owner.

“After I pay employee wages, I take in even less,” said Park. “Thankfully, the rent is relatively cheap for the size at 2.2 million won, so we’re not making a loss.”

Park has decided to close the restaurant this February with the end of her lease.

“I’ll probably make a loss with the rise in the minimum wage this month. It’s actually good that the lease ends next month,” explained Park.

Cho Hyun-chun also recorded disappointing sales last month at his delivery pizza store in Incheon.

“Business used to be so hectic at the end and the beginning of every year that we had to use other delivery services,” said Cho. “It’s a little busier than on a weekday, so I’m making the deliveries myself.”

“We only had 500,000 won in sales on Christmas, which is supposed to be the busiest day of the year,” noted the pizza store owner. “This is just half of last year’s sales.”

Cho worried about his store’s future.

“I’ve been in the pizza business for 10 years, and this is the first time that business was this bad,” said Cho. “We’re maintaining sales because we added tteokbokki [Korean rice cakes], which is a popular delivery item these days.”

The situation was similar for 34-year-old Lee Koo-keun, who owns three restaurants in Seomyeon and Namcheon-dong, Busan.

“The store in Seomyeon is faring about the same as last year, but sales for the Namcheon-dong store fell 30 percent,” sighed Lee.

“[Restaurants in] areas popular with people in their 20s and 30s are maintaining sales. However, areas visited by office workers in their 30s and 40s are empty,” said Lee.

The 34 year old is planning to reduce the number of his employees to cope with the situation.

“We’re planning to get rid of side dishes and focus on the main course,” explained Lee. “We can have one less worker by simplifying the menu.”

The country’s ubiquitous cafes are also suffering from the slow economy.

“Sales during the year’s end fell 30 percent compared to the previous year,” said Lee Chul-seung, a cafe owner in Juwol-dong, Gwangju. Customers “seem to look for cafes that sell 1,000 to 1,500 won [Americanos] rather than those where the cost is 3,000 won to 4,000 won.”

The lack of customers in restaurants is reflected by statistics.

According to the Bank of Korea on Jan. 1, the consumer sentiment index for self-employed workers, which covers most small businesses, in December last year was at 59 points, a 25 point drop from the 84-point figure in January last year. This is the largest fall since the statistic was first recorded in 2008. The introduction of the 52-hour workweek has reduced the number of company dinners, and rising prices may have turned customers away from eating out.

According to Statistics Korea, prices for food services in December last year rose 3.1 percent compared to the previous year. The 10.9 percent rise in the minimum wage this year to 8,350 won has also left restaurant owners struggling to keep costs down.

To avoid incurring labor costs for paid holidays, business owners are increasing the number of part-time workers. Under the law, businesses have to include holiday pay for employees who work more than 15 hours a week.

A businessman with a cafe in Sinjeong-dong, Yangcheon District, in western Seoul has adopted such a system since last year. He can avoid paying the holiday pay by having six part-timers working around 13 hours a week on average. The owner works the other hours himself.

“Scheduling the work hours is complex, and I have to be prepared at all times in case a worker doesn’t show up, but if it weren’t for this, I wouldn’t be able to cover labor costs,” he said.


BY KIM YOUNG-JU [chae.yunhwan@joongang.co.kr]