Lotteria, which operates the hamburger franchise, Lotteria, will make its first entry into the U.S. market in the third quarter of this year. It is attracting attention whether Lotteria, which is improving its performance through restructuring in South Korea, can achieve results in the U.S., the birthplace of hamburgers.
According to industry sources on the 17th, Lotteria has been preparing for its U.S. entry by establishing the American subsidiary, Lotteria USA, in October 2023 and setting up the Lotteria USA corporation in California last February. The company has also reorganized its structure by creating a North America business team under its global business division.
Lotteria has targeted overseas markets through direct entry or master franchise methods. Direct entry involves the headquarters establishing a branch abroad or managing business directly through local subsidiaries. The master franchise allows corporations to enter into contracts with local partners, granting them brand usage rights and operational know-how while receiving royalties.
In Vietnam, it opened local outlets through direct entry in 1998. It expanded into Indonesia (2011), Myanmar (2013), Cambodia (2014), Laos (2016), and Mongolia (2018) using the master franchise method.
In Vietnam, it operates over 250 stores and currently holds the top market share in the local fast food market. Utilizing the local adaptation strategy, a benefit of direct entry, it has successfully integrated domestic representative menu items with local dining culture.
Given the significance of making its initial entry into the land of burgers, Lotteria is expected to carry out its business using the direct entry method in North America. While direct entry incurs expenses, it is advantageous in terms of quality control compared to master franchises.
The first store is said to be established in Los Angeles, California. Lotteria plans to localize and launch Korean-style burgers such as bulgogi burgers and shrimp burgers. To increase awareness of K-burgers, Lotteria participated in the National Restaurant Association Show in Chicago last May, conducting product tastings for visitors and buyers of items including 'bulgogi burger,' 'real bulgogi burger,' and 'Jeonju bibimbap rice burger.' Cha Woo-chul, CEO of Lotteria, personally ran the tasting event to bolster its entry into the U.S.
Lotteria operates the hamburger franchise Lotteria, coffee shop chain Angel-in-us, and donut shop Krispy Donuts. As of 2017, Lotteria was generating over 1 trillion won in revenue, but it began to decline as the Korean burger market became saturated. The situation worsened with the COVID-19 pandemic, leading to a drop in revenue to 683.1 billion won in 2020.
CEO Cha was appointed at the end of 2020. Having joined Lotte Confectionery in 1992, he has spent nearly 30 years in the Lotte Group as a genuine 'Lotte man.' Tasked with revitalization, CEO Cha initiated a rigorous restructuring process. He closed underperforming Lotteria and Angel-in-us locations and sold the family restaurant, TGIF, to MFG Korea. Thus, he focused on revitalizing Lotteria, which accounts for 80% of Lotteria's revenue.
Industry insiders noted, 'Lotteria has steadily released new menu items like 'Wangdonkatsu burger' and 'squid burger,' naturally generating word of mouth,' and added, 'They also transformed aging stores into bright and cheerful spaces, which seems to have significantly altered the brand's image.'
As a result, Lotteria's revenue has steadily increased, reaching 675.7 billion won in 2021, 781.5 billion won in 2022, and 924.2 billion won in 2023. Following an operating loss of 25.8 billion won in 2021, it turned profitable the following year, posting an operating profit of 1.7 billion won in 2022 and 20.8 billion won in 2023. Securities analysts estimate that Lotteria's revenue surpassed 1 trillion won last year.
Lotteria aims to overcome its growth limitations in South Korea through a strategy targeting the U.S. market. According to global market research firm Custom Market Insights, the U.S. fast food and quick service restaurant market is projected to grow from $295 billion last year to $301 billion this year, reaching $508.6 billion by 2034.
Industry insiders stated, 'While the U.S. fast food market is saturated due to intensified competition, it remains the largest market in the world and has growth potential due to rising interest in K-food. If they differentiate their menu with Korean flavors and identity, they can target niche markets.'