On the morning of Sept. 1, a tanghulu (a traditional Chinese snack of sugar-coated fruits) shop in Seoul’s Yangcheon district was quiet. When the store first opened in November 2022, it often had lines forming even before it opened. Now, however, the shop is permanently closed. While the sign remains, a banner below it reads, “Closed. Toys and Stationery 50-80% Off.” On weekdays, the storefront is used to sell socks.
As South Korea’s population ages, more people in their late 50s are retiring and entering self-employment. However, in 2023, a record 986,487 businesses filed for closure—the highest number since statistics were first collected in 2006. Experts cite rapidly changing trends and an oversaturation of franchises as the primary causes of this “era of 1 million closures.” Many first-time entrepreneurs start with franchise operations, only to find that their success hinges on trends that can rise and fall within two to three years. A franchise industry insider noted, “Unprepared entrepreneurs are investing their savings in short-lived franchises, only to be forced out of business.”
An analysis by the Chosun Ilbo of data from the Korea Fair Trade Commission shows that the number of food service franchise brands—accounting for 80% of all franchises—more than doubled from 4,792 in 2019 to 9,934 in 2023. For example, a hot dog franchise saw its locations drop from 651 in 2019 to 191 today. A tanghulu franchise grew from 16 locations in 2021 to 420 in 2022, only to shrink back to 262.
This phenomenon has become a new risk for retirees entering self-employment. One gukbap (a Korean dish made by putting cooked rice into hot soup) restaurant franchisee remarked, “I didn’t expect to get rich quickly, but I believed I’d have a lower chance of closing and could survive for five years or more. However, the profits have been much lower than expected.”
Meanwhile, statistics on self-employment are increasingly bleak. According to Statistics Korea, the number of self-employed people in July stood at 5.721 million, a decrease of 62,000 from the same month last year. This decline has continued for six consecutive months since February, marking the first such sustained drop since the COVID-19 pandemic began.
Self-employed individuals describe a “cycle of debt,” where they take out loans to start a business, face worsening conditions, accumulate more debt, and eventually close down. According to Korea Credit Data’s “Small Business Trend Report,” self-employed people had 884.4 trillion won in outstanding loans as of the first quarter of this year, with more than 15 trillion won in overdue payments. Facing mounting debt, many are forced to close their businesses. Statistics Korea reports that the number of self-employed people who closed their businesses and became unemployed in the first half of this year increased by more than 20% compared to last year.
The retail industry notes that the rise and fall of franchises are happening faster than ever before. An industry insider said, “As generations familiar with social media become the core of the consumer market, the cycle of trends has shortened. We’re seeing brands rise quickly and then disappear just as fast.” The insider added, “With trends moving so rapidly and unproven franchises continuing to emerge, inexperienced entrepreneurs are finding themselves in a tight spot.”
For example, a Taiwanese sandwich franchise first surpassed 100 locations in October 2018, with average monthly sales per store of 69 million won. By January 2020, just 13 months later, the number of stores had increased to 276, but average monthly sales per store had dropped to 19 million won. The industry insider commented, “This was already the peak of the trend, but many entrepreneurs, unaware of this, continued to start new businesses.” As of June this year, the franchise had shrunk to about 130 stores, with average monthly sales down to 13 million won.
Prospective entrepreneurs face a difficult choice when selecting a franchise. They worry that a franchise with many locations might have already peaked in popularity, while those with fewer locations lack proven success. Among food service franchises, only 3.1% have more than 100 locations. In contrast, small franchises with fewer than 10 locations account for 74.5% of the total. Lee Jung-hee, an economics professor at Chung-Ang University, advised, “Rushing into a franchise could turn your life savings into nothing, so it’s crucial to proceed with caution.”
