New Rules Ban Coffee Franchise Clusters

New regulations ban the opening of two outlets of the same coffee shop franchise like Caffé Bene within 500 m of each other. The Fair Trade Commission set new guidelines for coffee shops to protect individual franchisees, a spokesman said Wednesday.

In principle, the new rules are voluntary, but in reality violators are subject to strictures. Similar rules already exist for bakery, pizza and fried-chicken franchises.

The franchises subject to the new rules include Caffé Bene, Angel-in-Us Coffee, Hollys Coffee, Tom N Toms Coffee, and A Twosome Place, which have more than 100 outlets and earn over W50 billion (US$1=W1,083). Foreign chains such as Starbucks and Coffee Bean are exempt because their head offices control outlets in Korea directly.

Existing outlets that are closer together are also exempt, but if one of them closes down, no other such franchise can take over.

The worst offender for multiple outlets within a small area is Angel-in-Us with 30.7 percent, followed by Caffé Bene with 28.8 percent.

"Many franchise outlets are clustered in the same business area, and the number of outlets of the five major franchises jumped from 748 in 2009 to 2,069 last year," an FTC official said.

The 500 m minimum radius was set taking into account the average distance between Starbucks outlets in Seoul, which is 476 m, the FTC said.