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Friday, April 27, 2012

500 m, 80%, 100% urban crappuccino

Two figures have been playing in my head lately: 500 m and 80%.

500 m? A new law shall fix a minimum radius of 500 meters between two shops belonging to the same franchise. In other words: when a - say - Caffe Bene pops up in your neighborhood, another one will not open next door just weeks later. In yet other words: franchisors have to stop giving away as many rights as they fancy, to the risk of spoiling franchisees, who paid fortunes in rights and marketing fees.

80%? Eighty percent of new very small businesses fail in Seoul. An unsustainable rate which often strikes first timers / old timers who invested their last assets to give a chance to their kids, for instance in - say - a coffee franchise.

This coffee bubble was bound to pop (see for instance "Brews and bruises", one year ago), but since whole residential neighborhoods have been transformed into urban crappuccino, the commercial real estate mess could reach much further.

Many started "alibi businesses" just to get official approvals, turning parts of their homes into (presumably more valuable) commercial properties. From the start they didn't expect to make a big bang for their small buck or homemade junk, but at the macro level, the terrifying (if not torrefying) equation simply doesn't add up.

At least we won't run out of java for the wake up call.

Black coffee, of course: the cow has been milked dry.

Seoul Village 2012
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  1. All current franchises, however, will have some time to get their newest locations before the laws go in effect. There are times when I'm curious about what's taught in business classes here in Korea...

    As for the 80% number, that's pretty much the same in the US, and probably across the board for first-world countries. People with a half-baked idea (or a half-baked meal) get into a market they think has low hanging fruit, and franchisors see dollar signs...

  2. Few original ideas indeed, but with luck you do bump into the odd creative concept (probabilities similar to those for a complete sentence in a book from Borges's Library of Babel)

    Overwhelmingly, series of lemming races to follow the latest fads. The Peer Factor.


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