The Dining Industry is in the Red with Restaurant Owners Unable to Sell Their Stores

Even the Dining Industry is Down—

Mr. Kim, 45, who own a Japanese restaurant in Ansan, Gyeonggi Province, has to shut his business due to the economic recession. When he acquired the restaurant in 2000, his daily sales reached 1.5 million won, but since the second half of last year, his daily sales plunged to 400,000 won, so he decided to sell the restaurant.

According to the National Statistical Office, during the first quarter of this year, or from January to March, restaurant sales dropped by 5.5 percent compared to the same period a year ago, showing the largest margin of decline when compared to other businesses. Such a sharp rate of decline is even greater than last year’s second quarter – from April to June – when for the first time after the financial crisis, sales in the dining industry fell by 0.2 percent. The sales lodging and dining industry combined fell by 3.8 percent in the first quarter and 0.9 percent in the second quarter of this year.

Lodging Industry also Facing Difficulties—

In the past, motels were popular as a common way of leasing small-scale real estate but now no longer. According to the secretary general of the Korean Lodging Industry Central Association, Kim Moon-soo, “Membership throughout Korea was reduced to less than 25,000 from 27,000 in just a year, and in particular, membership fees have decreased by about 40 percent.” In case of Seoul Jung-gu, the number of lodging businesses fell from 300 to 200 in just a year.

Secretary Kim added, “The problem is so serious that a motel in Hapjeong-dong, Mapo-gu has 10 rooms, but on Saturday, August 7, not even one room was occupied for the entire day.”

With the real estate business in a slump, the real estate broker licenses are also losing their popularity. Lee Gwang-hee, who runs the “Wangsimni Korean Law Academy,” a private institute located in Seongdong-gu, Seoul to prepare students for real estate broker licenses, said, “The number of people registering in the academy has fallen by about 20 percent when compared to last year. I think that is because with the real estate business going down, getting a broking license is no longer as attractive as it used to be.”

According to Digital Taein, a company that provides auction information, the number of auctions selling “facilities in the vicinity of residential areas” increased by over 1,000 cases from 4,368 in January to 5,518 in July. Facilities in the vicinity of residential areas are mostly stores or other small-scale shops for self-employed businesses.

The Slump of Self-employed Business Increased the Number of Credit Delinquents—

The Credit Counseling and Recovery Service stated that after it was created in October of 2002 until late May of this year, 156,226 credit delinquents applied to mediate their debts. The main reasons why their debts increased are living costs (29.4 percent) and poor business performance (16.8 percent) coming in second. Following are education costs (10.8 percent) and medical costs (9.0 percent).

Doctor Kum Jae-ho of the Korea Labor Institute said, “The shrunken domestic consumption is a big factor for the low performance of self-employed businesses but the restructuring of the distribution, restaurant and lodging industry is also another factor.” In other words, as distribution companies are becoming chain stores and large-scale giants, small-scale businesses are going down. In addition, Doctor Park pointed out that the expansion of family restaurants and mid to upscale restaurants shrinks the profitability of the small “traditional restaurants.” The lodging industry requested to the Ministry of Health and Welfare to restrict the opening hours of the 24-hour “Jjimjil Bang” (a mixture of bathhouse and resting place), citing that they were taking away customers.

After the financial crisis, almost everybody opened up a restaurant and saturated the market, increasing competition and hence causing more difficulties.

According to the Organization for Economic Cooperation and Development (OECD), in 2001, the percentage of self-employed businessmen and their unpaid family members out of the total employed workforce amounted to 36.6 percent, which is vastly higher than Japan’s 16.0 percent and U.S.’ 7.4 percent.