In recent days, the restaurant franchise industry has been repeatedly using the phrase "breaking 1 trillion won in sales." Major brands are highlighting consumer payments or franchisees' total sales to stress headline growth. But actual sales on a consolidation basis disclosed on the Financial Supervisory Service's electronic disclosure system come in at 400 billion to 500 billion won, showing a large gap with the announced figures. Inside and outside the industry, some say this is number marketing that induces an optical illusion.
On the 28th, according to the retail and restaurant sectors and the Financial Supervisory Service's electronic disclosure system, coffee franchise A TWOSOME PLACE posted 582.4 billion won in sales last year on a consolidation basis, but emphasized "1.0874 trillion won in consumer sales" in external releases. Consumer sales refer to the total amount paid by consumers at all stores nationwide. This differs greatly from sales on the financial statements, which reflect only the headquarters' actual revenue (royalties, supplies, etc.). Burger franchise Mom's Touch likewise has actual sales of about 479 billion won but touted "breaking 1 trillion won in POS (point-of-sale) sales." Emerging pizza brand No More Pizza is also highlighting "2.099 trillion won in total franchisee sales," more than 10 times its headquarters sales (206 billion won in 2024).
This gap in figures stems from the franchise business structure. Headquarters sales reflect only revenue from supplying ingredients to franchisees or receiving royalties, whereas consumer payments or total franchisee sales are the sum of all sales generated at each store. The more franchisees there are, the more the total sales naturally grow. Most of the sales generated at each store are taken by each franchisee.
The problem is that these indicators are far from reality. Even if headquarters' operating profit does not improve due to rising materials and supplies prices, if overall payment amounts increase with price hikes and store expansion, they can be packaged with phrases such as "record performance."
An official at a coffee franchise company said, "It is understandable that a company wants to emphasize that business is good," but added, "In a situation where most consumers read headlines, if terms such as consumer sales and total franchisee sales are not clearly stated, the actual size of the company can be misunderstood." The official continued, "For example, a new brand could look like a bigger company than an existing major brand based only on the number of franchisees and total sales, which could send the wrong signal to those preparing to start a business."
In particular, it is notable that this surge in number marketing coincides with periods ahead of corporate sales or initial public offerings (IPO). For franchises whose largest shareholders are private equity funds (PEF), it is important to highlight headline growth to boost corporate value.
In fact, KL&Partners, the largest shareholder of Mom's Touch, is pushing to sell Mom's Touch. Although not owned by a private equity fund like No More Pizza, new brands in recent growth stages also have a strong need to stress rapid headline expansion in the funding process. In particular, while sales and operating profit are subject to disclosure requirements, total sales are not, and some say disclosing them also reflects a company's intent.
An official at a burger franchise company said, "Without looking closely at disclosures, ordinary consumers find it hard to know headquarters' sales. Companies have an underlying intent to emphasize brand size or standing in the market." The official added, "Total sales that include consumer payments or franchisee sales are indicators different from the headquarters' pure sales or profitability," and said, "It is hard to see putting them front and center like a headline as the accurate conveyance of facts."
An official in the restaurant industry said, "When a private equity fund is the major shareholder, there is also the aim of boosting corporate value by emphasizing headline growth and volume," adding, "It is a kind of optical illusion effect. But because this approach can cause confusion among investors, the financial sector, and those preparing to start a business, key indicators such as sales and operating profit, which are disclosure standards, should be put front and center."
Seo Yong-gu, a professor in the business administration department at Sookmyung Women's University, said, "There is the symbolism of the 1 trillion won figure, and there appears to be an intent to make the headline look larger in a low-growth era," adding, "However, if this kind of number marketing is repeated, it can adversely affect the overall credibility of the franchise industry. For brand credibility, it is important to use clear expressions based on conventional standards."